<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
FAIRCHILD SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3674 77-0449095
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
--------------------------
FSC SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3674 04-3363001
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
--------------------------
333 WESTERN AVENUE, MAIL STOP 01-00
SOUTH PORTLAND, MAINE 04106
(207) 775-8100
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
------------------------------
DANIEL E. BOXER, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
FAIRCHILD SEMICONDUCTOR CORPORATION
333 WESTERN AVENUE, MAIL STOP 01-00
SOUTH PORTLAND, MAINE 04106
(207) 775-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH COPIES TO:
CHRISTOPHER G. KARRAS, ESQ.
DECHERT PRICE & RHOADS
4000 BELL ATLANTIC TOWER
1717 ARCH STREET
PHILADELPHIA, PENNSYLVANIA 19103
(215) 994-4000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 1/8% Senior Subordinated Notes
Due 2007................................. $300,000,000 100% $300,000,000 $90,909
Guarantee of 10 1/8% Senior Subordinated
Notes Due 2007 of FSC Semiconductor
Corporation.............................. $300,000,000 -- -- $0(2)
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n), no separate fee is payable for the guarantee.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FAIRCHILD SEMICONDUCTOR CORPORATION
FSC SEMICONDUCTOR CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(a) AND ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
<TABLE>
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Forepart of the Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors; Selected Combined
Financial Data
4. Terms of the Transaction................... The Exchange Offer; Description of the
Notes; Certain Federal Income Tax
Consequences; Plan of Distribution
5. Pro Forma Financial Information............ Summary; Unaudited Pro Forma Combined
Condensed Financial Statements; Selected
Combined Financial Data
6. Material Contracts With the Company Being
Acquired................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel..... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
10. Information With Respect to S-3
Registrants.............................. Not Applicable
11. Incorporation of Certain Information by
Reference................................ Not Applicable
12. Information With Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants........ Available Information; Summary; Risk
Factors; Use of Proceeds; Pro Forma
Capitalization; Unaudited Pro Forma
Combined Condensed Financial Statements;
Unaudited Supplemental Financial Data;
Selected Combined Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Industry Overview; Business;
The Transactions; Management; Ownership
of Capital Stock; Description of Certain
Indebtedness; Description of the Notes;
Plan of Distribution; Legal Matters;
Experts; Glossary; Financial Statements
15. Information With Respect to S-3
Companies................................ Not Applicable
16. Information With Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies................ Not Applicable
18. Information if Proxies, Consents or
Authorizations Are to be Solicited....... Not Applicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer.................. The Exchange Offer; Management; Ownership
of Capital Stock; Description of Certain
Indebtedness; Description of the Notes
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 12, 1997
PROSPECTUS OFFER TO EXCHANGE
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
FAIRCHILD SEMICONDUCTOR CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
Fairchild Semiconductor Corporation, a Delaware corporation ("Fairchild" or
the "Company"), hereby offers to exchange an aggregate principal amount of up to
$300,000,000 of its 10 1/8% Senior Subordinated Notes Due 2007 (the "Exchange
Notes") for a like principal amount of its 10 1/8% Senior Subordinated Notes Due
2007 (the "Existing Notes") outstanding on the date hereof upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
letter of transmittal (the "Letter of Transmittal" and, together with this
Prospectus, the "Exchange Offer"). The Exchange Notes and the Existing Notes are
hereinafter collectively referred to as the "Notes." The terms of the Exchange
Notes are identical in all material respects to those of the Existing Notes,
except for certain transfer restrictions and registration rights relating to the
Existing Notes. The Exchange Notes will be issued pursuant to, and be entitled
to the benefits of, the Indenture (as defined) governing the Existing Notes.
The Exchange Notes will bear interest from and including the date of
consummation of the Exchange Offer. Interest on the Exchange Notes will be
payable semi-annually on March 15 and September 15 of each year, commencing
September 15, 1997. Additionally, interest on the Exchange Notes will accrue
from the last interest payment date on which interest was paid on the Existing
Notes surrendered in exchange therefor or, if no interest has been paid on the
Existing Notes, from the date of original issue of the Existing Notes.
The Exchange Notes will be unsecured and subordinated to all existing and
future Senior Indebtedness (as defined) of the Company. On a pro forma basis
after giving effect to the Transactions (as defined), as of February 23, 1997,
the Company would have had approximately $120.0 million of Senior Indebtedness
outstanding. The Exchange Notes will rank PARI PASSU in right of payment with
all senior subordinated indebtedness of the Company and senior to any other
subordinated indebtedness of the Company issued after March 11, 1997. The
Exchange Notes will be fully and unconditionally guaranteed on a senior
subordinated basis by FSC Semiconductor Corporation ("Fairchild Holdings"), the
sole stockholder of the Company. The Company has entered into bank credit
facilities (the "Senior Credit Facilities") with a group of lenders providing
for $120.0 million of term loans and up to $75.0 million of revolving credit
loans. The indebtedness under the Senior Credit Facilities is secured by
substantially all of the domestic assets of the Company. See "Pro Forma
Capitalization" and "Unaudited Pro Forma Combined Condensed Financial Statements
and Unaudited Supplemental Data."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
March 6, 1997 (the "Registration Rights Agreement") by and among the Company,
Fairchild Holdings, as Guarantor, and Credit Suisse First Boston Corporation, BT
Securities Corporation and CIBC Wood Gundy Securities Corp. (the "Initial
Purchasers") with respect to the initial sale of the Existing Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined) for the Exchange Offer. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Existing Notes with respect to the Exchange Offer, the Company will promptly
return such Existing Notes to the holders thereof. See "The Exchange Offer."
The Company is offering the Exchange Notes in reliance on certain
interpretive letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties in unrelated transactions. Based
on such interpretive letters, the Company is of the view that holders of
Existing Notes (other than any holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act")) who exchange their Existing Notes for Exchange Notes pursuant
to the Exchange Offer generally may offer such Exchange Notes for resale, resell
such Exchange Notes and otherwise transfer such Exchange Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided such Exchange Notes are acquired in the ordinary course
of the holders' business and such holders have no arrangement with any person to
participate in a distribution of such Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivery of a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. If a market for the Exchange Notes should develop, such Exchange
Notes could trade at a discount from their principal amount. The Company
currently does not intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system, and no
active public market for the Exchange Notes is currently anticipated. There can
be no assurance that an active public market for the Exchange Notes will
develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF EXISTING NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company and Fairchild Holdings have filed with the Commission a
Registration Statement on Form S-4 (the "Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the Exchange Notes being offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement.
For further information with respect to the Company, Fairchild Holdings and the
Exchange Offer, reference is made to the Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the document or matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Seven World Trade Center, Suite 1300, New York, New York 10048 and
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such Web site is: http://www.sec.gov.
As a result of the Exchange Offer, the Company and Fairchild Holdings will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and in accordance therewith will be
required to file periodic reports and other information with the Commission. In
the event the Company ceases to be subject to the informational requirements of
the Exchange Act, the Company will be required under the Indenture, for so long
as any of the Notes remain outstanding, to furnish to the Trustee (as defined),
deliver or cause to be delivered to the holders of the Notes and file with the
Commission (provided that the Commission will accept such filing) copies of its
annual report and the information, documents and other reports which are
required to be filed by U.S. corporations subject to Section 13 or 15(d) of the
Exchange Act.
This Prospectus includes forward-looking statements which involve risks and
uncertainties as to future events. Actual events or results may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, those set forth under "Risk
Factors".
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
REQUIRES OTHERWISE, REFERENCES TO THE "COMPANY" OR "FAIRCHILD" MEAN (I) AT ALL
TIMES PRIOR TO THE CONSUMMATION OF THE TRANSACTIONS, THE FAIRCHILD SEMICONDUCTOR
BUSINESS OF NATIONAL SEMICONDUCTOR CORPORATION ("NATIONAL SEMICONDUCTOR") AND
(II) AT ALL TIMES AFTER THE CONSUMMATION OF THE TRANSACTIONS, FAIRCHILD
SEMICONDUCTOR CORPORATION AND ITS SUBSIDIARIES. IN ADDITION, UNLESS THE CONTEXT
REQUIRES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO "MANAGEMENT" MEAN THE
MANAGEMENT OF FAIRCHILD AFTER THE CONSUMMATION OF THE TRANSACTIONS. FOR AN
EXPLANATION OF CERTAIN TERMS USED IN THIS PROSPECTUS, REFERENCE SHOULD BE MADE
TO THE GLOSSARY BEGINNING AT PAGE G-1. REFERENCES TO THE COMPANY'S FISCAL YEAR
("FISCAL YEAR") REFER TO THE APPROXIMATELY 12-MONTH PERIOD ENDING ON THE SUNDAY
ON OR NEAREST PRECEDING MAY 31 OF EACH YEAR.
THE COMPANY
Fairchild is a leading global designer, developer and manufacturer of logic,
discrete and memory semiconductors. The Company's products are the building
block components for virtually all electronic devices, from sophisticated
computers to household appliances. Because of their basic functionality, the
Company's products provide customers with greater design flexibility than more
highly integrated products and improve the performance of more complex devices
or systems. Given such characteristics, the Company's products have a wide range
of applications for end users in multiple markets ("multi-markets"). The Company
supplies over 50,000 customers globally, representing industries such as
telecommunications, consumer products, automotive, industrial systems and
personal computers and peripherals. In addition, most of Fairchild's over 7,000
products have long product lives. The average life of the Company's current
product families is more than 12 years and many product lives extend up to 30
years.
Established more than 35 years ago, Fairchild was one of the original
founders of the semiconductor industry. Among Fairchild's notable innovations
was its development of planar technology in 1959, one of the key events that
spawned the subsequent explosive growth of the semiconductor industry. Even
today this technology is an integral part of all semiconductor fabrication. The
Company has manufacturing facilities in Maine, Utah, Malaysia and the
Philippines and has more than 6,000 employees.
Worldwide semiconductor market revenues were $132.0 billion during 1996
according to the reports of Worldwide Semiconductor Trade Statistics ("WSTS")
published by the Semiconductor Industry Association. Since 1990, the global
semiconductor market has expanded at a compound annual growth rate ("CAGR") of
17.4%, primarily as a result of two principal factors. The first is rapidly
expanding end-user demand for faster, smaller and more efficient devices with a
greater range of functionality. The second is the increasing level of
semiconductor content in electrical devices. The value of semiconductors as a
percentage of the cost of electrical products has increased from less than 5% in
the 1970s to 16% in 1996, according to a study prepared by Texas Instruments
Incorporated.
The worldwide semiconductor market can be divided into three segments: (i)
microprocessors and microcontrollers, which process data; (ii) memory devices,
which store data; and (iii) moving and shaping devices, which move commands and
shape signals. See "Industry Overview--Semiconductor Classifications." The
Company operates primarily in the moving and shaping segment ($56.1 billion
total available market ("TAM") in 1996) through its logic and discrete
businesses and, secondarily, through its electrically programmable read-only
memory ("EPROM") and electrically erasable and programmable read-only memory
("EEPROM") products, in the non-volatile memory segment ($6.1 billion TAM in
1996) of the memory business. While the market for semiconductors has
experienced growth and is expected to continue growing, it has from time to time
undergone short-term fluctuations in demand and capacity conditions. For
example, the 1996 worldwide semiconductor TAM ($132.0 billion) experienced an
overall decline from 1995 ($144.4 billion), according to WSTS. The decline was
primarily the result of a 36.2% reduction in sales in the volatile memory market
(which includes the dynamic random access memory
3
<PAGE>
("DRAM") market). However, the Company believes that the markets in which it
competes (which do not include the DRAM market) along with the breadth of its
product portfolio and its focus on multi-market end users make its businesses
less vulnerable to these fluctuations.
PRODUCTS
In Fiscal Year 1996, the Company derived approximately 89% of its revenues
from selling products to unaffiliated third parties ("trade sales") such as
original equipment manufacturers ("OEMs") and distributors, and approximately
11% from providing manufacturing services to National Semiconductor ("contract
manufacturing services").
STANDARD LOGIC PRODUCTS. Fairchild is one of the three leading suppliers of
global standard logic ("logic") products, with a highly regarded trade name and
industry standard products such as Fairchild Advanced Schottky Technology
("FAST-Registered Trademark-") and Fairchild Advanced CMOS Technology
("FACT-TM-"). Standard logic products are semiconductor chips that interconnect
and route (or move) electronic signals on circuit boards. Logic products control
instructions inside electronic devices, such as those instructing a computer
display to turn on. Management estimates that the Company had a market share of
11.2% of the $2.9 billion of standard logic products sold worldwide in 1995. The
Company's logic products are used in a wide variety of microelectronics
applications, including personal computers and peripherals (38% of Fiscal Year
1996 logic trade revenue), telecommunications (32%), industrial systems and
other products (18%), consumer products (6%) and automotive systems (6%). The
Company supplies more than 4,700 types of logic devices to more than 50,000
customers worldwide, including AT&T Corporation, International Business Machines
Corporation, Lucent Technologies Inc., Siemens AG and Toshiba Corp.
DISCRETE PRODUCTS. Fairchild is the second largest U.S. producer of
discrete power and small signal semiconductors ("discretes") with a well
established trade name and industry standard products. Discrete products switch,
amplify or otherwise shape or condition electrical signals. Products of this
type are used to manage the distribution of power inside electronic devices,
such as regulating the voltage of the LCD display of a microwave oven. Nearly
every electronic product contains a number of discrete devices, from computers
to dimmer switches for light fixtures. The Company's discrete products are used
in a wide variety of applications in personal computers and peripherals (37% of
Fiscal Year 1996 discrete trade revenue), industrial systems and other products
(23%), telecommunications (20%), consumer products (11%) and automotive systems
(9%). The Company supplies over 1,300 types of discrete devices to more than
15,000 customers worldwide, including Compaq Computer Corp., Delco Electronics
Corp., Hewlett-Packard Co., Intel Corp., Motorola Inc., Northern Telecom Ltd.,
Seagate Technology Co. and Sony Electronics Corp.
NON-VOLATILE MEMORY PRODUCTS. Fairchild is a leader in the global
non-volatile memory market with a highly regarded trade name and industry
standard Application Specific Standard Products ("ASSPs"), such as devices used
in Plug and Play internal modems, sound cards and other peripheral devices for
personal computers. Non-volatile memory products are semiconductor data storage
chips that retain data after power has been shut off. Products of this type,
including EPROMs and EEPROMs, are used to store data that does not frequently
change, such as the internal instructions a cellular phone uses to operate.
Management estimates that the Company had a market share of 9.3% of the
approximately $2.0 billion non-volatile memory market served by the Company in
1995. The Company does not produce DRAMs or other volatile memory products. The
Company's memory products are used in a wide variety of applications, including
industrial systems and other products (32% of Fiscal Year 1996 memory trade
revenue), telecommunications (22%), automotive systems (19%), personal computers
and peripherals (15%) and consumer products (12%). The Company supplies over 900
types of memory devices to more than 6,000 customers worldwide, including
Chrysler Corp., Delco Electronics, Ford Motor Co., Hewlett-Packard and Toshiba.
For a more complete description, see "Business--Products and Technology."
4
<PAGE>
CONTRACT MANUFACTURING SERVICES. Fairchild has provided and will continue
to provide manufacturing services to National Semiconductor, including the
fabrication of semiconductor devices on silicon wafers and assembly and testing
services for chips. Historically, these services have been provided at cost;
however, under the Fairchild Foundry Services Agreement (as defined) and the
Fairchild Assembly Services Agreement (as defined), National Semiconductor is
required to purchase at least $330.0 million of services from Fairchild during
the first 39 months after the consummation of the Transactions at prices that
are designed to generate a 20% gross profit for the Company, subject to certain
conditions and adjustments. See "The Transactions--Manufacturing Agreements."
This arrangement will provide a base level of capacity utilization in the
Company's facilities and will cover a substantial portion of Fairchild's
associated fixed costs. See "Risk Factors--Dependence on National
Semiconductor."
COMPANY STRENGTHS
Management believes that the Company's strong competitive position in each
of its businesses is primarily due to the following core strengths:
MARKET LEADERSHIP. From its origins as one of the founders of the
semiconductor industry, the Company has maintained a leading market position in
each of its product lines. Fairchild is recognized for its leadership in breadth
of products offered, worldwide distribution, high-volume manufacturing, on-time
delivery, customer service and competitive prices. Fairchild's strong customer
relationships give it an early opportunity to work with key customers to define
their future technological requirements, affording the Company a leading market
position and a competitive advantage in seizing new product opportunities. Many
of the world's leading telecommunications, computer and automotive companies
look to Fairchild to provide high-quality standard products as well as
customized solutions to complex problems. See "Business--Sales, Marketing and
Distribution."
BREADTH AND QUALITY OF PRODUCT PORTFOLIO. The Company offers a broad
portfolio of quality products, including one of the largest combined product
offerings in the industry for logic, discrete and memory devices. Fairchild
develops products for a wide range of market applications, reducing the
Company's dependence on any single product, application or market. As a broad
range supplier, the Company has the ability to provide its customers with a
single source of supply for multiple product needs. The Company has achieved a
reputation for maintaining the highest quality standards, as reflected by
numerous supplier awards and certifications. The Company's leading position is
evidenced by its record as a significant innovator in the semiconductor industry
with several leading edge technologies and industry firsts, including its
introduction of High Speed CMOS ("HCMOS") in the late 1970s,
FAST-Registered Trademark- and FACT-TM- in the 1980s and Low Voltage Logic
products in the 1990s. Recently, Fairchild won the Ford Q1 Preferred Quality
Award and the Outstanding Supplier Quality One Award from Intel. See
"Business--Customers and Applications."
DIVERSE AND BLUE-CHIP CUSTOMER BASE. The Company's diverse customer base,
in a wide spectrum of end markets, enables it to avoid much of the volatility
that may be encountered in specific semiconductor markets. In all, the Company
serves more than 50,000 customers, including the leading manufacturers in all of
its markets, with no single customer other than National Semiconductor providing
more than 5% of the Company's total annual revenue. In the telecommunications
market, which had a CAGR of 29% from 1990 to 1995 and accounted for
approximately 27% of Fiscal Year 1996 revenues, the Company has long-term
relationships with many customers including Alcatel Corp., Ericsson SA, Lucent
Technologies, Northern Telecom, Samsung Electronics, Inc. and Siemens. In the
personal computer market, which had a CAGR of 25% from 1990 to 1995 and
accounted for approximately 31% of Fiscal Year 1996 revenues, the Company's
customers include Compaq, Dell Computer Corporation, IBM, Intel, NEC
Corporation, Seagate Technology and Toshiba. In consumer products, a market
which had a CAGR of 15% from 1990 to 1995 and produced approximately 8% of
Fiscal Year 1996 revenues, the Company's customers include Canon Inc., Creative
Design & Manufacturing Ltd., Goldstar Electric Co., Sony and Zenith Data Systems
Inc. See "Business--Customers and Applications."
5
<PAGE>
HIGHLY EFFICIENT MANUFACTURING FACILITIES. The Company has spent
approximately $355.0 million during the past three years primarily to build a
new wafer fabrication plant ("fab") and to upgrade its existing facilities with
state-of-the-art manufacturing equipment. Management credits these capital
expenditures for yield improvements of 15% and capacity improvements of 40% for
the Class 1 fabs. Management therefore believes that the Company is well
positioned for growth and anticipates significantly lower capital outlays over
the next three years. The Company has two classes of fabs, Class 1 fabs, in
which the air in the manufacturing area has an average of less than one particle
no larger than 0.3 micron per cubic foot, and Class 100 fabs, which have an
average of less than 100 particles no larger than 0.5 micron per cubic foot. The
Company's Class 1 fabs and Class 100 fabs are capable of producing approximately
7,220 6-inch wafers per week and 6,500 6-inch equivalent wafers per week,
respectively. As a result of the Company's recent capital expenditure program,
the Company operates in a manufacturing environment which, coupled with its
leading edge technology, affords it a cost leadership position in the
multi-market semiconductor industry. The total yield in Fairchild's Class 100
fabs is greater than 90%, which management believes is among the best in the
world for facilities producing similar products. In addition, management
believes that the assembly sites in Penang, Malaysia and Cebu, the Philippines
are among the lowest cost facilities in the world as a result of the
installation of state-of-the-art equipment and unique manufacturing processes.
These facilities generated production yields in excess of 98% during Fiscal Year
1996. See "Business--Manufacturing."
EXPERIENCED MANAGEMENT. The Company is led by an experienced senior
management team of five individuals who average more than 25 years in the
semiconductor industry. Fairchild's Chief Executive Officer, Kirk P. Pond, has
30 years of management experience in the semiconductor industry with Texas
Instruments and Fairchild, most recently as the Chief Operating Officer of
National Semiconductor. See "Management--Directors and Officers." In addition,
Mr. Pond and several other Management Investors (as defined) have made a $6.5
million cash investment in the Company's parent, Fairchild Holdings. See "The
Transactions." Upon consummation of the Transactions, the Management Investors
owned in the aggregate approximately 16% of the outstanding common stock of
Fairchild Holdings.
BUSINESS STRATEGY
The Company's objective is to be the leading supplier of multi-market
semiconductors to the worldwide telecommunications, consumer products,
automotive, industrial systems and personal computer and peripherals industries.
As a stand-alone company, Fairchild will implement a business strategy
emphasizing the following key elements:
INCREASE MARKET PENETRATION OF EXISTING PRODUCTS. As the only global
semiconductor company focused solely on the logic, discrete and memory markets,
Fairchild is uniquely positioned to dedicate its sales and marketing efforts
toward expanding the market share of its existing products. Following National
Semiconductor's decision to launch Fairchild as an independent company,
Fairchild began to build an internal sales force dedicated solely to the sale of
Fairchild's products. The Company's internal sales force, authorized
representatives and distributors will be expanding customer information programs
(including technical specifications, application notes and on-line services),
augmenting the Company's comprehensive customer design-in support efforts
(including application engineering and detailed product performance data) and
increasing trade advertising.
INTRODUCE NEW PRODUCTS. The Company is focused on expanding its customer
base and increasing its market share by continuing to develop new products and
enhance its current product portfolio. The increasing portability of computers,
cellular phones and other electronic products is one of the industry's most
significant trends. The Company is designing new products to meet the power
management, lower voltage and heat dissipation characteristics demanded for
portability. In the logic market, the Company, in alliance with Toshiba and
Motorola, recently developed the advanced CMOS VCX family of 2.5 volt/2.5
nanosecond products. In the discrete market, the Company intends to build on its
current momentum in the surface DMOS Power MOSFET area with the addition of
products with low resistance, low gate drive,
6
<PAGE>
small footprints, thin profiles and superior heat dissipation characteristics.
In the memory market, the Company has the broadest serial EEPROM product
offering in the industry and intends to offer even more of the widely accepted
Microwire, IIC and SPI serial EEPROM product families and to develop application
specific memories, such as Plug and Play components for the personal computer
adapter card market and HiSeC for the automotive market. Management believes
that continued product innovation
and investment in research and development will help insulate it from changes in
demand patterns that affect particular customers, industry segments or
end-product markets.
MAINTAIN COST LEADERSHIP. The Company has made significant capital
expenditures over the last three years to increase capacity and improve
manufacturing efficiency at its facilities. Management believes that its fabs
and assembly and test facilities are among the most productive and efficient in
the industry. The Company will continue to invest in people and assets in order
to increase productivity and enhance process efficiency. Improvements now
underway include the expansion of a continuous flow process throughout the
entire Penang test facility and the introduction of reel-to-reel processing in
the Cebu assembly and test plant.
MAINTAIN CONSISTENT HIGH QUALITY CUSTOMER SERVICE. Multi-market
semiconductor products are available from a number of providers--accordingly,
logistical support, customer service and delivery are critical to customer
retention and sales growth. Fairchild seeks to distinguish its service by
providing the industry's best support services, including electronic order entry
and inquiry, just-in-time delivery and a full range of Internet services that
provide device specifications and order entry for samples. Fairchild's customer
support services are provided primarily from four regional customer support
centers as well as many other sales office locations throughout the world.
NATIONAL SEMICONDUCTOR RELATIONSHIP
As a result of the Transactions, National Semiconductor owns 15.0% of the
equity of Fairchild Holdings and National Semiconductor and Fairchild each
provide the other with certain manufacturing and assembly and test services.
National Semiconductor is required to purchase at least $330.0 million of goods
and services from the Company during the first 39 months after the consummation
of the Transactions. See "The Transactions--Manufacturing Agreements." The
continuing relationship between National Semiconductor and the Company provides
an assured base of capacity utilization for Fairchild's facilities. The Company
is afforded continued access to a substantial portion of National
Semiconductor's proprietary technology which the Company plans to use to enter
new markets and strengthen its existing position. See "The
Transactions--Technology Licensing and Transfer Agreement." National
Semiconductor had revenues of $2.0 billion in its fiscal year 1996 (excluding
revenues attributable to Fairchild) and is one of the major U.S. producers of
semiconductors. Although National Semiconductor retains an equity interest in
Fairchild Holdings and has substantial commercial relations with Fairchild,
National Semiconductor does not control Fairchild Holdings or Fairchild and is
not responsible for Fairchild Holdings' or Fairchild's performance.
THE TRANSACTIONS
Pursuant to the Agreement and Plan of Recapitalization dated January 24,
1997 (the "Recapitalization Agreement") with National Semiconductor, the
following transactions occurred concurrently on March 11, 1997 (collectively,
the "Transactions"): (i) National Semiconductor transferred to the Company
substantially all of the assets and certain of the liabilities of the Fairchild
multi-market semiconductor business in exchange for (a) demand promissory notes
of the Company and its subsidiaries in the aggregate principal amount of $401.6
million (the "Purchase Price Notes") and (b) all of the Company's capital stock;
(ii) National Semiconductor transferred all of the capital stock of the Company
and approximately $12.8 million in cash to Fairchild Holdings, a corporation
newly formed by National Semiconductor for such purpose, in exchange for shares
of 12% Series A Cumulative Compounding Preferred Stock of
7
<PAGE>
Fairchild Holdings ("Holdings Preferred Stock"), common stock of Fairchild
Holdings ("Holdings Common Stock") and a promissory note (the "Holdings PIK
Note") of Fairchild Holdings in the principal amount of approximately $77.0
million; (iii) Fairchild Holdings issued (a) to Sterling Holding Company, LLC
("Sterling") shares of Holdings Preferred Stock and Holdings Common Stock for
approximately $58.5 million in cash and (b) to Kirk P. Pond and Joseph R.
Martin, together with certain other key employees of the Company (the
"Management Investors"), Holdings Preferred Stock and Holdings Common Stock for
approximately $6.5 million in cash; (iv) Fairchild Holdings contributed cash in
the amount of approximately $77.8 million to the capital of the Company; (v) the
Company borrowed $120.0 million under the Senior Credit Facilities and received
the net proceeds from the issuance of the Existing Notes; and (vi) the Company
repaid the Purchase Price Notes in cash. See "The Transactions." For information
regarding the Senior Credit Facilities, see "Description of Certain
Indebtedness--Senior Credit Facilities."
The principal executive offices of the Company are located at 333 Western
Avenue, Mail Stop 01-00, South Portland, Maine 04106 and its telephone number is
(207) 775-8100.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered................ Up to $300,000,000 aggregate principal amount of 10 1/8%
Senior Subordinated Notes Due 2007. The terms of the
Exchange Notes and Existing Notes are identical in all
material respects, except for certain transfer
restrictions and registration rights relating to the
Existing Notes.
The Exchange Offer................ The Exchange Notes are being offered in exchange for a
like principal amount of Existing Notes. Existing Notes
may be exchanged only in integral multiples of $1,000.
The issuance of the Exchange Notes is intended to
satisfy obligations of the Company contained in the
Registration Rights Agreement.
Expiration Date; Withdrawal of
Tender.......................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on 1997, or such later date and time
to which it may be extended by the Company. The tender
of Existing Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. Any
Existing Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Certain Conditions to the Exchange
Offer........................... The Company's obligation to accept for exchange, or to
issue Exchange Notes in exchange for, any Existing Notes
is subject to certain customary conditions relating to
compliance with any applicable law or any applicable
interpretation by the staff of the Commission, the
receipt of any applicable governmental approvals and the
absence of any actions or proceedings of any govern-
mental agency or court which could materially impair the
Company's ability to consummate the Exchange Offer. The
Company currently expects that each of the conditions
will be satisfied and that no waivers will be necessary.
See "The Exchange Offer-- Certain Conditions to the
Exchange Offer."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Existing
Notes........................... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Existing Notes and
any other required documentation, to the Exchange Agent
(as defined) at the address set forth herein. See "The
Exchange Offer--Procedures for Tendering Existing
Notes."
Use of Proceeds................... The Company will not receive any proceeds from the
Exchange Offer.
Exchange Agent.................... United States Trust Company of New York (the "Exchange
Agent") is serving as the Exchange Agent in connection
with the Exchange Offer.
Federal Income Tax Consequences... The exchange of Notes pursuant to the Exchange Offer
should not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
</TABLE>
CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Existing Notes (other than any holder who is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who exchange
their Existing Notes for Exchange Notes pursuant to the Exchange Offer generally
may offer such Exchange Notes for resale, resell such Exchange Notes and
otherwise transfer such Exchange Notes without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided such Exchange
Notes are acquired in the ordinary course of the holders' business and such
holders have no arrangement with any person to participate in a distribution of
such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Existing Notes must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
in compliance with an available exemption from registration or qualification.
The Company has agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the
Exchange Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing. If a
holder of Existing Notes does not exchange such Existing Notes for Exchange
Notes pursuant to the Exchange Offer, such Existing Notes will continue to be
subject to the restrictions on transfer contained in the legend thereon. In
general, the Existing Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. Holders
of Existing Notes do not have any appraisal or dissenters' rights under the
Delaware General Corporation Law in connection with the Exchange Offer. See "The
Exchange Offer--Consequences of Failure to Exchange; Resales of Exchange Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the Exchange Notes will not be eligible for
PORTAL trading.
9
<PAGE>
THE EXCHANGE NOTES
The terms of the Exchange Notes and the Existing Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Existing Notes.
<TABLE>
<S> <C>
Securities Offered................ $300,000,000 aggregate principal amount of the Company's
10 1/8% Senior Subordinated Notes Due 2007.
Maturity Date..................... March 15, 2007.
Interest Payment Dates............ March 15 and September 15 of each year, commencing
September 15, 1997.
Optional Redemption............... The Exchange Notes (and any outstanding Existing Notes)
are not redeemable prior to March 15, 2002, except that,
until March 15, 2000, the Company may redeem, at its
option, up to an aggregate of $105.0 million of the
principal amount of the Notes at the redemption price
set forth herein plus accrued interest to the date of
redemption with the net proceeds of one or more Public
Equity Offerings if at least $150.0 million of the
principal amount of the Notes remains outstanding after
each such redemption. On or after March 15, 2002, the
Notes are redeemable at the option of the Company, in
whole or in part, at the redemption prices set forth
herein plus accrued interest to the date of redemption.
See "Description of the Notes-- Optional Redemption."
Mandatory Redemption.............. The Company is required to redeem $150.0 million
principal amount of Notes on March 15, 2005 and $75.0
million principal amount of Notes on March 15, 2006, in
each case at a redemption price of 100% of the principal
amount plus accrued interest to the date of redemption,
subject to the Company's right to credit against any
such redemption Notes acquired by it otherwise than
through any such redemption.
Change of Control................. Upon a Change of Control and subject to certain
conditions, each holder of the Notes may require the
Company to repurchase the Notes held by such holder at
101% of the principal amount thereof plus accrued
interest to the date of repurchase. See "Description of
the Notes--Change of Control."
Ranking........................... The Exchange Notes will be unsecured and subordinated to
all existing and future Senior Indebtedness of the
Company. On a pro forma basis after giving effect to the
Transactions, as of February 23, 1997, the Company would
have had approximately $120.0 million of Senior
Indebtedness outstanding. The Exchange Notes will rank
PARI PASSU in right of payment with all senior
subordinated indebtedness of the Company and senior to
any other subordinated indebtedness of the Company
issued after the Offering. See "Description of the
Notes--Ranking" and "Pro Forma Combined Condensed
Financial Statements and Unaudited Supplemental Data."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Guaranty.......................... The payment of the principal of, premium and interest on
the Exchange Notes is fully and unconditionally
guaranteed on a senior subordinated basis by Fairchild
Holdings. The guarantee by Fairchild Holdings is
subordinated to all existing and future Senior
Indebtedness of Fairchild Holdings, including Fairchild
Holdings' guarantee of the Company's obligations under
the Senior Credit Facilities. Fairchild Holdings
currently conducts no business and has no significant
assets other than the capital stock of the Company, all
of which is pledged to secure Fairchild Holdings'
obligations under the Senior Credit Facilities. See
"Description of the Notes--Guaranty."
Restrictive Covenants............. The indenture relating to the Notes (the "Indenture")
limits (i) the incurrence of additional debt by the
Company and its subsidiaries, (ii) the payment of
dividends on capital stock of the Company and the
purchase, redemption or retirement of capital stock or
subordinated indebtedness, (iii) investments, (iv)
certain transactions with affiliates, (v) sales of
assets, including capital stock of subsidiaries; and
(vi) certain consolidations, mergers and transfers of
assets. The Indenture also prohibits certain
restrictions on distributions from subsidiaries. All of
these limitations and prohibitions, however, are subject
to a number of important qualifications. See
"Description of the Notes--Certain Covenants."
</TABLE>
For a more detailed discussion of the Exchange Notes, see "Description of
the Notes."
RISK FACTORS
Holders of Existing Notes should consider carefully all of the information
set forth in this Prospectus and, in particular, should evaluate information set
forth under "Risk Factors".
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<PAGE>
SUMMARY HISTORICAL DATA
The following table sets forth summary historical combined financial data
with respect to Fairchild. The summary historical combined financial data as of
May 28, 1995 and May 26, 1996 and for the three fiscal years ended May 26, 1996
are derived directly from the audited Combined Financial Statements of Fairchild
included elsewhere in this Prospectus. The summary historical combined financial
data as of February 23, 1997 and for the nine months ended February 25, 1996 and
February 23, 1997 are derived directly from the unaudited Combined Financial
Statements of Fairchild included elsewhere in this Prospectus. The summary
historical combined financial data for the Fiscal Years ended May 31, 1992 and
May 30, 1993 and the summary historical balance sheet data as of May 31, 1992,
May 30, 1993, May 29, 1994 and February 25, 1996 are derived from unaudited
combined financial statements of Fairchild that are not included in this
Prospectus. Such unaudited combined financial statements of Fairchild, in the
opinion of management, include all adjustments necessary for the fair
presentation of the financial condition and the results of operations of
Fairchild. Operating results for the nine months ended February 23, 1997 are not
necessarily indicative of the results of operations that may be expected for
Fiscal Year 1997. This information should be read in conjunction with the
Combined Financial Statements of Fairchild included elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." See "Selected Combined Financial Data."
12
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
----------------------------------------------------- -----------------
1992 1993 1994 1995 1996 FEBRUARY 25, 1996
--------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
HISTORICAL STATEMENT OF
OPERATIONS DATA:
Revenue.................................... $ 535.7 $ 620.0 $ 716.6 $ 680.3 $ 775.4 $ 596.6
Gross profit............................... 84.5 124.0 248.3 203.8 215.1 176.4
Research and development................... 30.9 24.5 27.4 31.0 30.3 22.7
Selling and marketing...................... 46.5 44.7 55.0 56.8 65.6 50.0
General and administrative................. 24.4 24.7 42.3 43.5 48.4 37.6
Restructuring.............................. 18.0 -- -- -- -- --
Revenues less direct and allocated expenses
before other (income) expense and
taxes.................................... (35.3) 30.1 123.6 72.5 70.8 66.1
OTHER FINANCIAL DATA:
REVENUE:
Logic...................................... $ 306.5 $ 326.6 $ 393.8 $ 327.7 $ 338.6 $ 261.9
Discrete................................... 65.8 67.2 80.0 116.4 175.0 135.2
Memory..................................... 109.0 148.9 185.1 185.5 174.2 135.8
Contract manufacturing services............ 54.4 77.3 57.7 50.7 87.6 63.7
--------- --------- --------- --------- --------- -------
Total revenue.......................... $ 535.7 $ 620.0 $ 716.6 $ 680.3 $ 775.4 $ 596.6
--------- --------- --------- --------- --------- -------
--------- --------- --------- --------- --------- -------
EBITDA(1).................................. $ (0.2) $ 64.4 $ 162.3 $ 117.2 $ 135.0 111.0
Cash flows from operating activities....... --(2) 71.4 153.4 115.1 110.2 77.1
Cash flows from investing activities....... --(2) (34.0) (88.2) (112.9) (153.9) (120.7)
Net financing provided to (from)
National Semiconductor................... --(2) 51.8 65.2 2.2 (43.7) (43.6)
Depreciation and amortization.............. 32.9 31.4 33.0 39.1 57.6 40.5
Capital expenditures....................... 26.0 34.0 88.2 112.9 153.9 120.7
Ratio of earnings to fixed charges(3)...... --(4) 11.7x 84.7x 75.3x 46.2x 57.3x
HISTORICAL BALANCE
SHEET DATA (END OF PERIOD):
Inventories................................ $ 77.5 $ 55.0 $ 60.9 $ 68.8 $ 93.1 $ 96.3
Total assets............................... 187.8 175.5 233.0 323.2 432.7 422.2
Total business equity...................... 140.6 100.8 161.1 233.2 349.2 346.8
<CAPTION>
FEBRUARY 23, 1997
-----------------
<S> <C>
HISTORICAL STATEMENT OF
OPERATIONS DATA:
Revenue.................................... $ 509.7
Gross profit............................... 101.5
Research and development................... 13.6
Selling and marketing...................... 33.5
General and administrative................. 39.1
Restructuring.............................. 5.3
Revenues less direct and allocated expenses
before other (income) expense and
taxes.................................... 10.0
OTHER FINANCIAL DATA:
REVENUE:
Logic...................................... $ 210.4
Discrete................................... 118.1
Memory..................................... 105.4
Contract manufacturing services............ 75.8
------
Total revenue.......................... $ 509.7
------
------
EBITDA(1).................................. 66.7
Cash flows from operating activities....... 81.5
Cash flows from investing activities....... (36.7)
Net financing provided to (from)
National Semiconductor................... 44.8
Depreciation and amortization.............. 50.8
Capital expenditures....................... 36.7
Ratio of earnings to fixed charges(3)...... 8.4x
HISTORICAL BALANCE
SHEET DATA (END OF PERIOD):
Inventories................................ $ 67.3
Total assets............................... 390.2
Total business equity...................... 314.0
</TABLE>
- ------------------------------
(1) EBITDA is defined as the sum of revenue less direct and allocated expenses
before other (income) expense, interest expense, taxes and depreciation and
amortization. EBITDA is presented because the Company believes that it is a
widely accepted financial indicator of an entity's ability to incur and
service debt. EBITDA should not be considered by an investor as an
alternative to net income or income from operations, as an indicator of the
operating performance of the Company or other combined operations or cash
flow data prepared in accordance with generally accepted accounting
principles, or as an alternative to cash flows as a measure of liquidity.
Depreciation and amortization for purposes of the EBITDA calculation
includes amortization for tooling. Tooling is classified as a current asset
in the financial statements of the Company and amortization thereof is not
included in depreciation and amortization for purposes of calculating cash
flows from operating activities, nor are cash outflows for tooling included
in capital expenditures for purposes of calculating cash flows from
investing activities. Tooling amortization included in EBITDA totaled $2.2
million, $2.9 million, $5.7 million, $5.6 million, $6.6 million, $4.4
million, and $5.9 million, for the Fiscal Years 1992 through 1996, and for
the nine months ended February 25, 1996, and February 23, 1997,
respectively. Tooling expenditures totaled $3.4 million, $5.5 million, $6.1
million, $5.2 million, $8.6 million, $6.1 million and $4.8 million for the
same periods.
(2) Balance sheet data is not available for Fairchild prior to 1992. As such, it
is not practicable to determine cash flow information for Fiscal Year 1992.
(3) Earnings consist of revenue less direct and allocated expenses before taxes
plus fixed charges. Fixed charges consists of interest expense on debt and
amortization of deferred debt issuance costs, and the portion (approximately
one-third) of rental expense that the Company believes is representative of
the interest component of rental expense.
(4) Earnings for Fiscal Year 1992 were inadequate to cover fixed charges by
$34.8 million.
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SUMMARY SUPPLEMENTAL DATA
The following table sets forth certain unaudited supplemental data of the
Company for the periods indicated. The unaudited supplemental data reflects
certain pro forma adjustments and management's estimates of certain cost savings
which management believes will be attained on a stand-alone basis. This
information should be read in conjunction with the Unaudited Pro Forma Combined
Condensed Financial Statements and notes thereto and Unaudited Supplemental Data
and the notes thereto. See "Disclosure Regarding Forward Looking Statements."
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL ENDED
YEAR FEBRUARY 23,
1996 1997
--------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Adjusted EBITDA(1)................................................................................. $206.2 103.3
Cash interest expense(2).......................................................................... 40.3 29.7
Total interest expense(3)..................................................................... 42.9 31.4
Ratio of Adjusted EBITDA to cash interest expense................................................. 5.1x 3.5x
Ratio of Adjusted EBITDA to total interest expense................................................ 4.8x 3.3x
Ratio of debt to Adjusted EBITDA(4)............................................................... 2.0x --
</TABLE>
- ------------------------------
(1) Adjusted EBITDA is EBITDA as defined in Note 1 to the Summary Historical
Data plus pro forma adjustments and management's estimate of certain cost
savings which management believes will be achieved on a stand-alone basis.
This information should be read in conjunction with the Unaudited Pro Forma
Combined Condensed Financial Statements and notes thereto and Unaudited
Supplemental Data and notes thereto, included elsewhere in this Prospectus.
(2) Cash interest expense represents the pro forma cash interest expense.
(3) Total interest expense represents the pro forma cash interest expense and
amortization of deferred debt issuance costs.
(4) Debt consists of pro forma debt of $420.0 million outstanding as of February
23, 1997 as if the Transactions had occurred on such date.
14
<PAGE>
RISK FACTORS
Holders of Existing Notes should carefully consider the risk factors set
forth below, as well as the other information appearing in this Prospectus in
connection with the Exchange Offer. The risk factors set forth below are
generally applicable to the Existing Notes as well as the Exchange Notes.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company incurred substantial indebtedness in connection with the
Transactions and, as a result, is highly leveraged. On a pro forma basis after
giving effect to the Transactions, as of February 23, 1997, the Company would
have had total indebtedness of $420.0 million (exclusive of the Holdings PIK
Note) and stockholder's equity of $14.0 million. Of the total $497.8 million
used to consummate the Transactions, $420.0 million (84.4%) was supplied by debt
(excluding the $77.0 million Holdings PIK Note), and $77.8 million (15.6%) was
supplied by equity contributions. Pro forma interest expense, for Fiscal Year
1996 and nine months ended February 23, 1997, would have been $42.9 million and
$31.4 million, respectively. Fairchild Holdings issued the Holdings PIK Note to
National Semiconductor in exchange for all outstanding common stock of
Fairchild. Fairchild Holdings' ability to repay the principal on the Holdings
PIK Note is dependent on its ability to generate cash from its investment in
Fairchild. The Company may incur additional indebtedness in the future, subject
to limitations imposed by the Indenture and the Senior Credit Facilities. See
"Pro Forma Capitalization" and "Unaudited Pro Forma Combined Condensed Financial
Statements and Unaudited Supplemental Data."
The Company's ability to make scheduled principal payments of, to pay
interest on or to refinance its indebtedness (including the Exchange Notes)
depend on its future performance and financial results, which, to a certain
extent, are subject to general economic, financial, competitive, legislative,
regulatory and other factors beyond its control. The Company's historical
financial results have been, and its future financial results are anticipated to
be, subject to substantial fluctuations. See "--Cyclical Industry." There can be
no assurance that sufficient funds will be available to enable the Company to
service its indebtedness, including the Notes, or make necessary capital
expenditures or conduct needed research and development. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
degree to which the Company will be leveraged following the Offering could have
important consequences to holders of the Notes, including, but not limited to,
the following: (i) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
financing in the future could be limited; (iii) certain of the Company's
borrowings are at variable rates of interest, which could result in higher
interest expense in the event of increases in interest rates; (iv) the Company
may be more vulnerable to downturns in its business or in the general economy
and may be restricted from making acquisitions, introducing new technologies or
exploiting business opportunities; and (v) the Indenture and the Credit
Agreement contain financial and restrictive covenants that limit the ability of
the Company to, among other things, borrow additional funds, dispose of assets
or pay cash dividends. Failure by the Company to comply with such covenants
could result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which the
Company is leveraged could prevent it from repurchasing all Notes tendered to it
upon the occurrence of a Change of Control, which would constitute an Event of
Default under the Indenture. See "Description of the Notes" and "Description of
Certain Indebtedness."
RANKING OF THE NOTES AND GUARANTY
The payment of the principal of, premium (if any) and interest on the
Exchange Notes, like the Existing Notes, is subordinate in right of payment, as
set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness of the Company. At February 23, 1997, after giving pro forma effect
to the Transactions, the Company's Senior Indebtedness would have been
approximately $120.0 million. Although the Indenture contains limitations on the
amount of additional indebtedness that the Company
15
<PAGE>
may incur, under certain circumstances additional indebtedness may be incurred,
the amount of which could be substantial and which may be Senior Indebtedness.
See "Description of the Notes--Certain Covenants--Limitations on Indebtedness."
As a result of the Transactions, the Company realized approximately $75.0
million of borrowing availability under the Senior Credit Facilities. Any such
amounts, when borrowed, will constitute Senior Indebtedness of the Company.
In the event of the bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay the Notes only after
all Senior Indebtedness of the Company has been paid in full. Sufficient funds
may not exist to pay amounts due on the Notes in such event. In addition, the
subordination provisions of the Indenture provide that no cash payment may be
made with respect to the Notes during the continuance of a payment default under
any Senior Indebtedness of the Company. Furthermore, if certain non-payment
defaults exist with respect to certain Senior Indebtedness of the Company, the
holders of such Senior Indebtedness will be able to prevent payments on the
Notes for certain periods of time. See "Description of the Notes--Ranking."
Although the Company's U.S. operations are owned directly, its foreign
operations are conducted through several subsidiaries organized outside the
United States (the "Foreign Subsidiaries"). The Foreign Subsidiaries have not
guaranteed or otherwise become obligated with respect to the Notes. The Notes
will therefore be effectively subordinated to all existing and future
liabilities, including indebtedness, of the Foreign Subsidiaries. As of February
23, 1997, on a pro forma basis after giving effect to the Transactions, the
Foreign Subsidiaries would have had liabilities, excluding distributor reserves,
of approximately $21.6 million reflected on the Company's combined balance
sheet. Claims of creditors of the Foreign Subsidiaries, including trade
creditors, will generally have priority as to the assets of such subsidiaries
over the claims of the Company and the holders of the Company's indebtedness,
including the Notes.
Fairchild Holdings has guaranteed the Notes on a senior subordinated basis.
Fairchild Holdings currently conducts no business and has no significant assets
other than the capital stock of the Company, all of which has been pledged to
secure Fairchild Holdings' obligations under the Senior Credit Facilities. Thus,
currently there are no resources supporting Fairchild Holdings' guarantee of the
Notes that are in addition to those to which holders of the Notes already have
access as direct creditors of the Company. Fairchild Holdings' guarantee of the
Notes is subordinated in right of payment to the guarantee by Fairchild Holdings
of the Company's obligations under the Senior Credit Facilities, but is senior
to Fairchild Holdings' obligations under the Holdings PIK Note. See "Description
of the Notes--Guaranty."
CYCLICAL INDUSTRY
The semiconductor industry is highly cyclical. During the latter half of
Fiscal Year 1996 and the beginning of Fiscal Year 1997, the Company experienced
significant declines in the pricing of its products as customers reduced demand
forecasts and manufacturers reduced prices to keep capacity utilization high.
The cycle was highly publicized by both the trade and general news media, as the
semiconductor book-to-bill index ("Book-to-Bill") during this period fell below
1-to-1. Although in December 1996, Book-to-Bill exceeded 1-to-1, there can be no
assurance that the market for semiconductors will continue to improve, nor can
there be any assurance that the Company's markets will not experience other,
possibly more severe and prolonged, downturns in the future. Additionally, the
Company may experience significant changes in its operating profit margins as a
result of variations in sales, changes in product mix, price competition for
orders and costs associated with the introduction of new products.
The markets for the Company's products depend on continued demand for
personal computers, telecommunications, automotive, consumer and industrial
electrical goods. There can be no assurance that these end-product markets will
not experience changes in demand that will adversely affect the Company's
prospects.
16
<PAGE>
LACK OF INDEPENDENT OPERATING HISTORY
Prior to the consummation of the Transactions, the business of the Company
was conducted as a division of National Semiconductor since its acquisition by
National Semiconductor in 1987. During Fiscal Year 1996, the Company incurred
$144.3 million in costs for research and development, sales and marketing and
general and administrative activities. These costs represent expenses incurred
directly by the Company and charges allocated to Fairchild by National
Semiconductor. Following consummation of the Transactions the Company has begun
to provide many of these services on a stand-alone basis. However, to provide
certain of these services for a transition period, in connection with the
Transactions the Company entered into a Transition Services Agreement with
National Semiconductor pursuant to which the Company obtains certain of these
services substantially comparable to those previously provided. See "The
Transactions--Transition Services Agreement." The unaudited supplemental
financial information contained herein assumes that the Company would have
incurred annual expenses of $99.5 million in Fiscal Year 1996 to obtain these
services, either from National Semiconductor, under the Transition Services
Agreement, or otherwise. There can be no assurance that charges under the
Transition Services Agreement will not exceed historical charges or that upon
termination of such Agreement the Company will be able to obtain similar
facilities and services on comparable terms. See "--Dependence on National
Semiconductor."
A substantial portion of the Company's sales have been and will continue to
be made through distributors. As a stand-alone entity, the Company will enter
into new distribution arrangements with its distributors. However, there can be
no assurance that the Company will be able to obtain distribution arrangements
that are as favorable as those previously enjoyed by Fairchild as part of
National Semiconductor.
USE OF ASSUMPTIONS TO ESTIMATE FUTURE OPERATING RESULTS
Prior to consummation of the Transactions, the Company was a division of
National Semiconductor and had no independent operating history. Many expenses
that the Company now bears as a stand-alone entity were borne by National
Semiconductor, with all or some portion of such costs allocated to the Company.
In addition, Fairchild historically provided manufacturing services to National
Semiconductor at cost. Under the Manufacturing Agreements Fairchild provides
contract manufacturing services to National Semiconductor at rates designed to
generate a 20% gross profit for the Company, subject to certain conditions and
adjustments. As a result, the supplemental financial data throughout this
Prospectus are based on management's estimates of what such expenses will be on
a stand-alone basis, including the effect of the Transition Services Agreement
and of what contract manufacturing revenue will be under the Manufacturing
Agreements. See "The Transactions--Manufacturing Agreements." There can be no
assurance that such estimates are accurate or will reflect the actual expenses
of the Company. If the Company's actual expenses exceed such estimates, the
Company's operating results will be less favorable than those set forth in such
supplemental data.
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
The semiconductor industry as a whole is characterized by rapidly changing
technology and industry standards, along with frequent new product
introductions. The Company's success in these markets will depend on its ability
to design, develop, manufacture, assemble, test, market and support new products
and enhancements on a timely and cost-effective basis. There can be no assurance
that the Company will successfully identify new product opportunities and
develop and bring new products to market in a timely and cost-effective manner,
or that products or technologies developed by others will not render the
Company's products or technologies obsolete or noncompetitive. A fundamental
shift in technology in the Company's product markets could have a material
adverse effect on the Company.
17
<PAGE>
KEY CUSTOMERS AND STRATEGIC RELATIONSHIPS
In addition to the Company's continuing agreements for the sale of products
to National Semiconductor, the Company has several other large customers,
certain of which have entered into strategic alliances with the Company. Many of
the Company's key customers operate in cyclical businesses and have in the past
varied, and may in the future vary, order levels significantly from period to
period. The loss of one or more of such customers, or a declining market in
which such customers reduce orders or request reduced prices, could have a
material adverse effect on the Company.
DEPENDENCE ON CERTAIN SOURCES OF SUPPLY
The Company's manufacturing operations depend upon obtaining adequate
supplies of raw materials on a timely basis. The Company purchases raw materials
such as silicon wafers, lead frames, mold compound, ceramic packages and
chemicals and gases from a number of suppliers on a just-in-time basis. From
time to time, suppliers may extend lead times, limit supply to the Company or
increase prices due to capacity constraints or other factors. The Company's
results of operations could be adversely affected if it were unable to obtain
adequate supplies of raw materials in a timely manner or if there were
significant increases in the costs of raw materials. In addition, the Company
subcontracts certain of its wafer fabrication and assembly and test operations
to other manufacturers, including Torex, Alphatec, and National Semiconductor.
The Company's operations could be adversely affected if these subcontract
relationships were to be disrupted or terminated.
MANUFACTURING RISKS
The Company's manufacturing processes are highly complex, require advanced
and costly equipment and are continuously being modified in an effort to improve
yields and product performance. Impurities or other difficulties in the
manufacturing process can lower yields. The Company's manufacturing efficiency
will be an important factor in its future profitability, and no assurance can be
given that the Company will be able to maintain its manufacturing efficiency or
increase manufacturing efficiency to the same extent as its competitors.
In addition, as is common in the semiconductor industry, the Company has
from time to time experienced difficulty in beginning production at new
facilities or in effecting transitions to new manufacturing processes and,
consequently, has suffered delays in product deliveries or reduced yields. There
can be no assurance that the Company will not experience manufacturing problems
in achieving acceptable yields or experience product delivery delays in the
future as a result of, among other things, capacity constraints, construction
delays, upgrading or expanding existing facilities or changing its process
technologies, any of which could result in a loss of future revenues. The
Company's operating results could also be adversely affected by the increase in
fixed costs and operating expenses related to increases in production capacity
if revenues do not increase proportionately.
DEPENDENCE ON NATIONAL SEMICONDUCTOR
The Company continues to have rights and obligations under the continuing
agreements with National Semiconductor. The Fairchild Foundry Services
Agreement, pursuant to which National Semiconductor purchases products and
services from the Company, will account for a substantial portion of the
Company's revenues during the 39 months following the date of consummation of
the Transactions. Under the Transition Services Agreement, National
Semiconductor has agreed to continue to provide certain administrative services
to the Company. Under the Technology Licensing and Transfer Agreement, National
Semiconductor has agreed to indemnify the Company against certain losses
relating to infringement of intellectual property rights of third parties. Any
material adverse change in the purchase requirements of National Semiconductor,
in its ability to supply the agreed-upon services, in its ability to fulfill its
intellectual property indemnity obligations or in its ability to fulfill its
other financial obligations under the
18
<PAGE>
continuing agreements could have a material adverse effect on the Company.
Although National Semiconductor has retained an equity interest in Fairchild
Holdings, and although it has and will continue to have substantial commercial
relations with Fairchild, National Semiconductor does not control Fairchild
Holdings or Fairchild and is not responsible for Fairchild Holdings' or
Fairchild's performance.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; FOREIGN CASH FLOWS
Fairchild maintains significant operations in Cebu, the Philippines, and
Penang, Malaysia. These facilities handle the assembly and test of most of the
Company's products. The Company has enjoyed favorable labor, regulatory and tax
conditions in both countries; however, the Company's foreign operations are
subject to the risks of doing business internationally, such as changes in
import duties, trade restrictions, transportation delays, work stoppages,
economic and political instability, foreign currency fluctuations, the laws and
policies of the United States and of the countries in which the Company's
products are manufactured and other factors which could have a material adverse
effect on the Company's business and results of operations. Management believes
that the loss of its facilities in the Philippines or Malaysia would materially
adversely affect the Company's business and results of operations until
alternative manufacturing arrangements could be secured.
INTELLECTUAL PROPERTY
The Company's future success and competitive position depends in part upon
its ability to obtain and maintain certain proprietary technology used in its
principal products, and the Company relies in part on patent, trade secret,
trademark and copyright law to protect that technology. Some of the technology
is not covered by any patent or patent application, and there can be no
assurance that any of the more than 150 patents owned or thousands of patents
licensed by the Company from National Semiconductor will not be invalidated,
circumvented, challenged or licensed to others, that the rights granted
thereunder will provide competitive advantages to the Company or that any of the
Company's pending or future patent applications will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technology, duplicate the Company's technology or design around
the patents owned or licensed by the Company. In addition, effective patent,
trademark, copyright and trade secret protection may be unavailable, limited or
not applied for in certain foreign countries. Certain of the Company's
technology is licensed on a non-exclusive basis from National Semiconductor
which may license such technology to others, including competitors of the
Company. Under the Technology Licensing and Transfer Agreement, National
Semiconductor has limited royalty-free, worldwide license rights (without right
to sublicense) to all or some of the Company's technology. See "The
Transactions--Technology Licensing and Transfer Agreement." There can be no
assurance that steps taken by the Company to protect its technology will prevent
misappropriation of such technology.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. There is no
intellectual property litigation currently pending against the Company; however,
the Company may from time to time be notified of claims that it may be
infringing patents or other intellectual property rights owned by other third
parties. If it is necessary or desirable, the Company may seek licenses under
such patents or intellectual property rights. However, there can be no assurance
that licenses will be offered or that the terms of any offered licenses will be
acceptable to the Company. The failure to obtain a license from a third party
for technology used by the Company could cause the Company to incur substantial
liabilities and to suspend the manufacture or shipment of products or the use by
the Company of processes requiring the technology. Litigation could result in
significant expense to the Company, adversely affecting sales of the challenged
product or technology and diverting the efforts of the Company's technical and
management personnel, whether or not such litigation is determined in favor of
the Company. In the event of an adverse result in any such litigation, the
Company could be required to pay substantial damages, cease the manufacture,
use, sale or importation of infringing products, expend
19
<PAGE>
significant resources to develop or acquire non-infringing technology,
discontinue the use of certain processes or obtain licenses to the infringing
technology. There can be no assurance that the Company would be successful in
such development or acquisition or that such licenses would be available under
reasonable terms, and any such development, acquisition or license could require
expenditures by the Company of substantial time and other resources. National
Semiconductor has agreed to indemnify the Company for limited periods of time
against claims that may be made that the Company's activities infringe the
rights of others. See "The Transactions--Technology Licensing and Transfer
Agreement."
The Company also seeks to protect its proprietary technology, including
technology that may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors' rights agreements with its
collaborators, advisors, employees and consultants. There can be no assurance
that these agreements will not be breached, that the Company will have adequate
remedies for any breach or that such persons or institutions will not assert
rights to intellectual property arising out of such research.
COMPETITION
The semiconductor industry, and the multi-market semiconductor product
markets specifically, are highly competitive. Competition is based on price,
product performance, quality, reliability and customer service. The gross profit
margins realizable in the Company's markets can differ across regions, depending
on the economic strength of end-product markets in those regions. In addition,
even in strong markets price pressures may emerge as competitors attempt to gain
more share by lowering prices on those products. Competition in the various
markets served by the Company comes from companies of various sizes, many of
which are larger and have greater financial and other resources than the Company
and thus can better withstand adverse economic or market conditions than can the
Company. In addition, companies not currently in direct competition with the
Company may introduce competing products in the future.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, finance and
manufacturing personnel, certain of whom would be difficult to replace. The loss
of the services of certain of these executives could have an adverse effect on
the Company. There can be no assurance that the services of such personnel will
continue to be made available. The Company has entered into employment
arrangements with certain key executive officers and the Management Investors
have invested approximately $6.5 million to purchase approximately 16% of the
outstanding capital stock of Fairchild Holdings. See "Management" and "Ownership
of Capital Stock."
ENVIRONMENTAL LIABILITIES; OTHER GOVERNMENTAL REGULATIONS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations relating to the discharge, storage,
treatment, handling, disposal and remediation of certain materials, substances
and wastes used in or resulting from its operations. The Company's operations
are also governed by laws and regulations relating to workplace safety and
worker health which, among other things, regulate employee exposure to hazardous
substances in the workplace. Pursuant to the Asset Purchase Agreement (as
defined), National Semiconductor is obligated to indemnify the Company with
respect to certain environmental liabilities related to events or activities
prior to consummation of the Transactions, subject to certain limitations. See
"The Transactions--Asset Purchase Agreement." The nature of the Company's
operations expose it to the risk of liabilities or claims with respect to
environmental matters, including those relating to the on- and off-site disposal
and release of hazardous substances, and there can be no assurance that material
costs will not be incurred in connection with such liabilities or claims.
20
<PAGE>
Based on the Company's experience to date, management believes that the
future cost of compliance with existing environmental and health and safety laws
and regulations (and liability for known environmental conditions) will not have
a material adverse effect on the Company's business, financial condition or
results of operations. However, management cannot predict what environmental or
health and safety legislation or regulations will be enacted in the future or
how existing or future laws or regulations will be enforced, administered or
interpreted, nor can it predict the amount of future expenditures which may be
required in order to comply with such environmental or health and safety laws or
regulations or to respond to such environmental claims. See
"Business--Environmental Matters."
OWNERSHIP OF FAIRCHILD HOLDINGS AND THE COMPANY
As a result of the Transactions, Sterling and the Management Investors own
approximately 85% of the outstanding voting stock of Fairchild Holdings, which
owns all of the outstanding capital stock of the Company. By virtue of such
stock ownership, such persons have the power to direct the affairs of the
Company and are able to determine the outcome of all matters required to be
submitted to stockholders for approval, including the election of a majority of
the Company's directors and amendment of the Company's Certificate of
Incorporation. See "The Transactions" and "Ownership of Capital Stock."
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITIES AND THE INDENTURE
The Senior Credit Facilities and the Indenture contain a number of
significant covenants that, among other things, restrict the ability of the
Company to dispose of assets, incur additional indebtedness, repay other
indebtedness, pay dividends, enter into certain investments or acquisitions,
repurchase or redeem capital stock, engage in mergers or consolidations, or
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. There can be no assurance that such restrictions
will not adversely affect the Company's ability to finance its future operations
or capital needs or engage in other business activities that may be in the
interest of the Company. In addition, the Senior Credit Facilities also require
the Company to maintain compliance with certain financial ratios. The ability of
the Company to comply with such ratios may be affected by events beyond the
Company's control. A breach of any of these covenants or the inability of the
Company to comply with the required financial ratios could result in a default
under the Senior Credit Facilities. In the event of any such default, the
lenders under the Senior Credit Facilities could elect to declare all borrowings
outstanding under the Senior Credit Facilities, together with accrued interest
and other fees, to be due and payable, to require the Company to apply all of
its available cash to repay such borrowings or to prevent the Company from
making debt service payments on the Notes, any of which would be an Event of
Default under the Notes. If the Company were unable to repay any such borrowings
when due, the lenders could proceed against their collateral. If the
indebtedness under the Senior Credit Facilities (and thus the Notes) or the
Notes were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay such indebtedness in full. See "Description
of the Notes" and "Description of Certain Indebtedness--Senior Credit
Facilities."
LIMITATION ON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company is obligated to make
an offer to purchase all outstanding Notes at a price equal to 101% of the
principal amount of the Notes, plus accrued interest thereon. The Credit
Agreement prohibits the Company from purchasing any Notes, and also provides
that the occurrence of certain Change of Control events with respect to the
Company constitutes a default thereunder. In the event of a Change of Control,
the Company must offer to repay all borrowings under the Credit Agreement or
obtain the consent of its lenders under the Credit Agreement to the purchase of
Notes. If the Company does not obtain such a consent or repay such borrowings,
the Company would remain prohibited from purchasing Notes. In such case, the
Company's failure to purchase tendered Notes would constitute a default under
the Indenture, which, in turn, would constitute a default under the Credit
Agreement. There can be no assurance that the Company will have the financial
ability to purchase the Notes upon the occurrence of a Change of Control. There
can be no assurance that the Company will be
21
<PAGE>
able to comply with all of its obligations under the Credit Agreement, the
Indenture, the Holdings PIK Note and the other indebtedness upon the occurrence
of a Change of Control. See "Description of the Notes--Change of Control."
LACK OF PUBLIC MARKET
The Existing Notes are currently eligible for trading in the PORTAL Market.
The Exchange Notes are new securities for which there is no established market.
The Company does not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the Exchange Notes. However, the Initial Purchasers are not obligated to do
so and any market making may be discontinued at any time without notice. There
can be no assurance as to the development of any market or the liquidity of any
market that may develop for the Exchange Notes. See "Description of the Notes."
FRAUDULENT CONVEYANCE
The Existing Notes were incurred to finance in part the acquisition of the
Fairchild multi-market semiconductor business of National Semiconductor, and
Fairchild Holdings guaranteed the Company's obligations under the Existing Notes
and will guarantee the Company's obligations under the Exchange Notes.
Management believes that the indebtedness of the Company represented by the
Notes has been incurred for proper purposes and in good faith, and that, based
on present forecasts, asset valuations and other financial information, after
the consummation of the Transactions, each of the Company and Fairchild Holdings
is solvent, has sufficient capital for carrying on its business and will be able
to pay its debts as they mature. See, however, "--Substantial Leverage; Ability
to Service Indebtedness." Notwithstanding management's belief, however, under
federal or state fraudulent transfer laws, if a court of competent jurisdiction
in a suit by an unpaid creditor or a representative of creditors (such as a
trustee in bankruptcy or a debtor-in-possession) were to find that, at the time
of the incurrence of such indebtedness, the Company or Fairchild Holdings was
insolvent, was rendered insolvent by reason of such incurrence, was engaged in a
business or transaction for which its remaining assets constituted unreasonably
small capital, intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they matured, or intended to hinder, delay or
defraud its creditors, and that the indebtedness was incurred for less than
reasonably equivalent value, then such court could, among other things, (a) void
all or a portion of Fairchild Holdings' or the Company's obligations to the
Holders of the Notes, the effect of which would be that the Holders of the Notes
might not be repaid in full and/or (b) subordinate Fairchild Holdings' or the
Company's obligations to the Holders of the Notes to other existing and future
indebtedness of the Company or Fairchild Holdings to a greater extent than would
otherwise be the case, the effect of which would be to entitle such other
creditors to which the Notes were not previously subordinated to be paid in full
before any payment could be made on the Notes.
22
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The gross
proceeds to the Company from the sale of the Existing Notes of $300.0 million,
together with the $120.0 million from the Revolving Credit Facility and the
$77.8 million equity contribution, were used (i) to finance the purchase of
Fairchild from National Semiconductor, (ii) to pay fees and expenses relating to
the Transactions and (iii) to fund working capital needs of the Company.
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 23, 1997 on a pro forma basis after giving effect to the Transactions.
This table should be read in conjunction with "Unaudited Pro Forma Combined
Condensed Financial Statements and Unaudited Supplemental Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Combined Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT FEBRUARY 23,
1997
---------------
<S> <C>
(IN MILLIONS)
DEBT:
Senior Credit Facilities:
Revolving Credit Facility(1).............................................. $ --
Senior Term Facility (including $11.0 million current portion)............ 120.0
10 1/8% Senior Subordinated Notes Due 2007.................................. 300.0
------
TOTAL DEBT.............................................................. 420.0
STOCKHOLDER'S EQUITY(2):
Common Stock $.01 par value; 100 shares issued and outstanding as of
February 23, 1997 on a pro forma basis.................................... --
Stockholder's equity........................................................ 14.0
------
TOTAL STOCKHOLDER'S EQUITY.............................................. 14.0
------
TOTAL CAPITALIZATION.................................................... $ 434.0
------
------
</TABLE>
- ------------------------
(1) Borrowings of up to $75.0 million under the Revolving Credit Facility are
available to the Company for working capital and general corporate purposes.
The Company did not draw upon the Revolving Credit Facility in connection
with the Transactions.
(2) In addition to the Purchase Price Notes issued by the Company to National
Semiconductor, Fairchild Holdings issued the Holdings PIK Note, Holdings
Preferred Stock and Holdings Common Stock to National Semiconductor in
exchange for all outstanding common stock of Fairchild and $12.8 million.
Fairchild Holdings' ability to repay the principal on the Holdings PIK Note
is dependent on its ability to generate cash from its investment in
Fairchild.
23
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
(the "Pro Forma Financial Statements") are based on the historical Combined
Financial Statements of Fairchild included elsewhere in this Prospectus adjusted
to give effect to the Transactions. The Unaudited Pro Forma Combined Condensed
Balance Sheet gives effect to the Transactions as if they had occurred as of
February 23, 1997, and the Unaudited Pro Forma Combined Condensed Statements of
Operations give effect to the Transactions as if they had occurred as of May 29,
1995. The Transactions and the related adjustments are described in the
accompanying notes. The pro forma adjustments are based upon preliminary
estimates and certain assumptions that management of the Company believes are
reasonable in the circumstances. In the opinion of management, all adjustments
have been made that are necessary to present fairly the pro forma data. Final
amounts could differ from those set forth below.
The Pro Forma Financial Statements should be read in conjunction with the
notes included herewith, the Company's Combined Financial Statements and notes
thereto as of May 28, 1995 and May 26, 1996 and for each of the Fiscal Years in
the three-year period ended May 26, 1996, which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, the Company's unaudited
Combined Financial Statements as of February 23, 1997 and for the nine-month
periods ended February 23, 1997 and February 25, 1996, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The Pro Forma Financial Statements do not
purport to represent what the Company's results of operations or financial
position would have been had the Transactions occurred on the dates specified,
or to project the Company's results of operations or financial position for any
future period or date.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 26,
1996
--------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS
----------- -------------
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS: (DOLLARS IN MILLIONS)
Revenue
Net Sales--trade........................................................................ $ 687.8
Contract manufacturing--National Semiconductor.......................................... 87.6 $ 9.01(a)
----------- ------
775.4 9.0
Cost of sales
Cost of sales--trade.................................................................... 472.7 (1.5)1(b)
Cost of contract manufacturing--National Semiconductor.................................. 87.6
----------- ------
560.3 (1.5)
----------- ------
Gross profit.............................................................................. 215.1 10.5
Research and development................................................................ 30.3
Selling and marketing................................................................... 65.6 (3.5)1(b)
General and administrative.............................................................. 48.4 (3.1)1(b)
----------- ------
Revenues less direct and allocated expenses before other (income) expense and taxes....... 70.8 17.1
Other (income) expense.................................................................. (1.5)
Non-cash interest expense............................................................... -- 2.61(d)
Cash interest expense................................................................... -- 40.31(e)
----------- ------
Revenue less direct and allocated expenses before taxes................................... $ 72.3 (25.8)
-----------
-----------
Provision for income taxes.............................................................. 16.91(f)
------
Revenue less direct and allocated expenses................................................ (42.7)
------
------
<CAPTION>
PRO FORMA
-------------
<S> <C>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS:
Revenue
Net Sales--trade........................................................................ $ 687.8
Contract manufacturing--National Semiconductor.......................................... 96.6
------
784.4
Cost of sales
Cost of sales--trade.................................................................... 471.2
Cost of contract manufacturing--National Semiconductor.................................. 87.6
------
558.8
------
Gross profit.............................................................................. 225.6
Research and development................................................................ 30.3
Selling and marketing................................................................... 62.1
General and administrative.............................................................. 45.3
------
Revenues less direct and allocated expenses before other (income) expense and taxes....... 87.9
Other (income) expense.................................................................. (1.5)
Non-cash interest expense............................................................... 2.6
Cash interest expense................................................................... 40.3
------
Revenue less direct and allocated expenses before taxes................................... 46.5
Provision for income taxes.............................................................. 16.9
------
Revenue less direct and allocated expenses................................................ $ 29.6
------
------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed statements of
operations.
24
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED FEBRUARY 23, 1997
-------------------------------------------
PRO FORMA
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS: HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ------------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
Revenue
Net sales--trade.............................................................. $433.9 $ 433.9
Contract manufacturing--National Semiconductor................................ 75.8 $ 5.11(a) 80.9
---------- ------ ------------
509.7 5.1 514.8
Cost of sales
Cost of sales--trade.......................................................... 332.4 (0.6)1(b) 331.8
Cost of contract manufacturing--National Semiconductor........................ 75.8 75.8
---------- ------ ------------
408.2 (0.6) 407.6
---------- ------ ------------
Gross profit.................................................................... 101.5 5.7 107.2
Research and development...................................................... 13.6 13.6
Selling and marketing......................................................... 33.5 33.5
General and administrative.................................................... 39.1 (15.7)1(b,c) 23.4
Restructuring................................................................. 5.3 5.3
---------- ------ ------------
Revenue less direct and allocated expenses before other (income) expense and
taxes......................................................................... 10.0 21.4 31.4
Other (income) expense........................................................ 0.4 0.4
Non-cash interest expense..................................................... -- 1.71(d) 1.7
Cash interest expense......................................................... -- 29.71(e) 29.7
---------- ------ ------------
Revenue less direct and allocated expenses before taxes......................... $ 9.6 (10.0) (0.4)
----------
----------
Provision for income taxes.................................................... (0.1)1(f) (0.1)
------ ------------
Revenue less direct and allocated expenses...................................... $ (9.9) $ (0.3)
------ ------------
------ ------------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed statements of
operations.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
1 The Unaudited Pro Forma Combined Condensed Statements of Operations give
effect to the following adjustments:
(a) Reflects the increase in contract manufacturing revenue from National
Semiconductor under the terms of the Manufacturing Agreements (as
defined) between the Company and National Semiconductor. Historically,
the services to be provided by Fairchild under the Manufacturing
Agreements have been provided at cost. However, the terms of the
Manufacturing Agreements (i) require National Semiconductor to purchase
at least $330.0 million of goods and services from Fairchild during the
first 39 months after the Transactions are consummated and (ii) are
designed to generate a 20% gross profit for the Company subject to a
biannual price adjustment based on actual wafer costs for the previous
six months, except that the prices cannot be adjusted upward. The pro
forma adjustment represents the wafer prices as stated in the Agreement
applied to the historical unit volume, and compared to actual costs. See
"The Transactions--Manufacturing Agreements."
There is no pro forma adjustment with respect to the agreement concerning
sales from National Semiconductor to the Company. That agreement provides
for a pricing arrangement identical to that described above, except that
guaranteed volume levels are significantly lower than historical volume
levels. If the prices as stated in such Agreement were applied to the
historical unit volume, the result would be that the Company would have
recorded lower costs of sales primarily because historical product mix
and volume is not indicative of that considered by such agreement.
(b) Historically, National Semiconductor has allocated the costs of
corporate services, generally based on a percentage of sales or a
relevant usage base. Certain of these services are expected to continue
to be provided by National Semiconductor to Fairchild based on the
Transition Services Agreement, on terms which are generally more
favorable to the Company than represented by such historical allocations.
The adjustment represents the difference between amounts previously
allocated by National Semiconductor for these services and the amounts
which would have been paid to National Semiconductor had the Transition
Services Agreement been in effect since May 29, 1995 for those services
covered thereby and for which the price is fixed and for which the
historical costs are determinable. These adjustments can be summarized as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED ENDED
MAY 26, FEBRUARY 23,
1996 1997
----------- ---------------
(IN MILLIONS)
<S> <C> <C>
Logistical warehousing, planning and quality assurance services................................. $ 1.5 $ 0.6
Regional and corporate sales and marketing services............................................. 3.5 --
Regional and corporate finance, human resources and general and administrative services......... 3.1 1.6
----------- ---
$ 8.1 $ 2.2
----------- ---
----------- ---
</TABLE>
(c) In the nine months ended February 23, 1997, Fairchild recorded charges
of $14.1 million, primarily related to retention and incentive bonuses to
key employees which were directly related to the Transactions. The
adjustment reflects the elimination of such non-recurring retention
bonuses accrued for employees in the nine-months ended February 23, 1997.
These bonuses will be paid by National Semiconductor.
(d) Represents non-cash interest expense of $2.6 million and $1.7 million in
the Fiscal Year ended May 26, 1996, and the nine months ended February
23, 1997 representing the amortization of debt issuance costs of $20.6
million using the effective interest method.
(e) Represents estimated cash interest expense from the use of borrowings to
finance the Transactions and future working capital requirements.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED ENDED
MAY 26, FEBRUARY 23,
1996 1997
----------- -------------
(IN MILLIONS)
<S> <C> <C>
Interest on Notes (10.125% on $300 million)..................................................... $ 30.4 $ 22.8
Interest on borrowings under the Senior Credit Facilities at LIBOR (5.5625%) plus:
Term A 2.50% (8.0625% on $75.0 million)..................................................... 5.7 3.8
Term B 3.00% (8.5625% on $45.0 million)..................................................... 3.8 2.8
Commitment fee of 1/2% on unused Revolving Credit Facility...................................... 0.4 0.3
----------- ------
$ 40.3 $ 29.7
----------- ------
----------- ------
</TABLE>
(f) Represents the pro forma income tax provision as if the Company were a
stand-alone entity, assuming certain non U.S. income is invested
indefinitely outside the United States.
26
<PAGE>
FAIRCHILD SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
FEBRUARY 23, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ADJUSTMENTS TO
REFLECT ENTITY ENTITY PRO FORMA
HISTORICAL RECAPITALIZED RECAPITALIZED ADJUSTMENTS
--------- ---------------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash...................................................... $ -- $ $ -- $ 71.4
Inventories............................................... 67.3 67.3
Prepaids and other........................................ 8.6 8.6
Miscellaneous receivables................................. 9.6 (9.6) 1 --
--------- ----------- ------------ -----------
Total current assets.................................... 85.5 (9.6) 75.9 71.4
Property, plant and equipment............................... 303.8 303.8
Deferred income taxes....................................... -- -- 25.0
Other assets................................................ 0.9 0.9 20.6
--------- ----------- ------------ -----------
Total assets............................................ $ 390.2 (9.6) $ 380.6 $ 117.0
--------- ----------- ------------ -----------
--------- ----------- ------------ -----------
Current liabilities
Revolving credit facility................................. $ -- $ $ -- $
Current portion of bank debt.............................. -- -- 11.0
Accounts payable.......................................... 41.3 (12.2) 1 29.1
Accrued expenses.......................................... 21.1 13.4 1 34.5
Special reserves.......................................... 13.8 (13.8) 1 --
--------- ----------- ------------ -----------
Total current liabilities............................... 76.2 (12.6) 63.6 11.0
Long term bank debt, less current
portion................................................... -- -- 109.0
Senior Notes................................................ -- -- 300.0
Deferred income taxes....................................... -- --
--------- ----------- ------------ -----------
Total liabilities....................................... 76.2 (12.6) 63.6 420.0
Business equity/Stockholder's equity:
Business equity............................................. 314.0 3.0 1 317.0 (317.0)
Common Stock ($0.01 par value, no shares authorized, issued
and outstanding at February 23, 1997; 100 shares
authorized, issued and outstanding on a pro forma basis).. -- --
Stockholder's equity........................................ -- -- 14.0
--------- ----------- ------------ -----------
Total liabilities and business equity/stockholder's
equity................................................ $ 390.2 $ (9.6) $ 380.6 $ 117.0
--------- ----------- ------------ -----------
--------- ----------- ------------ -----------
<CAPTION>
PRO FORMA
-----------
<S> <C> <C>
Current assets:
Cash...................................................... 2(a) $ 71.4
Inventories............................................... 67.3
Prepaids and other........................................ 8.6
Miscellaneous receivables................................. --
-----------
Total current assets.................................... 147.3
Property, plant and equipment............................... 303.8
Deferred income taxes....................................... 2(h) 25.0
Other assets................................................ 2(d) 21.5
-----------
Total assets............................................ $ 497.6
-----------
-----------
Current liabilities
Revolving credit facility................................. $ --
Current portion of bank debt.............................. 2(b) 11.0
Accounts payable.......................................... 29.1
Accrued expenses.......................................... 34.5
Special reserves.......................................... --
-----------
Total current liabilities............................... 74.6
Long term bank debt, less current
portion................................................... 2(b) 109.0
Senior Notes................................................ 2(c) 300.0
Deferred income taxes....................................... --
-----------
Total liabilities....................................... 483.6
Business equity/Stockholder's equity:
Business equity............................................. 2(i) --
Common Stock ($0.01 par value, no shares authorized, issued
and outstanding at February 23, 1997; 100 shares
authorized, issued and outstanding on a pro forma basis).. --
Stockholder's equity........................................ 2(j) 14.0
-----------
Total liabilities and business equity/stockholder's
equity................................................ $ 497.6
-----------
-----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed balance sheet.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
1 Adjustments to the Company's historical Combined Balance Sheet as of
February 23, 1997 to reflect the elimination of $9.6 million of receivables
and $27.2 million of liabilities which are excluded from the Transactions
and to reflect the assumption of $14.6 million in liabilities for
distributor accounts receivable reserves which are not included in the
historical balance sheet.
2 The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to the
following pro forma adjustments:
(a) Represents the pro forma net increase in cash as a result of the
following:
<TABLE>
<CAPTION>
AMOUNT
-------------
<S> <C>
(IN MILLIONS)
Proceeds from Senior Term Facility.......................................................... $ 120.0(b)
Proceeds from the Notes..................................................................... 300.0(c)
Deferred debt issuance costs................................................................ (20.6)(d)
Cash paid to National Semiconductor......................................................... (401.6)(e)
Capital contribution from Fairchild Holdings................................................ 77.8(f)
Equity transaction fees..................................................................... (4.2)(g)
-------------
$ 71.4
-------------
-------------
</TABLE>
(b) Represents proceeds of $120.0 million received from 5-year and 7-year
term loan borrowings at the LIBOR rate plus 2.5% and 3.0%, respectively.
Interest rates of 8.06% and 8.56%, respectively, were used for purposes
of calculating pro forma interest expense. The current portion of the
term loan borrowings is $11.0 million.
(c) Represents the proceeds received from the issuance of the Notes of
$300.0 million at an interest rate of 10.125%.
(d) Represents deferred debt issuance costs primarily comprised of
underwriting, commitment and professional fees of $20.6 million
associated with the Senior Credit Facilities and the Notes.
(e) Represents cash paid to National Semiconductor of $401.6 million in
exchange for National Semiconductor's transfer of the assets and assumed
liabilities to Fairchild. See notes 2(i) and 2(j). National Semiconductor
also received 100 shares of $.01 par value common stock in Fairchild
which represents all of the outstanding common stock of Fairchild. The
cash distribution to National Semiconductor is subject to a dollar for
dollar adjustment to the extent that the Closing Inventory Amount is
greater or less than the amount of inventory on a pro forma basis after
giving effect to the Transactions on February 23, 1997 of $67.3 million.
See "The Transactions-- Recapitalization Agreement."
(f) Represents a capital contribution of $77.8 million from Fairchild
Holdings. Fairchild Holdings received $77.8 million from Sterling,
National Semiconductor and the Management Investors as follows. See note
2(j):
<TABLE>
<CAPTION>
AMOUNT
---------------
<S> <C>
(IN MILLIONS)
Received from Sterling in exchange for 53,113 shares of Holdings Preferred Stock, 3,553,000
shares of Holdings Class A Stock and 7,163,880 shares of Holdings Class B Stock........... $ 58.5
Received from National Semiconductor in exchange for 11,667 shares of Holdings Preferred
Stock, 1,095,000 shares of Holdings Class A Stock and 1,245,000 shares of Holdings Class B
Stock and the $77.0 million Holdings PIK Note from Fairchild Holdings..................... 12.8*
Received from the Management Investors in exchange for 5,220 shares of Holdings Preferred
Stock and 2,543,120 shares of Holdings Class A Stock...................................... 6.5
-----
$ 77.8
-----
-----
</TABLE>
-------------------------------------
*National Semiconductor also transferred 100 shares of Fairchild common
stock to Fairchild Holdings.
(g) Represents expenses of $4.2 million relating to the redemption of old
common stock in Fairchild and the issuance of Holdings Preferred Stock,
Holdings Class A Stock and Holdings Class B Stock. See note 2(j).
(h) The asset purchase included in the Transactions qualifies as a taxable
event for U.S. federal income tax purposes. The pro forma adjustment
represents the estimated deferred tax asset of $45.0 million related to
the difference between the tax basis and the book basis of assets and
liabilities as of February 23, 1997 after giving pro forma effect to the
Transactions, net of a valuation allowance of $20.0 million.
(i) Represents the pro forma elimination of business equity of $317.0
million as a result of the portion of the cash paid to National
Semiconductor of $401.6 million attributable to business equity. See
notes 2(e) and 2(j).
(j) Represents the pro forma stockholder's equity resulting from the
following:
<TABLE>
<CAPTION>
AMOUNT
-------------
<S> <C>
(IN MILLIONS)
The excess of the $401.6 million paid to National Semiconductor over the $317.0 million
attributable to business equity........................................................ $ (84.6)(e)(i)
Capital contribution from Fairchild Holdings............................................. 77.8(f)
Equity transaction fees.................................................................. (4.2)(g)
Deferred tax asset....................................................................... 25.0(h)
------
$ 14.0
------
------
</TABLE>
28
<PAGE>
UNAUDITED SUPPLEMENTAL FINANCIAL DATA
The Pro Forma Combined Financial Statements included elsewhere herein give
effect to certain pro forma adjustments to historical amounts as described in
the notes to such data. In evaluating the Notes, investors should consider
additional supplemental financial data which are summarized below.
The Unaudited Supplemental Financial Data reflect (i) certain pro forma
adjustments and (ii) management's estimates of certain cost savings which
management believes will be attained as a result of the Transactions. See
"Disclosure Regarding Forward Looking Statements."
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED ENDED
MAY 26, FEBRUARY 23,
1996 1997
----------- -------------
<S> <C> <C>
(IN MILLIONS)
Historical EBITDA(1).............................................................. $ 135.0 $ 66.7
Pro forma adjustments before interest and taxes(2):
Manufacturing Agreements...................................................... 9.0 5.1
Transition Services Agreement................................................. 8.1 2.2
Elimination of retention bonuses.............................................. -- 14.1
----------- -------------
Total pro forma adjustments before interest and taxes....................... 17.1 21.4
Management's estimate of cost savings, cost eliminations and
increased gross margins which are anticipated on a stand-alone basis:
Cost of sales(3).............................................................. 10.6 5.0
Research and development(4)................................................... 7.9 (2.7)
Selling, general and administrative(5)........................................ 30.3 1.1
Restructuring charge(6)....................................................... -- 5.3
Additional volume from Manufacturing Agreements(7)............................ 5.3 6.5
----------- -------------
Adjusted EBITDA................................................................... $ 206.2 $ 103.3
----------- -------------
----------- -------------
Ratio of EBITDA to cash interest expense(8)....................................... 5.1x 3.5x
Ratio of debt to Adjusted EBITDA(9)............................................... 2.0x --
</TABLE>
(1) EBITDA is defined as the sum of revenue less direct and allocated expenses
before other (income) expense, interest expense, taxes and depreciation and
amortization. EBITDA is presented because the Company believes that it is a
widely accepted financial indicator of an entity's ability to incur and
service debt. EBITDA should not be considered by an investor as an
alternative to net income or income from operations, as an indicator of the
operating performance of the Company or other combined operations or cash
flow data prepared in accordance with generally accepted accounting
principles or as an alternative to cash flows as a measure of liquidity.
Depreciation and amortization for purposes of the EBITDA calculation
includes amortization for tooling. Tooling is classified as a current asset
in the financial statements of the Company and amortization thereof is not
included in depreciation and amortization for purposes of calculating cash
flows from operating activities, nor are cash outflows for tooling included
in capital expenditures for purposes of calculating cash flows from
investing activities. Tooling amortization included in EBITDA totaled $2.2
million, $2.9 million, $5.7 million, $5.6 million, $6.6 million, $4.4
million, and $5.9 million for the Fiscal Years 1992 through 1996, and for
the nine months ended February 25, 1996, and February 23, 1997,
respectively. Tooling expenditures totaled $3.4 million, $5.5 million, $6.1
million, $5.2 million, $8.6 million, $6.1 million and $4.8 million for the
same periods.
(2) See notes to Unaudited Pro Forma Combined Condensed Statements of
Operations.
(3) COST OF SALES. The estimated cost savings relating to cost of sales include:
(i) elimination of indirect National Semiconductor logistic expenses and
allocated information systems expenses that management does not intend to
replicate after consummation of the Transactions; (ii) elimination of
expenses related to the transfer of production of certain Fairchild products
from a National Semiconductor manufacturing facility to a Fairchild
manufacturing facility; and (iii) elimination of indirect National
Semiconductor planning and quality assurance expenses that management does
not intend to replicate after consummation of the Transactions.
(4) RESEARCH AND DEVELOPMENT. Historically, National Semiconductor allocated
research and development costs to Fairchild based primarily on forecasted
unit manufacturing volume. For Fiscal Year 1996, such allocation methodology
resulted in charges greater than Fairchild's research and development needs,
primarily because Fairchild's products are more standardized, have longer
lives and require lower development expense than National Semiconductor's
products generally. The estimated cost savings (increase) are primarily
attributable to the excess of allocated research and development costs over
the Company's estimate of the research and development costs necessary to
replace such services on a stand-alone basis. During Fiscal Year 1997,
National Semiconductor reduced its allocations to reflect the redirection of
National Semiconductor's research and development spending away from
Fairchild, resulting in lower charges than management expects to incur on a
stand-alone basis.
(5) SELLING, GENERAL AND ADMINISTRATIVE. National Semiconductor allocated
selling, general and administrative expenses to the Company based on sales
and net assets, both of which resulted in allocations to the Company greater
than the expenses necessary on a stand-alone basis. The Company's
multi-market, standardized products require a
29
<PAGE>
UNAUDITED SUPPLEMENTAL FINANCIAL DATA
generally lower level of marketing and application engineering support than
the products of National Semiconductor. In addition, the cost savings
represent general and administrative allocations that the Company will not
replicate, such as certain corporate oversight and administrative services
currently provided by National Semiconductor.
(6) RESTRUCTURING CHARGE. The non-recurring charge was taken to reflect the
costs associated with the Company's cost reduction initiative. The
associated cash outlays relating to such charges have been paid by National
Semiconductor in the nine months ended February 23, 1997.
(7) ADDITIONAL VOLUME FROM MANUFACTURING AGREEMENTS. Under the terms of the
Manufacturing Agreements, National Semiconductor's committed volume
requirements are higher than its historical usage. Had such higher committed
volume requirements been fulfilled by Fairchild, the Company would have had
lower fixed production costs per unit and, in turn, higher gross margins.
See "The Transactions--Manufacturing Agreements."
(8) The ratio of Adjusted EBITDA to net cash interest expense is defined as
Adjusted EBITDA divided by cash interest expense which is summarized in Note
1(e) to the Unaudited Pro Forma Combined Condensed Statements of Operations.
(9) The ratio of debt to Adjusted EBITDA is defined as the $420.0 million in pro
forma debt outstanding as of February 23, 1997 divided by Adjusted EBITDA.
30
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The following table sets forth selected historical combined financial data
with respect to Fairchild. The historical combined financial data as of May 28,
1995 and May 26, 1996 and for the three fiscal years ended May 26, 1996 are
derived directly from the audited Combined Financial Statements of Fairchild
included elsewhere in this Prospectus. The historical combined financial data as
of February 23, 1997 and for the nine months ended February 25, 1996 and
February 23, 1997 are derived directly from the unaudited Combined Financial
Statements of Fairchild included elsewhere in this Prospectus. The historical
combined financial data as of May 31, 1992, May 30, 1993, May 29, 1994 and
February 25, 1996 and for the Fiscal Years ended May 31, 1992 and May 30, 1993
are derived from unaudited combined financial statements of Fairchild that are
not included in this Prospectus. Such unaudited combined financial statements,
in the opinion of management, include all adjustments necessary for the fair
presentation of the financial condition and the results of operations of
Fairchild for such periods and as of such dates. Operating results for the nine
months ended February 23, 1997 are not necessarily indicative of the results of
operations that may be expected for Fiscal Year 1997. This information should be
read in conjunction with the Combined Financial Statements of Fairchild included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR -------------
----------------------------------------------------- FEBRUARY 25,
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
HISTORICAL STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 535.7 $ 620.0 $ 716.6 $ 680.3 $ 775.4 $ 596.6
Gross profit...................................... 84.5 124.0 248.3 203.8 215.1 176.4
Research and development.......................... 30.9 24.5 27.4 31.0 30.3 22.7
Selling and marketing............................. 46.5 44.7 55.0 56.8 65.6 50.0
General and administrative........................ 24.4 24.7 42.3 43.5 48.4 37.6
Restructuring..................................... 18.0 -- -- -- -- --
Revenues less direct and allocated expenses before
other (income) expense and taxes................. (35.3) 30.1 123.6 72.5 70.8 66.1
OTHER FINANCIAL DATA:
REVENUE:
Logic............................................. $ 306.5 $ 326.6 $ 393.8 $ 327.7 $ 338.6 $ 261.9
Discrete.......................................... 65.8 67.2 80.0 116.4 175.0 135.2
Memory............................................ 109.0 148.9 185.1 185.5 174.2 135.8
Contract manufacturing services................... 54.4 77.3 57.7 50.7 87.6 63.7
--------- --------- --------- --------- --------- -------------
Total revenue............................... $ 535.7 $ 620.0 $ 716.6 $ 680.3 $ 775.4 $ 596.6
--------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- -------------
Depreciation and amortization..................... $ 32.9 $ 31.4 $ 33.0 $ 39.1 $ 57.6 $ 40.5
Capital expenditures.............................. $ 26.0 $ 34.0 $ 88.2 $ 112.9 $ 153.9 $ 120.7
Ratio of earnings to fixed charges(1)............. --(2) 11.7x 84.7x 75.3x 46.2x 57.3x
Fairchild Holdings ratio of earnings to combined
fixed charges(3)................................. --(2) 11.7x 84.7x 75.3x 46.2x 57.3x
HISTORICAL BALANCE SHEET DATA (END OF PERIOD):
Inventories....................................... $ 77.5 $ 55.0 $ 60.9 $ 68.8 $ 93.1 $ 96.3
Total assets...................................... 187.8 175.5 233.0 323.2 432.7 422.2
Total business equity............................. 140.6 100.8 161.1 233.2 349.2 346.8
<CAPTION>
FEBRUARY 23,
1997
-------------
<S> <C>
HISTORICAL STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 509.7
Gross profit...................................... 101.5
Research and development.......................... 13.6
Selling and marketing............................. 33.5
General and administrative........................ 39.1
Restructuring..................................... 5.3
Revenues less direct and allocated expenses before
other (income) expense and taxes................. 10.0
OTHER FINANCIAL DATA:
REVENUE:
Logic............................................. $ 210.4
Discrete.......................................... 118.1
Memory............................................ 105.4
Contract manufacturing services................... 75.8
-------------
Total revenue............................... $ 509.7
-------------
-------------
Depreciation and amortization..................... $ 50.8
Capital expenditures.............................. $ 36.7
Ratio of earnings to fixed charges(1)............. 8.4x
Fairchild Holdings ratio of earnings to combined
fixed charges(3)................................. 8.4x
HISTORICAL BALANCE SHEET DATA (END OF PERIOD):
Inventories....................................... $ 67.3
Total assets...................................... 390.2
Total business equity............................. 314.0
</TABLE>
- ------------------------------
(1) Earnings consist of revenue less direct and allocated expenses before taxes
plus fixed charges. Fixed charges consists of interest expense on debt and
amortization of deferred debt issuance costs, and the portion (approximately
one-third) of rental expense that the Company believes is representative of
the interest component of rental expense. For Fiscal Year 1996, on a pro
forma basis after giving effect to the Transactions, the ratio of earnings
to fixed charges was 2.0x. For the nine months ended February 23, 1997, on a
pro forma basis after giving effect to the Transactions, earnings were
inadequate to cover fixed charges by $0.4 million.
(2) Earnings for Fiscal Year 1992 were inadequate to cover fixed charges by
$34.8 million.
(3) Earnings consist of Fairchild Holdings revenue less direct and allocated
expenses before taxes plus fixed charges. Combined Fixed Charges consist of
interest expense on debt and amortization of deferred debt issuance costs,
preferred dividends and the portion (approximately one-third) of rental
expense that the Company believes is representative of the interest
component of rental expense. For Fiscal Year 1996, on a pro forma basis
after giving effect to the Transactions, the Fairchild Holdings ratio of
earnings to combined fixed charges was 1.5x. For the nine months ended
February 23, 1997, on a pro forma basis after giving effect to the
Transactions, earnings were inadequate to cover combined fixed charges by
$15.1 million.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Combined
Financial Statements of the Company included elsewhere in this Prospectus. The
Company generally accounts for its revenue by major product group (logic,
discrete and memory); however, the Company separately accounts for its revenue
from National Semiconductor as contract manufacturing services. Revenue by
product group, referred to as "trade sales," represent sales of products to
unaffiliated purchasers at market prices, while contract manufacturing services
have historically been provided at cost to National Semiconductor.
OVERVIEW
The following table sets forth the composition of historical revenue by
product group and contract manufacturing services, as a percentage of total
revenues:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
<S> <C> <C> <C>
MAY 29, MAY 28, MAY 26,
1994 1995 1996
----------- ----------- -----------
Logic........................................................... 55.0% 48.1% 43.7%
Discrete........................................................ 11.2 17.1 22.6
Memory.......................................................... 25.8 27.3 22.5
Contract manufacturing services................................. 8.0 7.5 11.2
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
Fairchild is renowned as one of the pioneering companies of the
semiconductor industry. Fairchild invented the planar process of manufacturing
semiconductors, regarded as one of the most significant achievements in the
semiconductor industry since the invention of the transistor. These early
innovations form the base of a rich company history. Acquired in 1979 by
Schlumberger, Fairchild continued to innovate, introducing logic products such
as FAST-Registered Trademark- (Fairchild Advanced Schottky Technology) and
FACT-TM- (Fairchild Advanced CMOS Technology), which remain industry standard
products today. In 1987, Fairchild was acquired by National Semiconductor and
integrated into its operations.
Today, Fairchild produces standard logic products, historically a core
business of Fairchild, and discrete and non-volatile memory products,
historically multi-market businesses within National Semiconductor. In the
aggregate, revenue from these product groups represented 92.0%, 92.5% and 88.8%
of total revenue in Fiscal Years 1994, 1995 and 1996, respectively. The
remainder of the Company's revenue, representing 8.0%, 7.5% and 11.2% of total
revenue in Fiscal Years 1994, 1995 and 1996, respectively, was derived from
contract manufacturing services for National Semiconductor. Historically, these
services were provided at cost. Today, as a result of the Transactions, National
Semiconductor and Fairchild each provide the other with certain manufacturing
and assembly and test services. National Semiconductor is required to purchase
not less than $330.0 million of services from the Company during the first 39
months after the consummation of the Transactions at prices designed to generate
a 20% gross profit for the Company, subject to certain conditions and
adjustments. See "Risk Factors--Use of Assumptions to Estimate Future Operating
Results" and "The Transactions--Manufacturing Agreements." The continuing
relationship between National Semiconductor and the Company during this period
will provide an assured base of capacity utilization for Fairchild's facilities.
See "Risk Factors--Dependence on National Semiconductor."
As a stand-alone company, management intends to leverage Fairchild's
strength in high-volume, low-cost manufacturing, and its strong position in the
markets it serves, to be the premier global supplier of logic, discrete and
memory multi-market products. As the only dedicated supplier of logic, discrete
and memory products in the industry, management will focus the Company's efforts
on being the supplier of choice for its customers. While maintaining and
leveraging its strength in bipolar logic, EPROMs and small
32
<PAGE>
signal discretes, the Company intends to focus its product development efforts
to build upon its strong position in the growing CMOS logic, EEPROM and DMOS
Power MOSFET markets. See "Business-- Business Strategy."
QUARTERLY RESULTS
The following table sets forth the unaudited historical quarterly trade
sales and trade gross profits of Fairchild's product groups:
<TABLE>
<CAPTION>
FISCAL
FISCAL YEAR 1995 FISCAL YEAR 1996 YEAR 1997
------------------------------------------ ------------------------------------------ ---------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
TRADE SALES:
Logic......................... $ 74.0 $ 82.6 $ 78.7 $ 92.4 $ 92.3 $ 91.8 $ 77.8 $ 76.7 $ 66.7
Discrete...................... 25.0 27.2 28.4 35.8 44.8 48.1 42.3 39.8 35.8
Memory........................ 45.1 43.7 45.5 51.2 48.0 50.8 37.0 38.4 30.2
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total......................... $ 144.1 $ 153.5 $ 152.6 $ 179.4 $ 185.1 $ 190.7 $ 157.1 $ 154.9 $ 132.7
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
GROSS PROFIT:
Logic......................... $ 25.3 $ 26.4 $ 25.7 $ 34.2 $ 34.3 $ 34.3 $ 20.5 $ 16.4 $ 12.0
Discrete...................... 8.7 9.2 10.3 14.6 20.0 20.5 17.1 14.1 10.5
Memory........................ 13.9 13.6 10.1 11.8 10.4 12.7 6.6 8.2 7.1
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total......................... $ 47.9 $ 49.2 $ 46.1 $ 60.6 $ 64.7 $ 67.5 $ 44.2 $ 38.7 $ 29.6
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
GROSS PROFIT PERCENTAGE:
Logic......................... 34.2% 32.0% 32.7% 37.0% 37.2% 37.4% 26.4% 21.4% 18.0%
Discrete...................... 34.8 33.8 36.3 40.8 44.6 42.6 40.4 35.4 29.3
Memory........................ 30.8 31.1 22.2 23.0 21.7 25.0 17.8 21.4 23.5
Total......................... 33.2% 32.1% 30.2% 33.8% 35.0% 35.4% 28.1% 25.0% 22.3%
<CAPTION>
Q2 Q3
--------- ---------
<S> <C> <C>
TRADE SALES:
Logic......................... $ 74.6 $ 69.1
Discrete...................... 39.7 42.6
Memory........................ 39.6 35.6
--------- ---------
Total......................... $ 153.9 $ 147.3
--------- ---------
--------- ---------
GROSS PROFIT:
Logic......................... $ 18.6 $ 15.5
Discrete...................... 11.1 13.3
Memory........................ 6.6 6.8
--------- ---------
Total......................... $ 36.3 $ 35.6
--------- ---------
--------- ---------
GROSS PROFIT PERCENTAGE:
Logic......................... 24.9% 22.4%
Discrete...................... 28.0 31.2
Memory........................ 16.7 19.1
Total......................... 23.6% 24.2%
</TABLE>
The above table illustrates the cyclical and seasonal nature of Fairchild's
financial performance, although management believes Fairchild is less
susceptible to cyclicality than the semiconductor industry as a whole. The
industry is characterized by periods of strong demand and fully-utilized
manufacturing capacity, as well as occasional periods of sluggish demand and
excess capacity. The Company's third fiscal quarter (December through February)
is generally the industry's weakest period as sales decline due to holidays
throughout the world and the practice of many manufacturers to work off
inventories. Conversely, the Company's fourth fiscal quarter (March through May)
is generally the strongest period as manufacturers return to normal buying
patterns.
Demand strengthened through Fiscal Year 1995 and into the first half of
Fiscal Year 1996, driven by a robust personal computer market and the
introduction of Windows 95-TM-. During this time, the Book-to-Bill, a key
indicator of the health of the semiconductor industry, was approximately 1.13,
which is a historically average level. In the second half of Fiscal Year 1996
and into the first quarter of Fiscal Year 1997, trade sales and gross profits
fell across all product groups, driven by excess inventories held by personal
computer manufacturers. The semiconductor market as a whole weakened during this
period, as the Book-to-Bill dropped to approximately 0.96 during the period
between December 1995 and August 1996. Fairchild's operating results, and the
industry as a whole, rebounded in the second quarter of Fiscal Year 1997. In the
third quarter of Fiscal Year 1997, Fairchild experienced the normal seasonal
decline in its revenues, though gross profit as a percentage of trade sales
continues to improve.
33
<PAGE>
RESULTS OF OPERATIONS
Trade sales data of the Company set forth in this Prospectus excludes
revenue from contract manufacturing services. The following table sets forth
certain financial statement data expressed as a percentage of trade sales:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
MAY 29, MAY 28, MAY 26, FEBRUARY 25, FEBRUARY 23,
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------- -------------
Trade sales............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of trade sales..................................... 62.3 67.6 68.7 66.9 76.6
Gross profit............................................ 37.7 32.4 31.3 33.1 23.4
Research and development................................ 4.2 5.0 4.4 4.3 3.1
Selling, general and administrative..................... 14.8 15.9 16.6 16.4 16.8
Restructuring........................................... -- -- -- -- 1.2
Revenue less direct and allocated expenses before other
(income) expense and taxes............................ 18.7 11.5 10.3 12.4 2.3
Other (income) expense.................................. (0.3) (0.3) (0.2) (0.3) 0.1
Revenue less direct and allocated expenses before
taxes................................................. 19.0 11.8 10.5 12.7 2.2
</TABLE>
NINE MONTHS ENDED FEBRUARY 23, 1997 COMPARED TO NINE MONTHS ENDED FEBRUARY 25,
1996
TRADE SALES. The Company's trade sales for the nine months ended February
23, 1997 were $433.9 million, as compared to $532.9 million for the nine months
ended February 25, 1996, a decrease of 18.6%. The decrease was due to depressed
prices resulting from the worldwide semiconductor market slowdown which started
in the second half of Fiscal Year 1996 and affected all of the Company's product
groups. Logic, discrete and memory trade sales for the nine months ended
February 23, 1997, were down 20%, 13% and 22%, respectively, from the nine
months ended February 25, 1996. The decline in logic trade sales was primarily
price driven, as unit volumes increased slightly. Discrete trade sales decreased
due mainly to lower volume, offset by higher prices as a result of a greater mix
of DMOS Power MOSFET sales. Memory trade sales were depressed due to lower
prices and lower unit volume, due in part to Fairchild's attempt to regain EPROM
market share which it had lost as a result of National Semiconductor's
announcement in the Spring of 1995 that it intended to exit the EPROM market in
a strategic decision to emphasize customized products. Upon announcement of its
intention to re-establish Fairchild as a stand-alone entity, National
Semiconductor announced its intention that Fairchild would remain in the EPROM
market. Overall, bookings rates began to pick up in the second quarter of Fiscal
Year 1997, and management expects a modest recovery for the remainder of Fiscal
Year 1997, although still below the results experienced in the first half of
Fiscal Year 1996. Geographically, 39%, 19% and 42% of trade sales were derived
from North America, Europe and Asia/Pacific, respectively, in the nine months
ended February 23, 1997, as compared to 37%, 24% and 39% in the nine months
ended February 25, 1996.
Total revenue for the nine months ended February 23, 1997 was $509.7
million, as compared to $596.6 million for the nine months ended February 25,
1996, including $75.8 million and $63.7 million, respectively, of contract
manufacturing revenue, which was provided at cost to National Semiconductor. The
increase was due to greater overall capacity in the 6-inch fab in South
Portland, Maine, which was used in part by the Company to produce additional
products for National Semiconductor.
GROSS PROFIT. Gross profit for the nine months ended February 23, 1997 was
$101.5 million, as compared to $176.4 million for the nine months ended February
25, 1996, a decrease of 42.5%. As a percentage of trade sales, gross profit was
23.4% and 33.1% for the nine months ended February 23, 1997 and February 25,
1996, respectively. The decline in gross profit was due to lower unit demand and
lower prices, particularly in the Asia/Pacific region and for EPROM products, as
the Company sought to regain
34
<PAGE>
market share. In addition, the Company suffered from excess manufacturing
capacity brought on by reduced demand and an inventory reduction initiative
which reduced inventories by approximately $26 million from the end of Fiscal
Year 1996. In response to declining gross profit, management enacted cost
reduction programs, which included headcount reductions, in the first quarter of
Fiscal Year 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses were $13.6
million (of which $5.1 million was allocated to Fairchild from National
Semiconductor) for the nine months ended February 23, 1997, as compared to $22.7
million (of which $14.1 million was allocated to Fairchild from National
Semiconductor) for the nine months ended February 25, 1996. As a percentage of
trade sales, research and development expenses were 3.1% and 4.3% for the nine
months ended February 23, 1997 and February 25, 1996, respectively. The decrease
in research and development expenses was primarily attributable to reduced
allocations from National Semiconductor reflecting the reduced consumption of
corporate services in Fiscal Year 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $72.6 million (of which $56.8 million was allocated
to Fairchild from National Semiconductor) for the nine months ended February 23,
1997, as compared to $87.6 million (of which $69.9 million was allocated to
Fairchild from National Semiconductor) for the nine months ended February 25,
1996. As a percentage of trade sales, selling, general and administrative
expenses were 16.8% and 16.4% for the nine months ended February 23, 1997 and
February 25, 1996, respectively. The decrease in selling, general and
administrative expenses was due to reduced allocations from National
Semiconductor reflecting the reduced consumption of corporate services in Fiscal
Year 1997 ($27.2 million), offset by an increase of $14.1 million primarily
attributable to retention and incentive bonuses related to the Transactions, and
lower direct costs ($1.9 million) resulting from cost reduction initiatives at
Fairchild, including headcount reductions.
RESTRUCTURING. The nine months ended February 23, 1997 included a
restructuring charge of $5.3 million (1.2% of trade sales) for severance and
other costs directly attributable to the sale of Fairchild.
OTHER (INCOME) EXPENSE. Other (income) expense was $0.4 million for the
nine months ended February 23, 1997, as compared to $(1.5) million for the nine
months ended February 25, 1996. The increase was primarily attributable to $1.4
million net interest expense related to the financing activities of National
Semiconductor allocated to Fairchild for the nine months ended February 23,
1997, compared to net interest income of $0.1 million for the nine months ended
February 25, 1996.
YEAR ENDED MAY 26, 1996 COMPARED TO YEAR ENDED MAY 28, 1995
TRADE SALES. The Company's trade sales in Fiscal Year 1996 were $687.8
million, as compared to $629.6 million in Fiscal Year 1995, an increase of 9.2%.
The increase in trade sales was primarily attributable to discrete products,
which experienced a 50% increase in revenues over the prior year, due to higher
volume and growth in sales of DMOS Power MOSFET products. Discrete trade sales
were approximately 25% of total trade sales in Fiscal Year 1996, as compared to
18% in Fiscal Year 1995. Logic products experienced a 3.3% growth in trade sales
in Fiscal Year 1996, as market leadership in the growing CMOS market drove a
20.4% increase in CMOS trade sales, which was partially offset by a 9.0%
decrease in Bipolar trade sales that was consistent with the overall Bipolar
market. Logic trade sales were approximately 49.2% of total trade sales in
Fiscal Year 1996, as compared to 52.0% in Fiscal Year 1995. Growth in discrete
and logic trade sales was offset by a 6.1% decline in memory trade sales in
Fiscal Year 1996. The decline in memory trade sales was due to a 21.4% decline
in EPROM trade sales as a result of National Semiconductor's announcement that
it intended to exit the EPROM business in a strategic decision to emphasize
customized products. The decline in EPROM trade sales was partially offset by a
30.5% increase in EEPROM trade sales, in line with the growth of the serial
EEPROM market. Memory trade sales were approximately 25.3% of total trade sales
in Fiscal Year 1996, as compared to 29.5% in Fiscal Year 1995. Fiscal Year 1996
trade sales were hampered by the start of the worldwide semiconductor market
slowdown in the second half of Fiscal Year 1996. As a result, 55% of trade sales
occurred in the
35
<PAGE>
first half and 45% in the second half. Conversely, 47% of trade sales in Fiscal
Year 1995 occurred in the first half and 53% in the second half. Geographically,
38%, 23% and 39% of trade sales were derived from North America, Europe and
Asia/Pacific, respectively, in Fiscal Year 1996, as compared to 38%, 24% and 38%
in Fiscal Year 1995.
Total revenue in Fiscal Year 1996 was $775.4 million, as compared to $680.3
million in Fiscal Year 1995. Total revenue included $87.6 million and $50.7
million of contract manufacturing revenues in Fiscal Year 1996 and Fiscal Year
1995, respectively, which were provided at cost to National Semiconductor. The
increase in contract manufacturing revenue was due to the production ramp up of
the 6-inch wafer fab in South Portland, Maine.
GROSS PROFIT. Gross profit in Fiscal Year 1996 was $215.1 million, as
compared to $203.8 million in Fiscal Year 1995. As a percentage of trade sales,
gross profit was 31.3% and 32.4% in Fiscal Year 1996 and Fiscal Year 1995,
respectively. The increase in gross profit was the result of increased trade
sales of higher margin discrete products, particularly DMOS Power MOSFETs, and
cost efficiencies in the 6-inch fab in South Portland, Maine as it continued its
production ramp up in Fiscal Year 1996. Gross profit was negatively affected by
yield and cost inefficiencies resulting from the ramp-up of an advanced 1 micron
EEPROM process in Salt Lake City and lower factory utilization in the second
half of Fiscal Year 1996 as a result of the start of the worldwide semiconductor
market slowdown.
RESEARCH AND DEVELOPMENT. Research and development expenses were $30.3
million (of which $18.9 million was allocated to Fairchild from National
Semiconductor) in Fiscal Year 1996, as compared to $31.0 million in Fiscal Year
1995. As a percentage of trade sales research and development expenses were 4.4%
and 5.0% in Fiscal Year 1996 and Fiscal Year 1995, respectively. The decrease in
research and development expenses was attributable to lower spending in logic
and EPROM development projects in Fiscal Year 1996 as a result of National
Semiconductor's decision to de-emphasize research and development in these
businesses, offset by higher allocations from National Semiconductor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $114.0 million (of which $91.7 million was
allocated to Fairchild from National Semiconductor) in Fiscal Year 1996, as
compared to $100.3 million (of which $76.8 million was allocated to Fairchild
from National Semiconductor) in Fiscal Year 1995. As a percentage of trade
sales, selling, general and administrative expenses were 16.6% and 15.9% in
Fiscal Year 1996 and Fiscal Year 1995, respectively. The increase in selling,
general and administrative expenses was attributable to increases in allocated
and direct sales support proportional to increased trade sales ($8.8 million)
and higher general and administrative expenses due primarily to increases in
allocations from National Semiconductor.
OTHER (INCOME) EXPENSE. Other (income) expense was $(1.5) million in Fiscal
Year 1996, as compared to $(1.8) million in Fiscal Year 1995. The increase was
attributable to a loss on disposal of certain fixed assets, offset by favorable
results from foreign currency exchange rates.
YEAR ENDED MAY 28, 1995 COMPARED TO YEAR ENDED MAY 29, 1994
TRADE SALES. The Company's trade sales in Fiscal Year 1995 were $629.6
million, as compared to $658.9 million in Fiscal Year 1994, a decrease of 4.4%.
The decrease in trade sales was primarily attributable to logic products, which
experienced a 16.8% decrease in trade sales over an exceptional Fiscal Year 1994
which was impacted by two significant one-time events:
- An explosion and fire occurred at the Sumitomo Chemical plant in Japan in
early Fiscal Year 1994. Sumitomo is a major supplier of resin for mold
compound, a key raw material used in the manufacture of semiconductor
packages. Fears of a shortage of mold compound, combined with forecasts of
growth in the personal computer market, drove logic prices to unusually
high levels in Fiscal Year 1994.
36
<PAGE>
- The Company gained logic market share due to temporary manufacturing
capacity constraints suffered by a major competitor.
Logic revenues were approximately 52.0% of trade sales in Fiscal Year 1995, as
compared to 59.8% in Fiscal Year 1994. The decline in logic trade sales was
offset by growth in discrete trade sales. Discrete trade sales grew
approximately 45.5% in Fiscal Year 1995 over Fiscal Year 1994, as DMOS Power
MOSFET trade sales nearly tripled over the prior year. Discrete trade sales were
approximately 18.5% of total trade sales in Fiscal Year 1995, as compared to
12.1% in Fiscal Year 1994. Memory trade sales, representing 29.5% and 28.1% of
total trade sales in Fiscal Year 1995 and Fiscal Year 1994, respectively, were
flat year on year. Geographically, 38%, 24% and 38% of trade sales were derived
from North America, Europe and Asia/Pacific, respectively, in Fiscal Year 1995,
as compared to 42%, 22% and 36% in Fiscal Year 1994.
Total revenue in Fiscal Year 1995 were $680.3 million, as compared to $716.6
million in Fiscal Year 1994. Total revenue include $50.7 million and $57.7
million of contract manufacturing revenue in Fiscal Year 1995 and Fiscal Year
1994, respectively, which were provided at cost to National Semiconductor. The
decrease in contract manufacturing revenues was due to the shutdown of the
under-utilized MOS1 fab in Salt Lake City, offset by new revenue from the
production ramp up of the 6-inch fab in South Portland, Maine in the second half
of Fiscal Year 1995.
GROSS PROFIT. Gross profit in Fiscal Year 1995 was $203.8 million, as
compared to $248.3 million in Fiscal Year 1994. As a percentage of trade sales,
gross profit was 32.4% and 37.7% in Fiscal Year 1995 and Fiscal Year 1994,
respectively. The decline in gross profit was primarily the result of lower
logic selling prices in Fiscal Year 1995 as compared to Fiscal Year 1994's
unusually high level.
RESEARCH AND DEVELOPMENT. Research and development expenses were $31.0
million in Fiscal Year 1995, as compared to $27.4 million in Fiscal Year 1994.
As a percentage of trade sales research and development expenses were 5.0% and
4.2% in Fiscal Year 1995 and Fiscal Year 1994, respectively. The increase in
research and development expenses was primarily attributable to an exploratory
project for FLASH memory, and an increase in discrete research and devlopment
expenses supporting SOT-23 and DMOS Power MOSFET product development.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $100.3 million (of which $76.8 was allocated to
Fairchild from National Semiconductor) in Fiscal Year 1995, as compared to $97.3
million (of which $74.2 million was allocated to Fairchild from National
Semiconductor) in Fiscal Year 1994. As a percentage of trade sales, selling,
general and administrative expenses were 15.9% and 14.8% in Fiscal Year 1995 and
Fiscal Year 1994, respectively. The increase in selling, general and
administrative expenses was primarily attributable to increased selling, general
and administrative expense allocations from National Semiconductor.
OTHER (INCOME) EXPENSE. Other (income) expense was $(1.8) million in Fiscal
Year 1995, as compared to $(1.9) million in Fiscal Year 1994. The increase was
attributable to less favorable results from foreign currency exchange rates,
partially offset by the decrease reflecting the loss on disposal of certain
fixed assets in Fiscal Year 1994 which did not recur in Fiscal Year 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital
needs, to meet required debt payments and to complete planned maintenance and
expansion. Management anticipates that the Company's operating cash flow,
together with available borrowings under the Revolving Credit Facility, will be
sufficient to meet its working capital, capital expenditure and interest service
requirements on its debt obligations for the foreseeable future. As of February
23, 1997, the Company's total debt and stockholder's equity would have been
$420.0 million and $14.0 million, respectively, on a pro forma basis after
giving effect to the Transactions. The Company would also have borrowing ability
of an additional $75.0 million for working capital and capital expenditure
requirements under the Revolving Credit Facility.
37
<PAGE>
During the past three years the Company has spent approximately $355.0
million primarily to build a new fab and to upgrade its existing facilities.
Capital expenditures for Fiscal Year 1997 are expected to be approximately $43.0
million, $36.7 million of which were made as of February 23, 1997. The Company
anticipates that its operating cash flow, together with available borrowings
under the Revolving Credit Facility, will be sufficient to meet its working
capital requirements, capital expenditure requirements and interest service
requirements on its debt obligations for the foreseeable future.
Concurrent with the Transactions the Company entered into the Senior Credit
Facilities under which a $75.0 million Revolving Credit Facility is available to
the Company. The Company did not draw upon these facilities in connection with
the consummation of the Transactions. See "Description of Certain
Indebtedness--Senior Credit Facilities." The Senior Credit Facilities and the
Notes do, and other debt instruments of the Company may, impose various
restrictions and covenants on the Company which could potentially limit the
Company's ability to respond to market conditions, to provide for unanticipated
capital investments or to take advantage of business opportunities.
38
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Existing Notes were sold by the Company to the Initial Purchasers on
March 11, 1997 (the "Issue Date"). The Initial Purchasers subsequently sold the
Existing Notes to qualified institutional buyers in reliance on Rule 144A under
the Securities Act and to a limited number of institutional "accredited
investors" as defined in Rule 501(a)(1),(2),(3) or (7) under the Securities Act.
Because the Existing Notes are subject to certain transfer restrictions, as an
inducement to the Initial Purchasers the Company, Fairchild Holdings and the
Initial Purchasers entered into a registration rights agreement dated March 6,
1997 (as used in this and the next paragraph, the "Registration Rights
Agreement"), pursuant to which the Company agreed (i) within 60 days after the
Issue Date, to prepare and file with the Commission the Registration Statement
of which this Prospectus is a part and (ii) within 150 days after the Issue
Date, to use its best efforts to cause the Registration Statement to become
effective under the Securities Act. The Registration Statement is intended to
satisfy in part the Company's obligations with respect to the Existing Notes
under the Registration Rights Agreement.
Under existing interpretations of the Commission, the Exchange Notes will be
freely transferable by holders other than affiliates of the Company after the
Exchange Offer without further registration under the Securities Act if the
holder of the Exchange Notes represents that it is acquiring the Exchange Notes
in the ordinary course of its business, that it has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes and that it is not an affiliate of the Company, as such terms are
interpreted by the Commission, PROVIDED, HOWEVER, that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will have a prospectus delivery requirement with respect to resales of such
Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to Exchange Notes (other than a resale of an unsold allotment from the original
sale of the Existing Notes) with this Prospectus. Under the Registration Rights
Agreement, the Company is required to allow Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements to use this
Prospectus in connection with the resale of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Existing Notes, where such Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a Prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Existing Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1997; PROVIDED, HOWEVER, that if the Company has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $300.0 million aggregate principal amount
of the Existing Notes are outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997 to all holders of
Existing Notes known to the Company. The Company's obligation to accept Existing
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Existing Notes, by giving
notice of such extension to the holders thereof. During any such extension, all
Existing Notes previously tendered will remain subject to the Exchange Offer and
may be accepted for
39
<PAGE>
exchange by the Company. Any Existing Notes not accepted for exchange for any
reason will be returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Existing Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "--Certain Conditions to the Exchange
Offer." The Company will give notice of any extension, amendment, non-acceptance
or termination to the holders of the Existing Notes as promptly as practicable,
such notice in the case of any extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
Holders of Existing Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law in connection with the Exchange
Offer.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Existing Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to United States Trust Company
of New York at one of the addresses set forth below under "Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Existing Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Existing Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility" or the "Depositary") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or the holder must comply with the
guaranteed delivery procedure described below. THE METHOD OF DELIVERY OF
EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Existing Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Existing Notes
who has not completed the box entitled "Special Issuance Instruction" or
"Special Delivery Instruction" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by, the registered holder with the
signature thereon guaranteed by an Eligible Institution.
40
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not properly tendered or to not accept
any particular Existing Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Existing Notes for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Existing Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder of Existing Notes will represent to the Company in
writing that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
holder and any beneficial holder, that neither the holder nor any such
beneficial holder has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and that neither the
holder nor any such other person is an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company. If the holder is not a broker-dealer, the
holder must represent that it is not engaged in nor does it intend to engage in
a distribution of the Exchange Notes. If the holder is a broker-dealer, the
holder must represent that it will receive Exchange Notes for its own account in
exchange for Existing Notes that were acquired as a result of market-making
activities or other trading activities. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (an "Exchanging Dealer"), must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Existing Note. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted properly tendered Existing Notes for exchange
when, as and if the Company has given oral and written notice thereof to the
Exchange Agent.
In all cases, issuance of Exchange Notes for Existing Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Existing Notes or
a timely Book-Entry Confirmation of such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Existing Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Existing Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Existing Notes will be returned without expense to the tendering
holder thereof (or, in the case of Existing Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Existing Notes will be credited to an
41
<PAGE>
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Existing Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
The Company understands that the Exchange Agent has confirmed with the
Book-Entry Transfer Facility that any financial institution that is a
participant in the Book-Entry Transfer Facility's system may utilize the
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") to tender
Existing Notes. The Company further understands that the Exchange Agent will
request, within two business days after the date the Exchange Offer commences,
that the Book-Entry Transfer Facility establish an account with respect to the
Existing Notes for the purpose of facilitating the Exchange Offer, and any
participant may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account in accordance with the Book-Entry Transfer Facility's ATOP
procedures for transfer. However, the exchange of the Existing Notes so tendered
will only be made after timely confirmation (a "Book-Entry Confirmation") of
such book-entry transfer and timely receipt by the Exchange Agent of an Agent's
Message (as defined in the next sentence), an appropriate Letter of Transmittal
with any required signature guarantee, and any other documents required. The
term "Agent's Message" means a message, transmitted by the Book-Entry Transfer
Facility and received by the Exchange Agent and forming part of Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from a participant tendering Existing Notes which are the
subject of such Book-Entry Confirmation and that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Existing Notes desires to tender such Existing
Notes and the Existing Notes are not immediately available, or time will not
permit such holder's Existing Notes or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if (i)
the tender is made through an Eligible Institution, (ii) prior to the Expiration
Date, the Exchange Agent received from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form provided by the Company
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Existing Notes and the amount of
Existing Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Existing Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are
42
<PAGE>
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at one of the addresses set
forth below under "Exchange Agent." Any such notice of withdrawal must specify
the name of the person having tendered the Existing Notes to be withdrawn,
identify the Existing Notes to be withdrawn (including the principal amount of
such Existing Notes), and (where certificates for Existing Notes have been
transmitted) specify the name in which such Existing Notes are registered, if
different from that of the withdrawing holder. If certificates for Existing
Notes have been delivered or otherwise identified to the Exchange Agent, then,
prior to the release of such certificates, the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Existing Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Existing
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Existing Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Existing Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or in the case of Existing Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Existing Notes will
be credited to an account maintained with such Book-Entry Transfer Facility for
the Existing Notes) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Existing Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if at any
time before the acceptance of such Existing Notes for exchange or the exchange
of Exchange Notes for such Existing Notes, the Company determines that (i) the
Exchange Offer does not comply with any applicable law or any applicable
interpretation of the staff of the Commission, (ii) the Company has not received
all applicable governmental approvals or (iii) any actions or proceedings of any
governmental agency or court exist which could materially impair the Company's
ability to consummate the Exchange Offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust
43
<PAGE>
Indenture Act"). In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED
BY HAND: MAIL: BY OVERNIGHT COURIER:
<S> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
111 Broadway P.O. Box 844 770 Broadway
Lower Level Cooper Station New York, New York 10003
Corporate Trust Window New York, New York Attn: Corporate Trust
New York, New York 10006 10276-0844
BY FACSIMILE:
United States Trust Company of New York
(212) 420-6152
Attn: Corporate Trust
CONFIRM BY TELEPHONE:
(800) 548-6565
</TABLE>
Delivery other than as set forth above will not constitute a valid delivery.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying amount as the
Existing Notes, which is the principal amount as reflected in the Company's
accounting records on the date of the exchange and, accordingly, no gain or loss
will be recognized. The debt issuance costs will be capitalized and amortized to
interest expense over the term of the Exchange Notes.
TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register Exchange Notes in the name of, or request that
Existing Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
44
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
Holders of Existing Notes who do not exchange their Existing Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of, the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
accrue interest at 10 1/8% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of Existing Notes do not have any appraisal
or dissenters' rights under the Delaware General Corporation Law in connection
with the Exchange Offer. In general, the Existing Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Existing Notes under the Securities Act. However, (i) if any
Initial Purchaser so requests with respect to Existing Notes not eligible to be
exchanged for Exchange Notes in the Exchange Offer and held by it following
consummation of the Exchange Offer or (ii) if any holder of Existing Notes
(other than an Exchanging Dealer) is not eligible to participate in the Exchange
Offer or, in the case of any holder of Existing Notes (other than an Exchanging
Dealer) that participates in the Exchange Offer, does not receive Exchange Notes
in exchange for Existing Notes that may be sold without restriction under state
and federal securities laws (other than due solely to the status of such holder
as an affiliate of the Company within the meaning of the Securities Act), the
Company is obligated to file a shelf registration statement on the appropriate
form under the Securities Act relating to the Existing Notes held by such
persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold or otherwise transferred by holders thereof (other than (i) any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or (ii) any broker-dealer that purchases Notes from the
Company to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
or understanding with any person to participate in the distribution of such
Exchange Notes. If any holder has any arrangement or understanding with respect
to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. A broker-dealer who holds Existing Notes that were
acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes. Each such broker-dealer that receives Exchange Notes for its own account
in exchange for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." The Company has not requested the staff of the Commission to
consider the Exchange Offer in the context of a no-action letter, and there can
be no assurance that the staff would take positions similar to those taken in
the interpretive letters referred to above if the Company were to make such a
no-action request.
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions in the
United States as any selling holder of the Notes reasonably requests in writing.
45
<PAGE>
INDUSTRY OVERVIEW
Semiconductors are the critical components used to create an increasing
variety of electronic products and systems. Since the invention of the
transistor in 1948, continuous improvements in semiconductor process and design
technologies have led to smaller, more complex and more reliable devices at a
lower cost per function. As performance has increased and size and cost have
decreased, semiconductors have expanded beyond their original primary
applications in computer systems to applications in telecommunications systems,
automotive products, consumer products and industrial automation and control
systems. In addition, system users and designers have demanded systems with
increased functionality, higher levels of performance, greater reliability and
shorter design cycle times, all in smaller packages at lower costs. These
demands have resulted in increased semiconductor content as a percentage of the
system costs of electronic products. According to a study published by Texas
Instruments, the value of semiconductors as a percentage of the cost of
electrical devices has increased from 5% in the 1970s to 16% in 1996. The demand
for electronic systems has also expanded geographically with the emergence of
new markets, particularly in the Asia/Pacific region.
During the 1960s and 1970s, the development of semiconductor process
technologies was critical to the success of participants in the industry. As
process technologies matured, manufacturing sciences became important. In the
1980s, the emphasis shifted to increasing production volumes, improving yields
and lowering production costs. The large capital expenditures and other
resources required during this period to develop advanced manufacturing
capabilities resulted in a stratification of the industry between broad range
suppliers operating multiple front-end and back-end manufacturing facilities and
specialty niche players operating small wafer fabs or subcontracting wafer
production.
Historically, cyclical changes in production capacity in the semiconductor
industry and demand for electronic systems have resulted in pronounced cyclical
changes in the level of semiconductor sales and subsequent fluctuations in
prices and margins. However, certain significant changes in the industry could
contribute to continued growth over the long term with less severe cyclical
variations than in the past. Such changes include the development of new
semiconductor applications, increased semiconductor content as a percentage of
total system cost, emerging strategic partnerships, growth in the electronic
systems industry in the Asia/Pacific region, more moderate capital spending on
production capacity, particularly in Japan, and increased customer use of
just-in-time supply systems that have reduced inventory levels.
According to the reports of WSTS, worldwide semiconductor market revenue was
$132.0 billion during 1996. Since 1990, the semiconductor market has expanded at
a CAGR of 17.4%, primarily as a result of two principal factors. The first is
rapidly expanding end-user demand for faster, smaller and more efficient devices
with a greater range of functionality. The second is the increasing value of
semiconductors as a percentage of the cost of electrical devices. In 1996 the
worldwide semiconductor TAM ($132.0 billion) experienced an overall decline from
1995 ($144.4 billion), according to WSTS. The decline was primarily the result
of a 36.2% reduction in sales in the volatile memory market, which includes the
DRAM market.
46
<PAGE>
SEMICONDUCTOR CLASSIFICATIONS
The following table sets forth the worldwide semiconductor TAM in each of
the three product functions of the semiconductor industry:
<TABLE>
<CAPTION>
WORLDWIDE SEMICONDUCTOR TAM(1)
----------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 CAGR
--------- --------- --------- --------- --------- --------- --------- -----------
(IN BILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Microcomponents......................... $ 9.2 $ 11.4 $ 13.9 $ 19.1 $ 23.8 $ 33.4 $ 39.8 27.8%
Memory
Volatile.............................. 8.7 9.1 11.4 16.4 27.2 46.9 29.9 22.8
Non-volatile.......................... 3.1 3.1 3.4 4.8 5.3 6.6 6.1 12.3
--------- --------- --------- --------- --------- --------- --------- -----
Total memory...................... 11.8 12.2 14.8 21.3 32.5 53.5 36.0 20.5
Moving/Shaping.......................... 29.6 31.0 31.1 37.0 45.6 57.5 56.1 11.3
--------- --------- --------- --------- --------- --------- --------- -----
Total................................... $ 50.5 $ 54.6 $ 59.9 $ 77.3 $ 101.9 $ 144.4 $ 132.0 17.4%
--------- --------- --------- --------- --------- --------- --------- -----
--------- --------- --------- --------- --------- --------- --------- -----
</TABLE>
- ------------------------
(1) According to WSTS. Due to rounding, some totals are not arithmetically
correct sums of their component figures.
Preliminary semiconductor market segment data indicates that worldwide revenue
in 1996 for the volatile memory segment fell dramatically whereas worldwide
revenue in the moving and shaping segment declined less sharply.
The semiconductor industry can be divided into three product functions:
microcomponents, memory and moving and shaping. Microcomponents include
microprocessors and microcontrollers that process data according to instruction
sets embedded within the semiconductors themselves. These are considered the
"brains" of the electronic system and are at the center of the system
architecture. Memory includes two types of memory devices, volatile and
non-volatile, that store data and instructions. Volatile memory devices, which
need continual application of electricity to retain data, can be segmented into
DRAM (dynamic random access memory), SRAM (static random access memory) and VRAM
(video random access memory). Non-volatile devices, which retain data after
power to the device has been shut off, can be segmented into ROM (read-only
memory), EPROM, EEPROM and FLASH (memories that enable high speed electrical
reprogramming). Moving and shaping includes the moving of commands and the
shaping of signals to enable electronic devices to perform intended functions,
including moving information into memory or from one sub-system to another, or
allowing microprocessors to process data. Semiconductors are either analog/mixed
signal, where electronic signals are not viewed as "one" and "zero," or digital
integrated circuits ("ICs"), such as logic devices, that do rely on ones and
zeroes to control the operation of electronic systems. Further, semiconductors
are classified as either standard components or application-specific components.
Multi-market standard components are used by a large group of systems designers
for a broad range of applications, while application-specific components are
designed to perform specific functions in specific applications.
47
<PAGE>
FAIRCHILD'S MARKETS
The following table sets forth information with respect to worldwide
semiconductor sales by product family and process technology in which the
Company participates:
<TABLE>
<CAPTION>
WORLDWIDE SEMICONDUCTOR SALES(1)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
----- ----- ----- ----- -----
<CAPTION>
(IN BILLIONS)
<S> <C> <C> <C> <C> <C>
MOVING & SHAPING:
LOGIC
Bipolar................................................... $ 1.5 $ 1.1 $ 1.1 $ 1.4 $ 1.1
CMOS...................................................... 0.9 0.9 0.9 1.2 1.4
BiCMOS.................................................... -- -- 0.1 0.2 0.1
--- --- --- --- ---
Total................................................... $ 2.3 $ 2.0 $ 2.1 $ 2.7 $ 2.7
--- --- --- --- ---
--- --- --- --- ---
DISCRETE
Power..................................................... $ 2.6 $ 2.7 $ 2.8 $ 3.2 $ 3.9
Small Signal.............................................. 2.8 2.9 2.8 3.3 3.8
--- --- --- --- ---
Total................................................... $ 5.4 $ 5.6 $ 5.6 $ 6.5 $ 7.7
--- --- --- --- ---
--- --- --- --- ---
MEMORY:
NON-VOLATILE MEMORY
EPROM..................................................... $ 1.6 $ 1.4 $ 1.2 $ 1.3 $ 1.4
EEPROM.................................................... 0.2 0.2 0.3 0.6 0.5
--- --- --- --- ---
Total................................................... $ 1.8 $ 1.5 $ 1.6 $ 2.0 $ 1.9
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
<S> <C>
1995
---------
<S> <C>
MOVING & SHAPING:
LOGIC
Bipolar................................................... $ 1.1
CMOS...................................................... 1.5
BiCMOS.................................................... 0.3
---------
Total................................................... $ 2.9
---------
---------
DISCRETE
Power..................................................... $ 5.4
Small Signal.............................................. 4.9
---------
Total................................................... $ 10.3
---------
---------
MEMORY:
NON-VOLATILE MEMORY
EPROM..................................................... $ 1.4
EEPROM.................................................... 0.6
---------
Total................................................... $ 2.0
---------
---------
</TABLE>
- --------------------------
(1) Due to rounding, some totals are not arithmetically correct sums of their
component figures.
MOVING AND SHAPING MARKETS
STANDARD LOGIC MARKET. The standard logic market is fully digital and has
five major participants, of which Fairchild is one of the leaders. Standard
logic products are fabricated through three primary process technologies:
Bipolar, CMOS and BiCMOS. The difference between Bipolar and CMOS is that
Bipolar technology is targeted for high speed applications while CMOS technology
allows the manufacturer to create a denser chip, consuming less power than
Bipolar chips. BiCMOS is a hybrid of Bipolar and CMOS. While Bipolar
semiconductors were once used extensively in large computer systems, CMOS has
become the most prevalent technology, particularly for devices used in portable
personal computer systems. Though Bipolar process technology produces faster
chips, these chips traditionally produce more heat, which creates design
problems and limits usability in portable applications. Given the growing demand
for portability, use of CMOS technology is expected to continue to expand;
however, the demand for Bipolar is expected to continue as a result of its lower
cost and suitability for particular applications. Significant participants in
the standard logic product market are Texas Instruments, Philips, Motorola and
Toshiba.
DISCRETE MARKET. The discrete business, unlike logic and memory, is highly
fragmented and composed of dozens of middle market players. Discrete devices
consist of individual diodes or transistors, whereas ICs (such as memory or
logic devices) combine millions of functions onto a "single chip" of silicon to
form a more complex circuit. Discrete products are differentiated almost
entirely on the basis of performance, as opposed to on the basis of function as
in the IC market. Fairchild participates in both the power and small signal
discrete markets, manufacturing semiconductors that condition power or signals
for use by other devices. While small signal discrete markets have generally
grown at slower, but more stable, rates than IC markets, the power discrete
market is rapidly growing due to the increasing importance of power management,
particularly in portable applications (E.G., pagers and notebook computers).
Discrete devices are analog products, and Fairchild competes in the standard end
of the discrete market. Significant participants in the discrete market include
Motorola, Toshiba and Philips. Suppliers of discrete products compete primarily
on a regional basis.
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<PAGE>
MEMORY MARKETS
NON-VOLATILE MEMORY MARKET. The memory market is composed of volatile
memory devices (DRAM, SRAM and VRAM) and non-volatile memory devices (ROM,
EPROM, EEPROM and FLASH). Volatile memory devices need continual application of
electricity to retain data, while non-volatile memory retains data after the
power to the device has been turned off. Most of the historic economic
cyclicality in the semiconductor industry has been attributable to the volatile
memory market, as evidenced by a 36.2% decline in 1996 market sales versus a
4.5% increase for the microcomponents, moving & shaping and non-volatile memory
markets. The non-volatile memory market has eight significant participants
including Fairchild, SGS Thomson, Texas Instruments and Atmel.
Fairchild produces standard EPROM and EEPROM products, but also fabricates
application-specific EEPROM devices. Fairchild has standardized the
application-specific nature of the EEPROM process, having designed it to perform
functions in a specific application, but not be proprietary for any single
customer. EEPROMs are being used extensively due to their ease of
programmability and the demand for these products is growing rapidly. The EEPROM
market has grown at a CAGR of 24.6% from 1990 to 1995, slightly ahead of the
overall semiconductor market growth. EEPROMs are somewhat isolated from FLASH
products, as they serve different market needs. Reprogrammable EEPROMs are used
in many products to store frequently used phone numbers (fax machines), store
accumulated phone time (cellular phones) and change authorization codes (keyless
security systems). EPROMs have been losing market share to FLASH products
because FLASH memories are easily programmed and have higher data densities.
However, there is a level of EPROM demand that is not economically served by
FLASH. As a result, EPROMs are still utilized in virtually all segments of the
low-end consumer electronic market (E.G., answering machines, garage door
openers and washing machines) where storage of the instruction set for the
microcontrollers require less than 2 Mb.
49
<PAGE>
BUSINESS
GENERAL
Fairchild is a leading global designer, developer and manufacturer of logic,
discrete and memory semiconductors. The Company's products are the building
block components for virtually all electronic devices, from sophisticated
computers to household appliances. Because of their basic functionality, the
Company's products provide customers with greater design flexibility than more
highly integrated products and improve the performance of more complex devices
or systems. Given such characteristics, the Company's products have a wide range
of applications in multi-markets. The Company supplies over 50,000 customers
globally, representing industries such as telecommunications, consumer products,
automotive, industrial systems and personal computers and peripherals. In
addition, most of Fairchild's over 7,000 products have long product lives. The
average life of the Company's product families is more than 12 years and many
product lives extend up to 30 years. The Company has manufacturing facilities in
Maine, Utah, Malaysia and the Philippines and has more than 6,000 employees.
Established more than 35 years ago, Fairchild was one of the original
founders of the semiconductor industry. Among Fairchild's notable innovations
was its development of planar technology in 1959, one of the key events that
spawned the subsequent explosive growth of the semiconductor industry. Even
today this technology is an integral part of all semiconductor fabrication.
Fairchild was established in 1959 as a provider of memory and logic
semiconductors. National Semiconductor acquired Fairchild in 1987. National
Semiconductor decided to relaunch Fairchild as an independent company in order
for National Semiconductor to focus on developing customized systems on a chip
(or chip sets) that integrate the functionality of many semiconductor components
into a single chip. These systems are state-of-the-art products, requiring high
levels of research and development expense, and are exposed to very short
product life cycles. Fairchild operates at the other end of the semiconductor
spectrum, designing and manufacturing standard semiconductors that can be
utilized by manufacturers of electronic products in a wide variety of solutions.
Fairchild's products are long-lived, with some products designed more than 30
years ago still contributing to the Company's financial success. Fairchild's
customers require standard non-customized products which provide the most
reliable solution with the best price/performance result and which remain
continually available throughout the customer's products' often lengthy
lifecycle.
BUSINESS STRATEGY
The Company's objective is to be the leading supplier of multi-market
semiconductors to the worldwide telecommunications, consumer products,
automotive, industrial systems and personal computer and peripherals industries.
As a stand-alone company, Fairchild is implementing a business strategy that
emphasizes the following key elements:
INCREASE MARKET PENETRATION OF EXISTING PRODUCTS. As the only global
semiconductor company focused solely on the logic, discrete and memory markets,
Fairchild is uniquely positioned to dedicate its sales and marketing efforts
toward expanding the market share of its existing products. Following National
Semiconductor's decision to launch Fairchild as an independent company,
Fairchild began to build an internal sales force dedicated solely to the sale of
Fairchild's products. The Company's internal sales force, authorized
representatives and distributors are expanding customer information programs
(including technical specifications, application notes and on-line services),
augmenting the Company's comprehensive customer design-in support efforts
(including application engineering and detailed product performance data) and
increasing trade advertising.
INTRODUCE NEW PRODUCTS. The Company is focused on expanding its customer
base and increasing its market share by continuing to develop new products and
enhancements of its current product portfolio. The increasing portability of
computers, cellular phones and other electronic products is one of the most
significant industry trends. The Company is designing new products to meet the
power management, lower voltage, and heat dissipation characteristics for
portability. In the logic market, the Company, in alliance
50
<PAGE>
with Toshiba and Motorola, recently developed the advanced CMOS VCX family of
2.5 volt/2.5 nanosecond products. In the discrete market, the Company intends to
build on its current momentum in the surface DMOS Power MOSFET area with the
addition of products with low resistance, low gate drive, small footprints, thin
profiles and superior heat dissipation characteristics. In the memory market,
the Company has the broadest serial EEPROM product offering in the industry and
intends to offer even more of the widely accepted Microwire, IIC and SPI serial
EEPROM product families and to develop application specific memories, such as
Plug and Play components for the personal computer adapter card market and HiSeC
for the automotive market. Management believes that continued product innovation
and investment in research and development will help insulate it from changes in
demand patterns that affect particular customers, industry segments or
end-product markets.
MAINTAIN COST LEADERSHIP. The Company has made significant capital
expenditures over the last three years to increase capacity and improve
manufacturing efficiency at its facilities. Management believes that its fabs
and assembly and test facilities are among the most productive and efficient in
the industry. The Company will continue to invest in people and assets in order
to increase productivity and enhance process efficiency. Improvements now
underway include the expansion of a continuous flow process throughout the
entire Penang test facility and the introduction of reel-to-reel processing in
the Cebu assembly and test plant.
MAINTAIN CONSISTENT HIGH QUALITY CUSTOMER SERVICE. Multi-market
semiconductor products are available from a number of providers--accordingly,
logistical support, customer service and delivery are critical to customer
retention and sales growth. Fairchild seeks to distinguish its service by
providing the industry's best support services, including electronic order entry
and inquiry, just-in-time delivery and a full range of Internet services that
provide device specifications and order entry for samples. Fairchild's customer
support services are provided primarily from four regional customer support
centers as well as many other sales office locations throughout the world.
CUSTOMERS AND APPLICATIONS
Fairchild designs, develops and manufactures products that it supplies to
more than 50,000 customers. The Company provides a wide range of more than 7,000
logic, discrete and memory products to its diverse customer base. The Company's
position as a strategic supplier of basic and essential semiconductor products
fosters close relationships with customers. These relationships result in
additional growth opportunities for sales of existing products as well as early
knowledge of customers' evolving requirements and opportunities arising from the
related development of their new products.
The following table sets forth the Company's principal end-user markets, the
percentage of Fiscal Year 1996 revenue generated from each end-user market,
certain applications for its products and certain of the Company's customers in
Fiscal Year 1996. Products from each of the Company's three businesses are used
throughout each of the major end-user markets set forth below.
51
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Personal Computer
and Peripheral
END MARKETS: Telecommunications Systems Consumer Products Automotive Industrial/Other
- ----------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF THE
COMPANY'S FISCAL
YEAR 1996 TRADE
REVENUE: 27% 31% 8% 11% 23%
- ----------------------------------------------------------------------------------------------------------------------------------
APPLICATIONS: Answering machines Chips for smartcards Cable television Airbags Industrial
Central office Disk drives systems Antiskid braking automation
switching systems Monitors Compact disc players kits and control
Digital cellular Network controllers Home security Automotive Intelligent power
telephones Optical scanners systems entertainment switches
ISDN controllers Photocopiers Household appliances systems Lighting systems
Modems Printers Pay television Central locking (lamp ballasts)
PBX systems PC motherboards decoders systems Motor controllers
Telephone sets Satellite receiver Engine management Power supplies
(corded and decoding circuits systems Smartcard readers
cordless) Video cassette Fuel injection
recorders circuits
Ignition circuits
Transmission control
circuits
- ----------------------------------------------------------------------------------------------------------------------------------
CUSTOMERS: Alcatel Apple Canon Bosch Allen Bradley
Ericsson Compaq Creative Design Chrysler American Power
Lucent Technologies Dell Goldstar Delco Electronics Honeywell
Northern Telecom Gateway Sony Ford Reliance
Samsung Hewlett-Packard Thompson Consumer Mitsubishi Siemens
Siemens IBM Zenith Teves Tektronics
Intel Toyota Teradyne
NEC
Seagate Technology
Toshiba
- ----------------------------------------------------------------------------------------------------------------------------------
EXAMPLE OF Portable phone Computer VCR Engine Control Electric motor
PRODUCT assembly line
APPLICATION: control
- ----------------------------------------------------------------------------------------------------------------------------------
INPUT: Turn on phone Turn on computer Program VCR to Start car Start motor
record assembly conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
WHAT THE PRODUCT Power is routed from Boot up program EEPROM memory is Program in EPROM Logic devices and
DOES: battery to active moves from programmed to memory directs fuel discrete products
circuits by a EPROM to main start VCR mixture turn on and off
discrete DMOS memory via logic conveyor system
transistor chip; logic chips
communicate
between main
memory and
processor
- ----------------------------------------------------------------------------------------------------------------------------------
RESULT: A phone call is made Internet is accessed Program is recorded Car runs smoothly Motor is assembled
with fewer emissions
</TABLE>
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<PAGE>
PRODUCTS AND TECHNOLOGY
Fairchild designs, develops and manufactures a broad range of products used
in a wide variety of microelectronic applications, including telecommunications,
personal computers and peripherals, consumer products, and automotive and
industrial systems. The Company's products are organized into three principal
products groups: logic products, discrete products and memory products.
LOGIC PRODUCTS
Logic devices are digital ICs that control the operation of electronic
systems and move data. The Company designs, develops and manufactures standard
logic devices utilizing three wafer fabrication processes: CMOS, BiCMOS and
Bipolar. Within each of these production processes, the Company manufactures
products that possess advanced performance characteristics, as well as mature
products which provide high performance at low cost to customers. Since market
adoption rates of new standard logic families have historically spanned several
years, management anticipates significant continued revenues from its mature
products. Customers are typically slow to move from an older product to a newer
one. Further, for any given product, standard logic customers use several
different generations of logic products in their designs. As a result, typical
life cycles for logic families are from 20 to 25 years. In Fiscal Year 1996, the
Company derived 91% of its total trade revenues from products developed more
than seven years ago. Nonetheless, management believes that significant future
growth will be derived from new or recently-developed applications that require
advanced technologies. Since it takes new logic products an average of three to
five years to reach full market acceptance, the Company has continually invested
in new products to generate future revenue growth. The Company currently has a
strong portfolio of recent product innovations with a leading market position in
high growth markets.
The Company's logic products are used in a wide variety of microelectronic
applications, including telecommunications, personal computers and peripherals,
automotive systems, consumer products and industrial systems. According to
reports published by Insight Onsite, in 1995 the Company was the third largest
supplier of all standard logic products ($2.9 billion TAM) in the world, with a
market share of approximately 11.2%. Within the advanced standard logic market
($1.2 billion TAM), the Company was the No. 2 supplier in 1995, behind only
Texas Instruments. In total, the Company's product portfolio includes
approximately 2,000 separate ICs and over 4,700 device types. The Company serves
more than 50,000 logic customers worldwide including Alcatel, Delco Electronics,
Hewlett-Packard, IBM, Lucent, NEC, Siemens and Toshiba.
CMOS. CMOS is a technology that consumes less power than Bipolar technology
and therefore permits more transistors to be integrated into a single IC.
Emerging portable applications such as laptop computers, cellular telephones and
hand-held meters all require the low power of CMOS technology. As a result of
its greater capabilities, CMOS technology has been expanding at the expense of
Bipolar. Given the push toward portability and further integration, use of CMOS
technology is expected to continue to expand. The Company's role as a
significant innovator in the logic industry is evidenced by its development of
several leading edge technologies and industry firsts including Low Voltage CMOS
and FACT-TM-, as well as the VHC Low Noise High Speed CMOS product recently
introduced jointly by Fairchild and Toshiba. Fairchild was the No. 2 supplier in
the advanced CMOS logic market in 1995.
BIPOLAR. Bipolar devices typically operate at high speeds, require more
power and are less costly than CMOS devices, and are used in many applications
that do not require CMOS solutions. In 1980, Fairchild originated
FAST-Registered Trademark- and continues to be a market leader in the Bipolar
product group, with a 16.9% market share of the 1995 worldwide $1.1 billion TAM.
The Company supplies a full line of Bipolar products to a wide customer base in
all end-user applications.
BICMOS. BiCMOS is a hybrid of CMOS and Bipolar technologies developed to
combine the high speed and high drive characteristics of bipolar technologies
with the low power consumption and high
53
<PAGE>
integration of CMOS technologies. BiCMOS is an emerging technology which
requires complex manufacturing processes and is used in niche applications,
primarily in the telecommunications market. The revenue generated by the Company
from BiCMOS technology in 1996 was not significant.
DISCRETE PRODUCTS
Discrete devices are individual diodes or transistors that perform basic
signal amplification and switching functions in electronic circuits. Driving the
growth of discretes is the increasing importance of power management,
particularly in portable applications (E.G., pagers and notebook computers).
Fairchild participates in both the power and small signal discrete markets,
manufacturing semiconductors that condition (or shape) power or signals for use
by other devices. While the world market is dominated by such multinational
semiconductor manufacturers as Toshiba, Motorola and Philips, competitors in the
discrete industry compete primarily on a regional basis. Within the domestic
market, which is Fairchild's primary market, Motorola is the No. 1 competitor
with 1996 discrete revenues of $1.4 billion. Fairchild, which has aggressively
pursued opportunities in the domestic discrete market and successfully increased
its discrete revenues from $65.8 million in Fiscal Year 1992 to $175.0 million
in Fiscal Year 1996, is second only to Motorola in the discrete market. The
balance of the domestic industry is highly fragmented, with more than 50
participants with average revenues from discrete products below $40 million. The
Company's Fiscal Year 1996 discrete revenues represented approximately 25.4% of
Fairchild's total trade revenues. The Company serves more than 15,000 discrete
customers worldwide including Compaq, Intel, Hewlett-Packard, Motorola, Seagate,
Northern Telecom, Delco Electronics and Sony Electronics.
POWER. Power discrete devices are used to convert, switch or otherwise
shape or condition electricity. The Company offers a wide range of DMOS power
MOSFETs and Bipolar power MOSFETs designed for low- and medium-voltage
applications over a wide range of performance characteristics, power handling
capabilities and package options. Management believes the trends towards smaller
and lighter products and longer battery life, as well as batteries with built-in
smart functions, will continue to drive demand for power discretes that handle
higher power levels in smaller packages (increased power density) with higher
efficiency. These products are commonly found in portable computers and
peripherals, portable telephones, automobiles, and battery-powered devices.
SMALL SIGNAL. Fairchild manufactures and sells a wide range of small signal
discretes, including single junction glass diodes, small signal transistors,
JFETs and Zener diodes. Designed to handle one watt or less of electrical power,
these products are available in a wide variety of package configurations. Small
signal devices switch, amplify and otherwise shape or modify electronic signals
and are found in nearly every electronic product, including computers, cellular
phones, mass storage devices, televisions, radios, VCRs and camcorders.
MEMORY PRODUCTS
The Company designs, develops and manufactures non-volatile memory circuits
which retain data after power to the device has been shut off. The non-volatile
memory market is divided into three segments: EPROM, EEPROM and FLASH. EPROMs
are electrically programmable read-only memories. EEPROMs are electrically
erasable programmable read-only memories that are similar to EPROMs, except they
can be erased electronically before being reprogrammed. These non-volatile
memory devices are used in personal computers and peripherals,
telecommunications, consumer products, automotive and industrial systems. The
Company offers an extensive portfolio of high performance serial EEPROM and
EPROM products. Management believes that Fairchild is a leader in providing an
extensive memory product portfolio to the marketplace, affording it a
competitive advantage. Selected memory customers of the Company include Bosch
Automotive Motor Systems, Inc., Chrysler, Compaq, Delco Electronics,
Hewlett-Packard, Matsushita Electric Industrial Co., Ltd., Siemens and U.S.
Robotics Corp.
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<PAGE>
EPROMS. EPROMs are used in cellular phones, telecommunication switching
equipment, automotive applications, personal computer hard disk drives and Basic
Input & Output Systems ("BIOS"), printer controllers, industrial machine
controls and numerous other types of electronic equipment to store data
instructions which control the equipment's operation. The ability of EPROMs to
be programmed electrically by the equipment manufacturer enables them to achieve
shorter time to market for new products than if they used products that must be
programmed by the chip manufacturer. EPROMs are generally used in preference to
more expensive FLASH memory devices in applications where cost is a major issue.
EPROMs are primarily utilized in applications where storage of the
instruction sets for microcontrollers requires less than 2 Mb in density, which
is virtually all segments of the low-end consumer electronic market (E.G.,
answering machines, garage door openers and washing machines). The Company's
portfolio of EPROM devices includes three product groups: (i) low density 5 volt
read, (ii) medium and high density 5 volt read and (iii) high density, low
voltage read. The low density 5 volt family is a mature family line in a
declining market. As there are few suppliers of low density products, management
believes the Company is uniquely positioned to capture market share and achieve
high margins with this product despite overall market shrinkage. The medium and
high density 5 volt family is a medium life cycle product in a slow growth
market. The high density low voltage family is an emerging product line in a
high growth market. With the increase in portable consumer devices, lower
voltage products are in demand. In 1995, the Company was ranked fifth in the
EPROM market ($1.4 billion TAM), with a 9.4% market share.
EEPROMS. EEPROMs are used primarily to store changing information in
consumer products and automotive applications such as microwaves, televisions,
stereos and automotive controls. The Company's serial EEPROM product portfolio
is divided into two product categories: (i) standard EEPROM and (ii) ASSPs. The
Company's standard EEPROM products serve each of the three bus interface
protocols used with all industry standard microcontrollers. The bus is the data
path between memory devices and the microcontroller. The Company's ASSP products
are individually developed for specific applications and combine the Company's
core EEPROM competencies with logic capabilities. The Company's ASSP products
serve three applications groups: HiSeC, Plug and Play and SPD. HiSeC, introduced
in 1994, is a single chip remote keyless entry solution which operates complex
rolling codes for secure entry. The device is intended for applications such as
automotive keyless entry systems, garage door openers and other applications
where secure transmission of a code is critical. Plug and Play devices allow
manufacturers of computer add-on cards to configure automatically their cards
for the host system. Since the introduction of Plug and Play in 1995, the
Company has created several new generations of Plug and Play devices. SPD,
introduced in 1996, allows a computer to identify specifications of an add-on
memory module and is used in memory upgrade products.
In the rapidly growing ASSP market, the Company's strategy is to collaborate
with customers in developing high margin ASSP products which utilize the
Company's unique ability to combine logic and memory on a chip to deliver
differentiated solutions. The Company is currently developing two additional
ASSPs, a radio frequency identification product, named RFID, for contact-less
inventory control and inventory management applications, and Motherboard Mux, a
device which enables the variation of microprocessor speed. As a stand-alone
company, the Company intends to focus on the large market opportunities
available in ASSP products. In 1995, the Company was ranked third in the serial
EEPROM market ($586 million TAM), with an 9.0% market share.
SALES, MARKETING AND DISTRIBUTION
The Company's Fiscal Year 1996 revenue was derived from trade sales of
semiconductors (89% of total revenues) and contract manufacturing services for
National Semiconductor (11%). In Fiscal Year 1996, the Company derived
approximately 61% of its trade sales from OEM customers through its regional
sales organizations and 39% of its trade sales through distributors.
55
<PAGE>
Fairchild operates regional sales organizations in Europe, the Americas and
the Asia/Pacific region. Each of the three regional sales organizations is
supported by logistics organizations which manage independently-operated FOB
warehouses. Product orders flow to the Company's manufacturing facilities, where
the product is made. Products are then shipped to the central warehouse in
Singapore, which ships to the regional warehouses for eventual delivery to the
customer.
Fairchild has a dedicated direct sales organization operating in the
Americas, Europe and Asia/Pacific regions that serves its major OEM accounts.
The Company's distributors and manufacturer's representatives distribute its
products around the world. The sales managers within each region are responsible
for Fairchild's distributors and representatives servicing that region.
Management believes that maintaining a small, highly focused, direct sales force
selling products for each of the Company's three businesses, combined with an
extensive network of distributors and representatives, is the most efficient way
to serve its multi-market customer base. Fairchild also maintains a dedicated
marketing organization, which consists of marketing organizations in each
product group, including tactical and strategic marketing and applications, as
well as marketing personnel located in each of the three sales regions.
Typically, distributors handle a wide variety of products, including
products that compete with Fairchild products, and fill orders for many
customers. Most of the Company's sales to distributors are made under agreements
allowing for market price fluctuations and/or the right of return on unsold
merchandise. The Company has historically experienced low levels of returns of
unsold products. Sales representatives generally do not offer products that
compete directly with the Company's products, but may carry complementary items
manufactured by others. Representatives do not maintain a product inventory;
instead their customers place large quantity orders directly with Fairchild and
are referred to distributors for smaller orders.
For a transition period of approximately one year following the
Transactions, in order to provide a smooth transition for the Fairchild customer
base, National Semiconductor has agreed to make available to Fairchild much of
its sales organization infrastructure, as well as its Japanese marketing and
distribution infrastructure and the use of its regional logistics organizations.
See "The Transactions--Transition Services Agreement." During this period,
customers place their orders either through National Semiconductor's Customer
Response Centers in Germany, Texas, Singapore and Japan, or through Fairchild's
network of independent distributors and manufacturer's representatives.
Following the transition period, Fairchild will utilize its own inside sales
organization.
RESEARCH AND DEVELOPMENT
The Company's expenses for research and development in Fiscal Years 1994,
1995 and 1996 were $27.4 million, $31.0 million and $30.3 million, respectively.
Such expenses represented 4.2%, 5.0% and 4.4% of trade sales in Fiscal Years
1994, 1995 and 1996, respectively. The Company's research and development
expenses are charged to operations as incurred. Management expects that it will
have to increase its direct research and development expenditures following the
date of consummation of the Transactions from approximately 1.7% of Fiscal Year
1996 trade sales to approximately 3.3% of trade sales.
Manufacturing technology is the key determinant in the improvement of
semiconductor products. Each new generation of process technology has resulted
in products with higher speed and greater performance produced at lower cost.
Infrastructure investments made in recent years will enable the Company to
continue to achieve high volume, high reliability and low-cost production using
leading edge process technology. The Company's research and development efforts
are focused on new product development and improvements in process technology.
The Company's new product efforts are primarily focused on three major
areas: (i) in the logic product business, toward multi-market solutions for off
board driving (backplanes) applications, which drive signals from a printed
circuit board through a connector to other parts of the system; on board
buffering applications, which add current drive to signals on a printed circuit
board; on board inter-connect
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<PAGE>
applications, which route or gate signals between electronic devices on a
printed circuit board; and signal conditioning applications, which shape,
invert, delay or change electrical signals within the system; (ii) in the
discrete product business, toward remaining on the forefront of technological
change and developing enhancements of its current and future products; and (iii)
in the memory product business, toward producing cost competitive standard
products and developing value-added ASSP solutions that provide the Company's
customers a competitive cost or functional advantage.
The Company maintains an independent research and development organization
at its South Portland facility, which is supported by its engineering staff at
the Salt Lake City, Santa Clara, Penang and Cebu locations and by its marketing
personnel worldwide. The Company works closely with its major customers in many
research and development situations, an arrangement which management believes
substantially increases the likelihood that the Company's products will be
designed directly into the customers' products and achieve rapid and lasting
market acceptance.
MANUFACTURING
Fairchild currently operates four manufacturing facilities, two of which are
front-end wafer fabrication facilities located in the United States and two of
which are back-end assembly and test facilities in the Asia/ Pacific region.
Fairchild's products are manufactured and designed using a broad range of
manufacturing processes and proprietary design methods. The Company uses all of
the prevalent function-oriented process technologies, including CMOS, Bipolar,
BiCMOS, DMOS and non-volatile memory technologies. The Company's manufacturing
operations are organized around the concept of delivering maximum customer value
through premier service and minimizing total customer costs. The table below
sets forth certain information with respect to Fairchild's current manufacturing
facilities, products and technologies.
MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
LOCATION PRODUCTS TECHNOLOGIES
- ---------------------- --------------------------------- ---------------------------------
<S> <C> <C>
FRONT-END FACILITIES:
South Portland, Bipolar, CMOS and 4-inch fab -- 5.0/3.0 micron
Maine BiCMOS logic products Bipolar and CMOS
National Semiconductor 5-inch fab -- 3.0/1.5 micron
contract manufacturing Bipolar and CMOS
6-inch fab -- 1.5/0.8 micron CMOS
and BiCMOS
Salt Lake City, Utah EPROMs, EEPROMs, Plug and 6-inch fab -- 2.0/0.65 micron
Play CMOS
Discrete power EEPROM
National Semiconductor -- 2.0/0.8 micron CMOS
contract manufacturing EPROM
-- 2.0 micron DMOS
BACK-END FACILITIES:
Penang, Malaysia Bipolar, CMOS and BiCMOS logic MDIP, SOIC, EIAJ, TSSOP, SSOP,
products 8-56 Pins
National Semiconductor assembly
and test services
Cebu, the Power and small signal discrete TO92, SOT-23, Super SOT, SOT-223,
Philippines National Semiconductor assembly TO220, TO263
and test services
</TABLE>
The Company's strategy is to have its manufacturing facilities dedicated to
its product groups. The South Portland and Penang facilities primarily support
the logic products group and the Salt Lake City and
57
<PAGE>
Cebu facilities primarily support the discrete and memory products groups. The
Company also subcontracts fabrication of wafers and certain discrete products to
Torex Semiconductor as well as certain back-end assembly and testing operations
to Alphatech. In addition, the Company is entering into foundry and assembly
service agreements with National Semiconductor, under which the Company will
purchase certain services from National Semiconductor. See "The
Transactions--Manufacturing Agreements."
Fairchild's manufacturing processes use many raw materials, including
silicon wafers, copper lead frames, mold compound, ceramic packages and various
chemicals and gases. The Company obtains its raw materials and supplies from a
large number of sources on a just-in-time basis. Although supplies for the raw
material used by the Company are currently adequate, shortages could occur in
various essential materials due to interruption of supply or increased demand in
the industry.
All of the Company's manufacturing facilities have been certified to conform
to ISO international quality standards. Several major customers, including
Siemens, Intel, AT&T and Ford, have recognized Fairchild's commitment to quality
and have honored the Company with numerous quality awards. The Company's CIM
systems provide management with real time data on all aspects of the performance
of its manufacturing lines.
BACKLOG
The Company's trade sales are made primarily pursuant to standard purchase
orders that are generally booked from one to twelve months in advance of
delivery. Backlog is influenced by several factors including market demand,
pricing and customer order patterns in reaction to product lead times.
Quantities actually purchased by customers, as well as prices, are subject to
variations between booking and delivery to reflect changes in customer needs or
industry conditions. Fairchild recognizes only the first 26 weeks of backlog.
Backlog as of March 23, 1997 was $175.8 million (exclusive of contract
manufacturing services), as compared to $173.0 million as of February 23, 1997
and $201.9 million as of February 25, 1996. The Company recognizes revenue from
contract manufacturing services but does not account for these revenues on a
backlog basis.
Although the Company's backlog has increased in recent periods due to
improved conditions in the semiconductor market, in a declining market the
Company has in the past and may in the future be requested to reduce prices to
limit the level of order cancellations. Despite price reductions, however, in an
industry downturn order cancellations may still be expected, particularly by
distributors and for standard products. The Company's level of backlog is
therefore not necessarily a reliable indicator of the level of future billings.
Fairchild also sells certain products to key customers pursuant to
contracts. Contracts are annual fixed-price contracts with customers setting
forth the terms of purchase and sale of specific products. These contracts allow
the Company to schedule production capacity in advance and allow customers to
manage their inventory levels consistent with just-in-time principles while
shortening the cycle times required to produce ordered products.
COMPETITION
Markets for the Company's products are highly competitive. Although only a
few companies compete with Fairchild in all of the Company's product lines, the
Company faces significant competition within each of its product lines from
major international semiconductor companies. Some of the Company's competitors
may have substantially greater financial and other resources with which to
pursue engineering, manufacturing, marketing and distribution of their products
than the Company. Competitors include manufacturers of standard semiconductors,
application-specific ICs and fully customized ICs, including both chip and
board-level products, as well as customers who develop their own integrated
circuit products.
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The Company's primary competitors include Motorola, Siliconix Inc.,
International Rectifier Corporation, Siemens, Philips, Rohm Corporation, Texas
Instruments, Toshiba, Integrated Device Technology, Inc., SGS-Thomson, Inc.,
Microchip Technology Inc., Atmel Corporation, Xicor, Inc. and Advanced Micro
Devices, Inc.
The Company competes in different product lines to various degrees on the
basis of price, technical performance, product features, product system
compatibility, customized design, availability, quality and sales and technical
support. The Company's ability to compete successfully depends on elements both
within and outside of its control, including successful and timely development
of new products and manufacturing processes, product performance and quality,
manufacturing yields and product availability, customer service, pricing,
industry trends and general economic trends.
PROPERTIES
The Company's corporate headquarters as well as certain manufacturing and
warehouse operations are located in approximately 240,000 square feet of space
in buildings owned by the Company in South Portland, Maine. Additional
manufacturing, warehouse and office facilities are housed in approximately
300,000 square feet of space in buildings owned by the Company in Salt Lake
City, Utah.
The Company owns or leases approximately 397,000 square feet of
manufacturing and warehouse space in Penang, Malaysia. Additional warehouse
space is leased in Singapore.
Manufacturing, warehouse and office facilities are housed in approximately
170,000 square feet of space owned or leased by the Company in Cebu, the
Philippines. Additional office facilities are located in leased space in Santa
Clara, California.
Leases affecting the facilities in Penang, Malaysia and Cebu, the
Philippines are generally in the form of long-term ground leases, with the
Company owning improvements on the land. The initial terms of these leases will
expire beginning in 2014. In some cases the Company has the option to renew the
lease term, while in others the Company has the option to purchase the leased
premises.
TRADEMARKS AND PATENTS
The Company owns rights to a number of trademarks and patents that are
important to its business. Management considers Fairchild, FACT-TM- and
FAST-Registered Trademark- to be the trademarks that are material to the
Company's operations.
Fairchild's corporate policy is to protect proprietary products by obtaining
patents for such products when practicable. Under the Technology Licensing and
Transfer Agreement with National Semiconductor entered into in connection with
the Transactions, the Company has acquired more than 150 U.S. patents and
obtained perpetual, royalty free non-exclusive licenses on more than 1,000 of
National Semiconductor's patents. Management believes that it has the right to
use all technology used in the production of its products. See "The
Transactions--Technology Licensing and Transfer Agreement."
ENVIRONMENTAL MATTERS
The Company's operations are subject to environmental laws and regulations
in the countries in which it operates that regulate, among other things, air and
water emissions and discharges at the Company's manufacturing facilities; the
generation, storage, treatment, transportation and disposal of solid and
hazardous wastes by the Company; the investigation, remediation and response
related to environmental contamination; and the release of hazardous substances,
pollutants and contaminants into the environment at or from properties operated
by the Company and at other sites. As with other companies engaged in like
businesses, the nature of the Company's operations exposes it to the risk of
liabilities or claims with respect to such matters. Management believes,
however, that its operations are in substantial compliance with applicable
environmental laws and regulations.
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<PAGE>
The Company's facilities in South Portland, Maine and, to a lesser extent,
Salt Lake City, Utah have ongoing remediation projects to respond to certain
releases of hazardous substances that occurred prior to the consummation of the
Transactions. Pursuant to the Asset Purchase Agreement, National Semiconductor
has agreed to indemnify the Company for the cost of these projects. See "The
Transactions--Asset Purchase Agreement." Based on the historical costs of these
projects, management does not believe the cost to continue to respond to these
conditions will be material, even without the indemnity. The Company has leased
one building as office space from National Semiconductor, which is located in
Santa Clara, California on a portion of a Superfund site. The Regional Water
Quality Control Board, acting as an agent for the Environmental Protection
Agency, has selected a clean-up remedy for the Superfund site, portions of which
management understands are currently being implemented. With certain
limitations, any claims asserted against the Company for damages in connection
with contamination existing prior to the closing of the Asset Purchase Agreement
would be covered under National Semiconductor's indemnity in the Asset Purchase
Agreement and, in connection with the Santa Clara facility, under the lease.
In connection with the Transactions, the Company identified certain
conditions which may require further investigation and possible remediation or
response activity. However, management believes that based on independent
consultants' projected costs for such activities and the National Semiconductor
indemnity, such additional investigation, remediation or response activities
will not have a material adverse effect on the Company's results of operations,
business or financial condition. Future laws or regulations and changes in
existing environmental laws or regulations may subject the Company's operations
to different, additional or more stringent standards. While historically the
cost of compliance with environmental laws has not had a material adverse effect
on the Company's results of operations, business or financial condition,
management cannot predict with certainty its future costs of compliance because
of changing standards and requirements. There can be no assurance by the Company
that material costs will not be incurred in connection with the future
compliance with environmental laws.
LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings arising in
the ordinary course of its business. Management believes there is no litigation
pending that could have a material adverse effect on its operations.
EMPLOYEES
The Company's worldwide workforce consisted of approximately 6,180 employees
(full- and part-time) as of February 23, 1997, none of whom were represented by
collective bargaining arrangements. Of the total number of employees,
approximately 5,455 were engaged in manufacturing, approximately 75 were engaged
in marketing and sales, approximately 400 were engaged in administration, and
approximately 250 were engaged in research and development. Of the total number
of employees, approximately 3,305 or 54% were employed in the logic product
group, approximately 2,300 or 37% were employed in the discrete product group
and approximately 575 or 9% were employed in the memory product group.
THE TRANSACTIONS
RECAPITALIZATION AGREEMENT
Pursuant to the Recapitalization Agreement with National Semiconductor, the
following transactions occurred on March 11, 1997 (collectively, the
"Transactions"): (i) National Semiconductor transfered to the Company, pursuant
to an Asset Purchase Agreement (the "Asset Purchase Agreement"), substantially
all of the assets and certain of the liabilities of the Fairchild multi-market
semiconductor business in exchange for (a) the Purchase Price Notes in the
principal amount of $401.6 million and (b) all of the Company's capital stock;
(ii) National Semiconductor transferred all of the capital stock of the Company
and approximately $12.8 million in cash to Fairchild Holdings in exchange for
shares of Holdings Preferred
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Stock, Holdings Common Stock and the Holdings PIK Note in the principal amount
of approximately $77.0 million; (iii) Fairchild Holdings issued (a) to Sterling
shares of Holdings Preferred Stock and Holdings Common Stock for $58.5 million
in cash and (b) to the Management Investors shares of Holdings Preferred Stock
and Holdings Common Stock for approximately $6.5 million in cash; (iv) Fairchild
Holdings contributed cash in the amount of approximately $77.8 million to the
capital of the Company; (v) the Company borrowed $120.0 million under the Senior
Credit Facilities and received the net proceeds from the issuance of the Notes
in the Offering; and (vi) the Company repaid the Purchase Price Notes in cash.
Pursuant to the Recapitalization Agreement, the Company and National
Semiconductor entered into the Asset Purchase Agreement, the Technology
Licensing and Transfer Agreement, the Fairchild Foundry Services Agreement, the
Fairchild Assembly Services Agreement, the National Foundry Services Agreement,
the National Assembly Services Agreement, the Mil/Aero Wafer and Services
Agreement, the Shared Facilities Agreement, the Shared Services Agreement, the
Santa Clara Lease, the Transition Services Agreement, the Stockholders'
Agreement and the Registration Rights Agreement. See "Ownership of Capital
Stock--Stockholders' Agreement" and "--Registration Rights Agreement."
ASSET PURCHASE AGREEMENT
The Asset Purchase Agreement provides for the sale from National
Semiconductor to Fairchild of substantially all the assets and certain of the
liabilities of the logic, discrete and memory business units. The assets
purchased by Fairchild include, among other things, certain properties located
at South Portland, Maine and Salt Lake City, Utah (see "Properties") as well as,
with some exceptions and limitations, all of the manufacturing equipment, motor
vehicles, office furniture, inventory, governmental permits and licenses and
other assets necessary to operate the Company's businesses. In addition,
purchased assets include (i) the contractual rights and obligations which
primarily relate to the logic, discrete and memory product units, (ii) the
intellectual property rights granted under the Technology Licensing and Transfer
Agreement and (iii) all of the capital stock of the Foreign Subsidiaries which
own or lease the properties located in Penang, Malaysia and Cebu, the
Philippines. Among the liabilities not assumed by Fairchild are any of the
environmental liabilities (as defined in the Asset Purchase Agreement) of
National Semiconductor. The agreement provides that National Semiconductor will
indemnify Fairchild for any damages arising from such excluded liabilities. The
agreement also provides for Fairchild to offer to employ all logic, discrete and
memory employees on substantially the same terms and conditions as they were
employed immediately before the Transactions. In addition, the agreement
contains a provision that, subject to certain limitations, forbids National
Semiconductor for a period of five years after the consummation of the
Transactions from engaging in any business competing with Fairchild products in
existence on the date the Transactions are consummated. For a period of 39
months after consummation of the Transactions the agreement, subject to certain
limitations, forbids the Company from engaging in any business competing with
National Semiconductor's products on the date the Transactions were consummated.
TECHNOLOGY LICENSING AND TRANSFER AGREEMENT
Under the Technology Licensing and Transfer Agreement, National
Semiconductor assigned or non-exclusively licensed to the Company certain
patent, copyright, maskwork, trade secret and trademark rights necessary to the
Company's business and to make certain improvements to the Company's product
line. These rights include a non-exclusive license to practice certain processes
necessary to the Company's business. For patent rights, National Semiconductor
assigned to the Company more than 150 patents and granted the Company a
worldwide, royalty-free, non-exclusive license under applicable patents and
patent applications, for the life of such patents (but without right to
sublicense) to manufacture, package, use, sell, offer for sale, import, design
or develop the Company's products and certain improvements to those products.
With respect to copyrights and maskworks used in the Company's business,
National Semiconductor granted the Company an undivided interest in certain
co-owned copyrights and maskworks. For trademarks, National Semiconductor
assigned certain trademarks related to the Company's products and granted
licenses recognizing transitional use of visible trademarks and of
product-embedded trademarks,
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which embedded trademarks in some cases will not be eliminated until the
relevant product is discontinued or replaced. For patents that National
Semiconductor assigned to the Company, a worldwide, paid-up, royalty-free,
non-exclusive license, with a limited right to sublicense, was granted by the
Company to National Semiconductor.
National Semiconductor and the Company also agreed to further cross-license
certain discoveries, improvements or inventions occurring within one year after
the consummation of the Transactions, with no right to grant sublicenses (except
for the purpose of settling third party claims against the Company). The
agreement further provides that National Semiconductor, for a period of time,
shall indemnify and render assistance to the Company for intellectual property
claims made by third parties.
MANUFACTURING AGREEMENTS
Under the National Foundry Services Agreement and the Fairchild Foundry
Services Agreement (collectively, the "Foundry Agreements"), National
Semiconductor and Fairchild manufacture semiconductor products (I.E., provide
"foundry" services) for each other during at least the 39-month period following
consummation of the Transactions. Foundry services are the manufacturing
processes through which thousands of integrated circuits are added to raw
silicon wafers. The Fairchild Foundry Services Agreement establishes the terms
and conditions under which Fairchild provides foundry services for National
Semiconductor and the National Foundry Services Agreement defines the terms and
conditions under which National Semiconductor provides foundry services for
Fairchild. The Foundry Agreements (i) establish the processes used by the
foundry service provider, (ii) define purchase commitments and production
forecasts, (iii) establish pricing, (iv) provide for engineering support from
the other party, (v) establish quality standards and (vi) specify delivery and
payment terms, among other things. The agreements also specify warranty and
inspection terms.
The National Assembly Services Agreement and the Fairchild Assembly Services
Agreement (collectively, the "Assembly Agreements") provide for assembly and
test services between National Semiconductor and Fairchild during at least the
39-month period following consummation of the Transactions. During the assembly
and test phase of semiconductor production, the thousands of integrated circuits
produced on silicon wafers during the foundry phase are separated and packaged
into individual devices ready for sale to the Company's customers. The Fairchild
Assembly Services Agreement establishes the terms and conditions under which
Fairchild provides assembly and test services for National Semiconductor and the
National Assembly Services Agreement establishes the terms and conditions under
which National Semiconductor provides such services for Fairchild. Similar to
the Foundry Agreements, the Assembly Agreements establish terms for (i) volume
commitments and production planning, (ii) ordering and shipping, (iii) quality,
inspection and acceptance of finished goods and (iv) pricing and payment. For
information on pricing under the Fairchild Foundry Services Agreement and the
Fairchild Assembly Services Agreement, see Note 1(a) to "Notes to Unaudited Pro
Forma Combined Condensed Statements of Operations."
In addition to the Foundry Agreements and the Assembly Agreements, National
Semiconductor and Fairchild have entered into the Mil/Aero Wafer and Services
Agreement (the Foundry Agreements, the Assembly Agreements and the Mil/Aero
Wafer and Services Agreement, collectively, the "Manufacturing Agreements")
which establishes, in a similar fashion, the terms and conditions under which
Fairchild manufactures integrated circuits for certain military and aerospace
industry customers of National Semiconductor.
The Manufacturing Agreements provide both the Company and National
Semiconductor assured sources of supply and demand. National Semiconductor is
required to purchase from Fairchild a minimum of $330.0 million in goods and
services in the first 39 months following the consummation of the Transactions
at prices that are designed to generate a 20% gross profit for the Company,
subject to certain
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conditions and adjustments. See Note 1(a) of Notes to Unaudited Pro Forma
Combined Condensed Financial Statements of Operations. See "Risk
Factors--Dependence on National Semiconductor."
TRANSITION SERVICES AGREEMENT
Under the Transition Services Agreement, National Semiconductor is providing
a number of business support services to the Company that assist in Fairchild's
conversion to an independent entity. From the consummation of the Transactions
until, in most instances, June 1, 1998, National Semiconductor has agreed to
provide to Fairchild (i) data processing and communication services, (ii)
financial and administrative support, (iii) purchasing services, (iv) marketing
and sales services, (v) logistics and operational support services, (vi) human
resources and benefits services and (vii) security assistance and consulting as
well as additional services as provided in separate shared facilities and
services agreements for the South Portland, Maine site and a sublease for the
Santa Clara, California site. Generally, the agreement provides for National
Semiconductor to invoice Fairchild for the services provided, with certain
charges based on a fixed cost and other charges based on National
Semiconductor's actual incurred costs. In addition, under the agreement National
Semiconductor has granted to the Company a royalty-free, perpetual and
irrevocable worldwide license to use National Semiconductor's in-house business,
engineering and manufacturing systems software. The license will survive
termination of the agreement. See "Risk Factors-- Dependence on National
Semiconductor."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of
Fairchild Holdings and the Company. Other officers may also be appointed to fill
certain positions. Each director of Fairchild Holdings and the Company will hold
office until the next annual meeting of shareholders of Fairchild Holdings or
the Company or until his successor has been elected and qualified.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Kirk P. Pond........................ 52 Chairman of the Board of Directors, President and Chief Executive
Officer
Joseph R. Martin.................... 49 Executive Vice President and Chief Financial Officer and Director
Jerry M. Baker...................... 45 Executive Vice President and General Manager, Memory and Discrete
Products Group
W. Wayne Carlson.................... 54 Executive Vice President and General Manager, Logic Products Group
Daniel E. Boxer..................... 51 Executive Vice President, General Counsel and Secretary
Darrell Mayeux...................... 54 Senior Vice President, Worldwide Sales and Marketing
David A. Henry...................... 35 Corporate Controller
Matthew W. Towse.................... 34 Treasurer
Brian L. Halla...................... 49 Director
William N. Stout.................... 58 Director
Richard M. Cashin, Jr............... 43 Director
Paul C. Schorr IV................... 30 Director
</TABLE>
KIRK P. POND, CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND CHIEF
EXECUTIVE OFFICER. Mr. Pond has been the President of the Company since June
1996. Since 1987, Mr. Pond has held several executive positions with National
Semiconductor, most recently Executive Vice President and Chief Operating
Officer. Prior executive management positions were with Fairchild Semiconductor
Corporation, Texas Instruments and Timex Corporation.
JOSEPH R. MARTIN, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
DIRECTOR. Mr. Martin has been the Executive Vice President and Chief Financial
Officer of the Company since June 1996. Mr. Martin has held several senior
financial positions with National Semiconductor since 1989, most recently as
Vice President of Finance, Worldwide Operations. Prior to joining National
Semiconductor, Mr. Martin was Senior Vice President and Chief Financial Officer
of VTC Incorporated, and prior to that held various senior positions with the
Company.
JERRY M. BAKER, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, MEMORY AND
DISCRETE PRODUCTS GROUP. Mr. Baker has been Executive Vice President and General
Manager, Memory and Discrete Products Group, since December 1996. He has spent
more than 24 years in a variety of engineering and management positions within
National Semiconductor, most recently as Vice President and General Manager,
Discrete Products Divisions.
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W. WAYNE CARLSON, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, LOGIC
PRODUCTS GROUP. Mr. Carlson has been Executive Vice President and General
Manager, Logic Products Group, since June 1996. He has 30 years of prior
engineering and management experience with National Semiconductor and Fairchild,
most recently as Vice President and General Manager, Data Management Division.
DANIEL E. BOXER, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY. Mr. Boxer joined the Company immediately following the consummation
of the Transactions, having worked closely on behalf of the Company on many
aspects of the Transactions. He has practiced law for 27 years and since 1975
had been a partner at the law firm of Pierce Atwood, Portland, Maine. His
practice at Pierce Atwood included advising many of Maine's largest
manufacturing companies, including the Company, on business, governmental, legal
compliance and environmental issues. He was most recently a senior partner and
Chairman of the firm's Management Committee.
DARRELL MAYEUX, SENIOR VICE PRESIDENT, WORLDWIDE SALES AND MARKETING. Mr.
Mayeux has been Senior Vice President, Worldwide Sales and Marketing since
November 1996. He had been with National Semiconductor since 1992 as Vice
President of Sales and Marketing for logic products group. He previously held
engineering, marketing and general management positions with Texas Instruments
and Philips.
DAVID A. HENRY, CORPORATE CONTROLLER. Mr. Henry has been Corporate
Controller since December 1996. He had been with National Semiconductor for
eight years and has held various financial management positions, most recently
as Director of Financial Planning and Analysis for Fairchild. Mr. Henry
previously worked for Amfac, Inc. as well as Ernst and Whinney, and is a
Certified Public Accountant.
MATTHEW W. TOWSE, TREASURER. Mr. Towse became Treasurer upon consummation
of the Transactions. He had been with National Semiconductor for six years and
has held various financial management positions, most recently as Controller for
the Fairchild plant in South Portland, Maine. Mr. Towse previously worked for
Ernst & Young and is a Certified Public Accountant.
BRIAN L. HALLA, DIRECTOR. Mr. Halla has been employed by National
Semiconductor since 1996, serving as Chairman of the Board, President and Chief
Executive Officer. Prior to joining National Semiconductor, Mr. Halla was
Executive Vice President of LSI Logic Products at LSI Logic Corporation and had
held positions at LSI Logic Corporation as Senior Vice President and General
Manager, Microprocessor/DSP Products Group and Vice General Manager,
Microprocessor Products Group.
WILLIAM N. STOUT, DIRECTOR. Mr. Stout has been Chairman and Chief Executive
Officer of Sterling Holding Company and Sterling's subsidiaries since 1988.
Sterling is engaged, through subsidiaries including Trompeter Electronics, Inc.
and Semflex, Inc., in the manufacture and sale of coaxial connectors, coaxial
cable and coaxial cable assemblies. From 1985 to 1988, Mr. Stout was a private
investor and consultant. From 1979 until 1985, Mr. Stout was President and Chief
Executive Officer of Lundy Electronics & Systems, which manufactured electronic
products and systems.
RICHARD M. CASHIN, JR., DIRECTOR. Mr. Cashin has been employed by Citicorp
Venture Capital Ltd. since 1980, and has been President since 1994. Mr. Cashin
is a director of Levitz Furniture Incorporated, Lifestyle Furnishings
International, Euromax and Titan Wheel International.
PAUL C. SCHORR IV, DIRECTOR. Mr. Schorr has been employed by and been a
Vice President of Citicorp Venture Capital Ltd. since 1996. Prior to joining
Citicorp Venture Capital Ltd., Mr. Schorr was a consultant with McKinsey &
Company, Inc. He is a director of Inland Resources.
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<PAGE>
DIRECTOR COMPENSATION AND ARRANGEMENTS
It is not currently contemplated that those persons listed above as
directors of the Company and who are employed by the Company or by Citicorp
Venture Capital Ltd. will receive compensation for their services as directors.
Members of the Board of Directors will be elected pursuant to certain voting
agreements outlined in the Stockholders' Agreement.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation received by the five most highly compensated officers of the
Company for services rendered in Fiscal Year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ----------------
-------------------- STOCK OPTION ALL OTHER
SALARY BONUS AWARDS (1) COMPENSATION(2)
NAME AND PRINCIPAL POSITION ($) ($) (# SHARES) ($)
- -------------------------------------------------------- --------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Kirk P. Pond (3)........................................ 414,521 146,300 18,000 34,292
Chairman of the Board of Directors, President
and Chief Executive Officer
Joseph R. Martin........................................ 181,466 68,875 7,500 7,114
Executive Vice President and Chief Financial
Officer and Director
Jerry M. Baker.......................................... 169,370 54,744 10,200 6,906
Executive Vice President and General Manager,
Memory and Discrete Products Group
W. Wayne Carlson........................................ 234,125 64,815 7,000 8,895
Executive Vice President and General Manager,
Logic Products Group
Darrell Mayeux.......................................... 160,458 31,801 4,000 6,072
Senior Vice President, Worldwide Sales and
Marketing
</TABLE>
- ------------------------
(1) Options were granted for National Semiconductor common stock pursuant to
National Semiconductor's Stock Option Plan. National Semiconductor's
obligations under its Stock Option Plan were not assumed by Fairchild.
(2) Reflects contributions and allocations to National Semiconductor's defined
contribution retirement plans and the value of life insurance premiums paid
by National Semiconductor for term life insurance.
(3) In addition to the amounts disclosed in the table, Mr. Pond received, as
long-term compensation from National Semiconductor in Fiscal Year 1996,
$311,190 in long-term incentive plan payouts pursuant to National
Semiconductor's Performance Award Plan. National Semiconductor's obligations
under the Performance Award Plan were not assumed by Fairchild.
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The following table provides information pertaining to individual grants
made by National Semiconductor of options for shares of National Semiconductor
common stock to the named executive officers in Fiscal Year 1996.
<TABLE>
<CAPTION>
STOCK OPTIONS % OF ALL GRANT DATE
GRANTED OPTIONS GRANTED EXERCISE PRESENT
(# SHARES) TO ALL EMPLOYEES PRICE EXPIRATION VALUE
(1) (%) (2) ($/ SHARE) DATE ($) (3)
------------- ----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Kirk P. Pond.................................. 18,000 0.46 28.25 9/29/05 308,660
Joseph R. Martin.............................. 7,500 0.19 27.13 7/20/05 123,509
5,200 0.13 28.25 9/29/05 89,168
5,000 0.13 22.50 12/20/05 68,288
Jerry M. Baker................................
W. Wayne Carlson.............................. 7,000 0.18 28.25 9/29/05 120,034
Darrell Mayeux................................ 4,000 0.10 28.25 9/29/05 68,591
</TABLE>
- ------------------------
(1) Options for National Semiconductor common stock granted under the National
Semiconductor Stock Option Plan during Fiscal Year 1996.
(2) A total of 3,926,300 options were granted to National Semiconductor
employees, including executive officers, during Fiscal Year 1996.
(3) Represents grant date valuation computed under the Black-Scholes option
pricing model adapted for use in valuing stock options. The actual value, if
any, that may be realized will depend on the excess of the stock price over
the exercise price on the date the option is exercised, so there can be no
assurance that the value realized will be at or near the value estimated by
the Black-Scholes model. Grant date values were determined based in part on
the following assumptions: risk free rate of return of 7.5%, no dividend
yield, time of exercise of ten years, discount for vesting restrictions of
0%-3% per year, and annualized volatility of 39.7% (based on historical
stock prices for five years preceding the grant date).
The following table provides information with respect to the named executive
officers concerning the exercise of National Semiconductor options during Fiscal
Year 1996, and unexercised National Semiconductor options held as of the end of
Fiscal Year 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
SHARES ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
ON EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
NAME (#)(1) ($)(2) (#) ($)(3)
- ------------------------------- --------------- --------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
Kirk P. Pond................... 25,000 593,750 82,250/41,750 728,594/27,656
Joseph R. Martin............... 9,875 72,047 0/19,625 0/10,781
Jerry M. Baker................. -- -- 19,475/16,950 162,897/7,188
W. Wayne Carlson............... -- -- 38,125/21,875 244,969/15,156
Darrell Mayeux................. 2,925 45,400 3,250/11,725 0/6,063
</TABLE>
- ------------------------
(1) Options exercised were for National Semiconductor common stock. The table
excludes any shares acquired under the National Semiconductor Employees
Stock Purchase Plan.
(2) Equals the market value of the underlying shares (based on the opening price
of National Semiconductor common stock on the date of exercise) less the
exercise price.
(3) Represents the difference between $16.25, the market price of National
Semiconductor common stock at Fiscal Year end, and the exercise price.
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DEFERRED COMPENSATION AGREEMENTS
National Semiconductor adopted the National Semiconductor Corporation
Deferred Compensation Plan (the "Plan") shortly before consummation of the
Transactions. Under the Plan, Kirk P. Pond, Joseph R. Martin and certain other
Management Investors have elected to defer receipt of amounts that otherwise
would have become payable under National Semiconductor's Key Employee Incentive
Plan, Discrete Retention Bonus Plan, Discrete Performance Incentive
Plan--Executive Level and/or letter agreements with National Semiconductor
concerning certain payments relating to the Transactions.
Upon consummation of the Transactions, Fairchild Holdings assumed the Plan
and all liabilities with respect to payments due thereunder, and the Plan
participants released National Semiconductor from those liabilities. The Plan is
administered by a committee appointed by Fairchild Holdings' Board of Directors.
Amounts a Plan participant defers pursuant to the Plan will be credited to
an account for that participant on the books of Fairchild Holdings and will be
credited with earnings based on the employee's election. Each Plan participant
has elected that specified portions of the earnings on his deferrals will be
measured based on the performance of Holdings Preferred Stock and Holdings
Common Stock, and that a portion of the earnings on his deferrals will be
measured based on short-term U.S. Treasury obligations.
Amounts credited to a Plan participant's account also will be paid based on
the participant's election. Each participant has elected that the portion of his
account on which earnings are measured based on shares of Holdings stock will be
paid when such shares, if actually held, would be redeemed, automatically or
upon request, by Fairchild Holdings, to the extent that all restrictions on the
transfer of such shares have lapsed. Generally, all payments under the Plan will
be made in cash. Payments will be made in all events (1) upon liquidation or
dissolution of the Company, (2) upon sale of fifty percent (50%) or more of the
equity interests in the Company, consolidation or merger of the Company with or
into another entity, or sale of all or substantially all of the Company's
assets; (3) to the participant's beneficiary upon his death; and (4) upon the
mandatory redemption of Holdings Preferred Stock. Payments pursuant to items (2)
through (4) of the portion of any account the earnings on which are measured
based on the performance of Fairchild Holdings stock will only be made, however,
to the extent that shares of such stock, if actually held, would be redeemed at
that time upon request. Payment to a participant may be accelerated if the
participant suffers an unforeseeable financial emergency or severe hardship.
Upon consummation of the Transactions, the Company established a grantor
trust (a so-called "rabbi trust") (the "Trust") to which National Semiconductor
and the Company together contributed cash in an amount equal to the aggregate
amount of deferrals under the Plan as of the closing date of the Transactions.
The trust agreement establishing the Trust provides that such amount, when
contributed, will be invested in specified amounts of Holdings Preferred Stock
and Holdings Common Stock. The Trust will be a party to the Stockholders'
Agreement and will be treated as a Management Investor.
National Semiconductor also entered into a Retention Agreement dated July
1996 with Kirk P. Pond, which assigned to Mr. Pond full management
responsibility for National Semiconductor's logic and memory product lines
including the manufacturing operations related thereto. Compensation for this
assignment was agreed to be Mr. Pond's salary at the rate of $418,000 per annum,
a stock option for 100,000 shares of common stock of National Semiconductor,
vesting of which would be accelerated concurrently with the termination of Mr.
Pond's employment if Mr. Pond's employment were to be terminated at the end of
his assignment, an incentive reflecting returns to National Semiconductor of the
businesses run by Mr. Pond, and an incentive based on the value received by
National Semiconductor upon any sale or other disposal of the businesses. In
addition, National Semiconductor agreed to provide Mr. Pond benefits upon
termination of employment by National Semiconductor as follows: payment of
salary and benefits for twelve months, payment of an incentive at 70% of base
salary, crediting of one additional year's service towards certain payments
under the Performance Award Plan and payment of
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vacation accrued through the date salary ends. The other four executive officers
of the Company named above entered into arrangements with National Semiconductor
providing various benefits in connection with the sale or disposal of the
businesses. The executive officers have no further obligations under these
arrangements.
EMPLOYMENT AGREEMENTS
Concurrent with the consummation of the Transactions, the Company, Fairchild
Holdings and Sterling entered into an employment agreement with each of Kirk P.
Pond and Joseph R. Martin (each an "Executive"). Mr. Pond is employed as
Chairman of the Boards of Directors and as Chief Executive Officer of the
Company and Fairchild Holdings. Mr. Martin is employed as Executive Vice
President and Chief Financial Officer, and serves as a member of the Boards of
Directors, of the Company and Fairchild Holdings. The respective agreements
provide for an annual base salary of $450,000 for Mr. Pond and $250,000 for Mr.
Martin, subject in each case to increases at the discretion of the Board of
Directors and to annual performance bonuses in accordance with the FSC
Semiconductor Corporation 1997 Executive Officer Incentive Plan. Each agreement
also provides for the Executive to receive standard Company benefits. The term
of each agreement is three years subject to automatic renewal for up to two
consecutive one-year terms unless, in each case, either the Company or the
Executive gives prior notice of non-renewal. Under each agreement, either the
Executive or the Company may terminate the agreement with or without cause. If
terminated by the Company without cause or by the Executive with cause, each
agreement requires the Company to pay the Executive monthly severance payments
(approximately equal to his salary at the time of termination plus an amount
equal to incentive awards payable in the fiscal year prior to termination) until
the end of the term of the agreement or for 24 months if longer. Each Executive
is subject to a non-competition covenant during the term of his agreement and
for a period of at least 24 months following termination or expiration of the
agreement.
The Company may enter into employment agreements with other executive
officers of the Company.
PERSONAL SAVINGS AND RETIREMENT PLAN
Fairchild Holdings and the Company have adopted a Personal Savings and
Retirement Plan (the "Retirement Plan") for all eligible employees who are not
foreign nationals or contract employees. The Retirement Plan includes a cash or
deferred arrangement under Section 401(k) of the Internal Revenue Code and
matching contributions under Section 401(m) of the Internal Revenue Code. Under
the 401(k) plan, participants may elect to defer from 1% to 15% of their
compensation on an after-tax or before-tax basis, directing the investment of
these elective deferrals among several mutual funds. The Company will make
quarterly matching contributions equal to 50% of the first 6% of an employee's
before-tax elective deferral contributions for that period. Both elective
deferrals and matching contributions under the 401(k) plan will be fully vested
at all times.
FAIRCHILD BENEFIT RESTORATION PLAN
Fairchild Holdings and the Company have adopted the Fairchild Benefit
Restoration Plan. Under the Plan, certain employees of the Company are eligible
(i) to defer on a before-tax basis amounts over and above those they are
permitted by law to defer under the Company's Retirement Plan and (ii) to
receive matching contributions from the Company equal to the difference between
matching contributions received under the Retirement Plan and the matching
contributions they would have received under the Retirement Plan but for
statutory limits applicable to such contributions. Deferral and matching
contributions are credited to accounts established and maintained by the
Company. Interest at a rate equal to a commonly reported rate for long-term
A-rated corporate bonds is credited to participants' accounts at such times as
determined by a committee appointed by the Board of Directors to administer the
Plan. The Plan is an unfunded plan of deferred compensation, and amounts payable
thereunder are paid out of general
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corporate assets of the Company and are subject to the claims of the general
creditors of the Company and Fairchild Holdings.
FAIRCHILD INCENTIVE PROGRAM
Fairchild Holdings and the Company have adopted the Fairchild Incentive
Program. Under the Program, all regular full- and part-time employees of the
Company (with certain limited exceptions) are eligible to receive annual or
semiannual incentive awards from the Company. The amount of each payment is
based on a given employee's "Target Award." As the Program is currently
formulated, the Target Award is 8% of annual compensation for non-exempt
employees, from 8% to 15% (depending on grade level) of annual compensation for
exempt employees, and up to 35% (depending on grade level) of annual
compensation for certain management-level employees. Payment awards range from
0% to 200% of the Target Award, depending on whether the Company achieves
certain pre-established earnings goals. Certain participants in the Program are
eligible to defer awards, and to the extent that the deferral option applies
only to certain Program participants, it constitutes a separate unfunded plan
known as the Fairchild Select Employee Incentive Deferral Plan (the "Deferral
Plan"). For participants who elect deferral, the Company will establish and
maintain book-entry accounts to which the Company shall credit deferred payments
and interest equal to a commonly reported rate for long-term A-rated corporate
bonds. Deferred amounts and accrued interest are paid to participants upon
termination or on a date pre-selected by the participant according to the terms
of the Plan. The Compensation Committee appointed by the Board of Directors of
Fairchild Holdings will administer the Program and reserves the right, among
other things, not to make award payments, and to modify or amend the Program.
The Deferral Plan is an unfunded plan of deferred compensation, and benefits
payable thereunder are paid out of general corporate assets of the Company and
are subject to the claims of the general creditors of the Company and Fairchild
Holdings.
FSC SEMICONDUCTOR CORPORATION 1997 EXECUTIVE OFFICER INCENTIVE PLAN
Fairchild Holdings has adopted the FSC Semiconductor Corporation 1997
Executive Officer Incentive Plan. Under the Plan, certain executive officers of
the Company may be eligible to receive annual incentive awards, based on a
"Target Award" which ranges from 40% to 70% of an officer's base annual
compensation. Actual award payments range from 0% to 200% of the Target Award
depending on the extent to which the Company achieves or surpasses certain
pre-established earnings goals. Participants may elect to defer all or any
portion of an award payment. For participants who elect deferral, the Company
will establish and maintain book-entry accounts, and credit each account
annually with deferred payments as well as interest at a rate equal to a
commonly reported rate for long-term A-rated corporate bonds. Deferrals and
accrued interest thereon are paid to participants upon termination or on a date
pre-selected by the participant according to the terms of the Plan. Eligibility
for Plan participation, performance goals and other terms of the Plan are
determined by a committee comprised of two or more directors of the Company who
are outside directors within the meaning of Section 162(m) of the Internal
Revenue Code. To the extent of any deferrals, the Plan is an unfunded plan of
deferred compensation, and benefits payable thereunder are paid out of general
corporate assets of the Company and are subject to the claims of the general
creditors of the Company and Fairchild Holdings.
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OWNERSHIP OF CAPITAL STOCK
The Company is a wholly owned subsidiary of Fairchild Holdings. The
following table sets forth certain information with respect to the security
ownership of certain beneficial owners and management.
<TABLE>
<CAPTION>
NUMBER AND PERCENT OF SHARES
------------------------------------------------
<S> <C> <C> <C> <C>
HOLDINGS CLASS A HOLDINGS CLASS B
STOCK (1) STOCK (2)
----------------------- -----------------------
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ----------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sterling Holding Company, LLC
c/o Fairchild Semiconductor Corporation
333 Western Avenue
South Portland, Maine 04106.................................... 3,553,000 49.4% 7,163,880 85.2%
National Semiconductor Corporation
2900 Semiconductor Drive
Santa Clara, California 95052(3)............................... 1,095,000 15.2% 1,245,000 14.8%
Kirk P. Pond
c/o Fairchild Semiconductor Corporation
333 Western Avenue
South Portland, Maine 04106.................................... 793,268 11.0% -- --
Joseph R. Martin
c/o Fairchild Semicondutor Corporation
333 Western Avenue
South Portland, Maine 04106.................................... 396,634 5.5% -- --
Jerry M. Baker................................................... 161,764 2.2% -- --
W. Wayne Carlson................................................. 161,764 2.2% -- --
Darrell Mayeux................................................... 161,764 2.2% -- --
All directors and executive officers as a group (12
persons)(4)(5)................................................. 1,836,958 25.5% -- --
</TABLE>
- ------------------------
(1) Does not include shares of Holdings Class A Stock issuable upon conversion
of Holdings Class B Stock.
(2) Does not include shares of Holdings Class B Stock issuable upon conversion
of Holdings Class A Stock.
(3) Brian L. Halla, who is a director of the Company and Fairchild Holdings, is
affiliated with National Semiconductor in the capacities described under
"Management--Directors and Executive Officers." In those capacities he may
be deemed to beneficially own the shares held of record by National
Semiconductor. Mr. Halla disclaims ownership of all such shares.
(4) The amounts shown in the table do not include 332 shares of Holdings
Preferred Stock (representing less than one percent of such shares issued
and outstanding) beneficially owned by Daniel E. Boxer, who is an executive
officer.
(5) Certain of the Company's employees are expected to participate in the FSC
Semiconductor Corporation Stock Option Plan pursuant to which they will be
offered the opportunity to acquire Holdings Class A Stock which would equal
in the aggregate up to an additional 5% of the Holdings Common Stock
outstanding. See "--FSC Semiconductor Corporation Stock Option Plan." The
table does not include shares or options that may be acquired by such
individuals pursuant to such Plan.
HOLDINGS PREFERRED STOCK
The Fairchild Holdings Certificate of Incorporation provides that Fairchild
Holdings may issue 70,000 shares of Holdings Preferred Stock, all of which are
designated as 12% Series A Cumulative Compounding
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Preferred Stock. Holdings Preferred Stock has a stated value of $1,000 per share
and is entitled to annual dividends when, as and if declared, which dividends
will be cumulative, whether or not earned or declared, and will accrue at a rate
of 12%, compounding annually. The vote of a majority of the outstanding shares
of the Holdings Preferred Stock, voting as a separate class, is required to (i)
create, authorize or issue any other class or series of stock entitled to a
preference prior to the Holdings Preferred Stock upon any dividend or
distribution or any liquidation, distribution of assets, dissolution or winding
up of Fairchild Holdings, or increase the authorized amount of any such other
class or series, or (ii) amend Fairchild Holdings' Certificate of Incorporation
if such amendment would adversely affect the relative rights and preferences of
the holders of the Holdings Preferred Stock. Except as described in the
immediately preceding sentence or as otherwise required by law, the Holdings
Preferred Stock is not entitled to vote. Fairchild Holdings may not pay any
dividend upon (except for a dividend payable in Junior Stock, as defined below),
or redeem or otherwise acquire shares of, capital stock junior to the Holdings
Preferred Stock (including the Holdings Common Stock) ("Junior Stock") unless
all cumulative dividends on the Holdings Preferred Stock have been paid in full.
Upon liquidation, dissolution or winding up of Fairchild Holdings, holders of
Holdings Preferred Stock will be entitled to receive out of the legally
available assets of Fairchild Holdings, before any amount shall be paid to
holders of Junior Stock, an amount equal to $1,000 per share of Holdings
Preferred Stock, plus all accrued and unpaid dividends to the date of final
distribution. If such available assets are insufficient to pay the holders of
the outstanding shares of Holdings Preferred Stock in full, such assets, or the
proceeds thereof, will be distributed ratably among such holders. The Holdings
Preferred Stock will not be mandatorily redeemable prior to the maturity of the
Holdings PIK Note, which will be one year after the maturity of the Notes.
Fairchild Holdings may optionally redeem, in whole or in part, the Holdings
Preferred Stock at any time at a price per share of $1,000, plus accrued and
unpaid dividends to the date of redemption. At the option of Fairchild Holdings,
the Holdings Preferred Stock may be exchanged for junior subordinated debentures
of Fairchild Holdings.
HOLDINGS COMMON STOCK
The Certificate of Incorporation of Fairchild Holdings provides that
Fairchild Holdings may issue 60,000,000 shares of Holdings Common Stock, divided
into two classes consisting of 30,000,000 shares of Holdings Class A Stock and
30,000,000 shares of Holdings Class B Stock. The holders of Holdings Class A
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders. Except as required by law, the holders
of Holdings Class B Stock have no voting rights. Under the Certificate of
Incorporation of Fairchild Holdings, a holder of either class of Holdings Common
Stock may convert any or all of his shares into an equal number of shares of the
other class of Holdings Common Stock; PROVIDED that in the case of a conversion
from Holdings Class B Stock, which is nonvoting, into Holdings Class A Stock,
which is voting, the holder of shares to be converted would be permitted under
applicable law to hold the total number of shares of Holdings Class A Stock
which would be held after giving effect to the conversion.
STOCKHOLDERS' AGREEMENT
In connection with the Transactions, the stockholders of Fairchild Holdings
entered into a Securities Purchase and Holders Agreement (the "Stockholders'
Agreement") containing certain agreements among such stockholders with respect
to the capital stock and corporate governance of Fairchild Holdings and the
Company. The following is a summary description of the principal terms of the
Stockholders' Agreement.
Pursuant to the Stockholders' Agreement, the Boards of Directors of
Fairchild Holdings and the Company will be composed at all times of seven
directors as follows: Mr. Pond (so long as he continues to own shares of
Holdings Common Stock or Holdings Preferred Stock); Mr. Martin (so long as he
continues to own shares of Holdings Common Stock or Holdings Preferred Stock);
the President of the Company if either of Messrs. Pond or Martin is no longer
serving on the Board of Directors; if National Semiconductor so chooses, so long
as National Semiconductor continues to own shares of Holdings Common Stock or
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Holdings Preferred Stock, one individual designated by National Semiconductor,
PROVIDED that such person shall initially be either Mr. Halla or Donald Macleod
(until the earlier of the second anniversary of the date of consummation of the
Transactions or the date upon which such person ceases to be an executive
officer of National Semiconductor, and thereafter shall be an executive officer
of National Semiconductor reasonably acceptable to the remaining directors); two
individuals designated by Sterling; and the remaining directors shall be such
independent directors as shall be designated by Sterling (to the extent
permitted by applicable law as determined by Sterling in its sole discretion),
subject to the right of the Chief Executive Officer of the Company to veto the
election of any such independent director, PROVIDED that in the event that
Sterling concludes that it is unable to designate, or elects not to designate
for any reason, one or more of such independent directors or the election of any
such independent director is not approved by the holders of a majority of the
outstanding shares of Holdings Class A Stock, such directorship(s) shall not be
filled by the remaining members of the Board of Directors but shall remain
vacant until the election of a director designated by Sterling to fill such
vacancy in accordance with the Stockholders' Agreement.
The Stockholders' Agreement contains certain provisions which, with certain
exceptions, restrict the ability of the stockholders to transfer any Holdings
Common Stock or Holdings Preferred Stock except pursuant to the terms of the
Stockholders' Agreement. If holders of more than 50% of the Holdings Common
Stock approve the sale of Fairchild Holdings or the Company (an "Approved
Sale"), each stockholder has agreed to consent to such sale and, if such sale
includes the sale of stock, each stockholder has agreed to sell all of such
stockholder's Holdings Common Stock and Holdings Preferred Stock on the terms
and conditions approved by holders of a majority of the Holdings Common Stock
then outstanding. In the event Fairchild Holdings proposes to issue and sell
(other than in a public offering pursuant to a registration statement) any
shares of Holdings Common Stock or any securities containing options or rights
to acquire any shares of Holdings Common Stock or any securities convertible
into Holdings Common Stock to Citicorp Venture Capital Ltd., Sterling or any of
their respective affiliates, Fairchild Holdings must first offer to each of the
other shareholders a PRO RATA portion of such shares. Such preemptive rights
will not be applicable to the issuance of shares of Holdings Common Stock upon
the conversion of shares of one class of Holdings Common Stock into shares of
the other class. Subject to certain limitations neither Sterling nor National
Semiconductor, nor any of their respective affiliates, may sell any of their
shares of Holdings Preferred Stock or Holdings Common Stock without offering the
other stockholders a PRO RATA opportunity to participate in such sale. In
addition, the Stockholders' Agreement restricts certain transactions between
Fairchild Holdings and the Company, on the one hand, and owners of 15% or more
of the Holdings Common Stock and their affiliates, on the other hand.
The Stockholders' Agreement also provides for certain additional
restrictions on transfer of shares by Management Investors, including the right
of Fairchild Holdings to repurchase certain shares upon termination of such
stockholder's employment prior to 2002, at a formula price, and the grant of a
right of first refusal in favor of Holdings in the event a Management Investor
elects to transfer shares of Holdings Common Stock.
FSC SEMICONDUCTOR CORPORATION STOCK OPTION PLAN
Under the FSC Semiconductor Corporation Stock Option Plan, certain employees
of the Company will be offered the opportunity to purchase Holdings Class A
Stock. The employees will have the opportunity to acquire or be granted options
to acquire an aggregate of up to 5% of Holdings Common Stock outstanding on a
fully-diluted basis. In addition, upon the purchase of Holdings Class A Stock or
the acquisition of options to purchase such stock, the employees become subject
to the terms and conditions of the Stockholders' Agreement. See "--Stockholders'
Agreement."
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REGISTRATION RIGHTS AGREEMENT
In connection with their entry into the Stockholders' Agreement, Fairchild
Holdings, Sterling, the Management Investors, National Semiconductor and certain
other stockholders of Fairchild Holdings entered into a Registration Rights
Agreement (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, upon the written request of Sterling or National
Semiconductor, Fairchild Holdings will prepare and file a registration statement
with the Securities and Exchange Commission concerning the distribution of all
or part of the shares held by Sterling or National Semiconductor and use its
best efforts to cause such registration statement to become effective. If at any
time Fairchild Holdings files a registration statement for the Holdings Common
Stock pursuant to a request by Sterling, National Semiconductor or otherwise
(other than a registration statement of Form S-8, Form S-4 or any similar form,
a registration statement filed in connection with a share exchange or an
offering solely to Holdings' employees or existing stockholders, or a
registration statement registering a unit offering (as defined)) (a "Qualifying
Offering"), Fairchild Holdings will use its best efforts to allow the other
parties to the Registration Rights Agreement to have their shares of Holdings
Common Stock (or a portion of their shares under certain circumstances) included
in such offering of Holdings Common Stock. Registration expenses of the selling
stockholders (other than underwriting fees, brokerage fees and transfer taxes
applicable to the shares sold by such stockholders or in certain cases the fees
and expenses of any accountants or other representatives retained by a selling
stockholder) will be paid by Fairchild Holdings.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company and
Fairchild Holdings which is outstanding. To the extent such summary contains
descriptions of the Senior Credit Facilities and other loan documents, such
descriptions do not purport to be complete and are qualified in their entirety
by reference to such documents, which are available upon request from the
Company.
SENIOR CREDIT FACILITIES
In connection with the Transactions, the Company entered into the Senior
Credit Facilities with a syndicate of financial institutions for which Bankers
Trust Company is acting as administrative agent (the "Administrative Agent"),
Credit Suisse First Boston is acting as syndication agent and Canadian Imperial
Bank of Commerce is acting as documentation agent. The Senior Credit Facilities
provide up to a maximum aggregate amount of $195.0 million of financing. The
following is a summary of the material terms and conditions of the Senior Credit
Facilities and is subject to the detailed provisions of the credit agreement
(the "Credit Agreement") and various related documents which were entered into
in connection with the Senior Credit Facilities.
GENERAL. The Senior Credit Facilities consist of (i) the Senior Term
Facility in an aggregate principal amount of $120.0 million, composed of two
tranches: $75.0 million of Tranche A Term Loans ("Tranche A Term Loans") and
$45.0 million of Tranche B Term Loans ("Tranche B Term Loans" and, together with
the Tranche A Term Loans, the "Term Loans"); and (ii) the $75.0 million
Revolving Credit Facility.
The proceeds of the Senior Term Facility, which were obtained on the date of
consummation of the Transactions, were used to finance the Transactions in part
and to pay related transaction costs. Proceeds of the Revolving Credit Facility
can be used to fund the Company's general corporate and working capital
requirements. The Revolving Credit Facility may be used in part for the issuance
of standby and trade letters of credit ("Letters of Credit") to support the
obligations of the Company and its subsidiaries.
INTEREST RATES; FEES. The Senior Credit Facilities may be maintained from
time to time, at the Company's option, as (i) Base Rate Loans which bear
interest at the Base Rate (defined in the Credit Agreement as the higher of (x)
1/2 of 1% in excess of the Federal Reserve reported certificate of deposit rate
and (y) the Administrative Agent's announced prime lending rate, each as in
effect from time to time) plus the "Applicable Margin" (as defined below) or
(ii) Eurodollar Loans bearing interest at the
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Eurodollar Rate (adjusted for maximum reserves) as determined by the
Administrative Agent for the applicable interest period plus the Applicable
Margin. No Eurodollar Loans may be incurred prior to the earlier of the 90th day
following the date of consummation of the Transactions and the date on which the
primary syndication is completed. "Applicable Margin" means a per annum rate
equal to (x) in the case of Tranche A Term Loans and the Revolving Credit
Facility, a floating rate that will vary depending on the Company's consolidated
debt to EBITDA ratio and EBITDA to interest expense ratio (each as defined in
the Credit Agreement) and which rate shall range (A) from 0.0% to 1.5% for Base
Rate Loans and (B) from 1.0% to 2.5% for Eurodollar Loans and (y) in the case of
Tranche B Term Loans (A) maintained as Base Rate Loans, 2.0%, and (B) maintained
as Eurodollar Loans, 3.0%.
Eurodollar Loans may have 1, 2, 3 and 6 month interest periods. Interest on
Eurodollar Loans will be payable in arrears at the end of the applicable
interest period and every three months where the applicable period exceeds three
months. Interest on Base Rate Loans will be payable quarterly in arrears on the
last business day of each quarter.
Overdue amounts shall bear interest at a rate per annum equal to the greater
of (i) the rate which is 2% in excess of the rate otherwise applicable to Base
Rate Loans and (ii) the rate which is 2% in excess of the rate then borne by the
applicable borrowings. Default interest is payable on demand.
The Company will pay a commitment fee calculated at a rate of 0.5% per annum
of the unutilized commitments of each lender under the Revolving Credit
Facility. This fee accrues from the date of consummation of the Transactions to
and including the date of termination of the Senior Credit Facilities, and will
be payable quarterly in arrears.
The Company will pay a letter of credit fee equal to the Applicable Margin
then in effect for revolving loans maintained as Eurodollar Loans, and a facing
fee of 1/4 of 1% per annum, in each case calculated on the aggregate stated
amount of each Letter of Credit for its stated duration. Such fees are payable
in arrears at the end of each quarter. In addition, the Company will pay
customary administrative charges in connection with the issuance and amendment
of, and draws under, Letters of Credit.
AMORTIZATION; PREPAYMENTS. The Tranche A Term Loans are scheduled to mature
on the fifth anniversary of the date of consummation of the Transactions and
will be subject to quarterly amortization payments. The first such payment will
be due three months after the date of consummation of the Transactions. The
Tranche B Term Loans are scheduled to mature on the sixth anniversary of the
date of consummation of the Transactions. Amortization payments equal to
$1,000,000 will be required for each of the five successive one-year periods
following the date of consummation of the Transactions, payable quarterly in
arrears. The remaining aggregate principal amount of Tranche B Term Loans shall
be subject to four equal quarterly amortization payments, with the first such
payment to be made five years and three months after the date of consummation of
the Transactions. The Revolving Credit Facility is scheduled to mature on the
fifth anniversary of the date of consummation of the Transactions.
Voluntary prepayments may be made in whole or in part without premium or
penalty (other than the payment of breakage costs for Eurodollar Loans prepaid
on a day other than the last day of an interest period). Such payments on the
Senior Term Facility will be applied to reduce the scheduled amortizations of
all then-outstanding Term Loans on a PRO RATA basis across the respective
maturities thereof.
The Company will be required to make mandatory repayments of the Senior Term
Facility from (i) 100% (or, in the case of an initial public offering of the
common stock of Fairchild Holdings, 50% of that portion of net proceeds thereof
in excess of $50 million) of the net cash proceeds from certain issuances of
debt or equity by Fairchild Holdings or any of its direct or indirect
subsidiaries (other than pursuant to (a) the Transactions or (b) any takeout of
bridge securities issued as part of the Transactions (to the extent the proceeds
of the takeout financing are used to retire such bridge financing with permanent
replacement securities)), (ii) 100% of the net sale proceeds from certain asset
sales by Fairchild Holdings or any of its direct or indirect subsidiaries
subject to such baskets as may be agreed upon,
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(iii) 75% of annual excess cash flow of the Company (provided that once Term
Loans in the aggregate principal amount of $25 million have been repaid solely
pursuant to this clause (iii), the percentage set forth in this clause (iii)
shall be reduced to 50%) and (iv) 100% of certain insurance proceeds.
Applications of payments to the term loans shall apply to reduce the scheduled
amortizations of all then outstanding Term Loans on a PRO RATA basis across the
respective maturities thereof. In addition, revolving loans shall be required to
be prepaid (and letters of credit cash collateralized) if at any time the
aggregate principal amount thereof exceeds the total Revolving Credit Facility
commitments, with such prepayment (and/or cash collateralization) to be in an
amount equal to such excess.
GUARANTEES AND COLLATERAL. Fairchild Holdings was required and each
domestic direct and indirect subsidiary of the Company (collectively, the
"Guarantors") will be required to guarantee all of the amounts owing under the
Senior Credit Facilities. All amounts owing under the Senior Credit Facilities
(including amounts owed under such guarantees) are secured by a first priority
(subject to certain permitted liens and encumbrances) perfected security
interest in all stock of domestic subsidiaries, not more than 65% of the stock
of the Foreign Subsidiaries that are wholly owned by the Company and the
promissory notes owned by the Company and the Guarantors, and in all or
substantially all other tangible and intangible assets owned by the Company and
each Guarantor.
COVENANTS. The obligations of the lenders under the Senior Credit
Facilities are subject to the satisfaction of certain conditions precedent
customary in acquisition credit facilities or otherwise appropriate under the
circumstances. The Company and each of its subsidiaries are subject to certain
affirmative and negative covenants contained in the Senior Credit Facilities,
including without limitation covenants that restrict, subject to specified
exceptions, (i) the incurrence of additional indebtedness and other obligations
and the granting of additional liens, (ii) mergers, acquisitions, investments
and acquisitions and dispositions of assets, (iii) the incurrence of capitalized
lease obligations, (iv) dividends, (v) prepayment or repurchase of other
indebtedness and amendments to certain agreements governing indebtedness,
including the Indenture and the Notes, (vi) engaging in transactions with
affiliates and formation of subsidiaries, (vii) capital expenditures, (viii) the
use of proceeds and (ix) changes of lines of business. There are also covenants
relating to compliance with ERISA and environmental and other laws, payment of
taxes, maintenance of corporate existence and rights, maintenance of insurance
and interest rate protection, and financial reporting. Certain of these
covenants are more restrictive than those set forth in the Indenture. In
addition, the Senior Credit Facilities require the Company to maintain
compliance with certain specified financial covenants, including covenants
relating to minimum interest coverage, minimum fixed charge coverage, and
maximum leverage.
EVENTS OF DEFAULT. The Senior Credit Facilities also include events of
default that are typical for these types of credit facilities and appropriate in
the context at the proposed transaction, including, without limitation, a
default in the event of a change of control of Fairchild Holdings or the
Company. The occurrence of any of such events of default could result in
acceleration of the Company's and the Guarantors' obligations under the Senior
Credit Facilities and foreclosure on the collateral securing such obligations,
which could have material adverse results to holders of the Notes.
SUBSIDIARY CREDIT FACILITIES
Certain of the Company's subsidiaries may incur certain indebtedness. As an
obligation of a subsidiary of the Company, such indebtedness would be
effectively senior, as to the assets of such subsidiary, to the obligations of
the Company under the Notes. It is expected that the debt instruments evidencing
such indebtedness will contain customary terms and conditions, covenants and
events of default.
HOLDINGS PIK NOTE
In connection with the Transactions, Fairchild Holdings issued to National
Semiconductor the Holdings PIK Note in the original principal amount of $77.0
million. The Holdings PIK Note will mature
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in 2008 and bears interest at an annual rate equal to 11.74%. To the extent any
Fairchild Holdings Senior Debt (as defined) prohibits Fairchild Holdings from
paying interest due on the Holdings PIK Note in cash, such interest shall be
paid by adding such interest to the then outstanding principal amount of the
Holdings PIK Note. Such amount shall accrue interest as a portion of the
principal amount of the Holdings PIK Note from the applicable interest payment
date. Fairchild Holdings may redeem the Holdings PIK Note at any time in whole
or in part at 100% of the principal amount thereof plus accrued and unpaid
interest to the date of redemption. In addition, upon a "change in control"
Fairchild Holdings will be required to redeem the Holdings PIK Note at the same
price subject to certain conditions. The Holdings PIK Note contains certain
covenants in favor of the holder (the "Holder") including, but not limited to:
(i) restrictions on the payment by Fairchild Holdings of dividends and the
purchase, redemption or prepayment by Fairchild Holdings and its subsidiaries of
its capital stock or indebtedness which is, by its terms or by operation of law,
ranks PARI PASSU or junior in right of payment to the Holdings PIK Note and (ii)
restrictions on subsidiaries entering into agreements (other than with respect
to the Holdings PIK Note) restricting their ability to pay dividends or make
certain other distributions to Fairchild Holdings or any subsidiary of Holdings.
The Holdings PIK Note is and will be subordinated to Fairchild Holdings'
obligations (including guarantees, if any, from time to time) under the Senior
Credit Facilities, the Notes and certain other indebtedness of Fairchild
Holdings, other than indebtedness which by its terms is PARI PASSU or junior in
right of payment to the Holdings PIK Note (the "Fairchild Holdings Senior
Debt"). Until such Fairchild Holdings Senior Debt is paid in full, Fairchild
Holdings may not make any payment of principal or interest to the Holdings PIK
Note Holder: (i) if such Fairchild Holdings Senior Debt has not been paid in
full, following the maturity of any Fairchild Holdings Senior Debt (either by
lapse, acceleration or otherwise); (ii) following a payment default on Fairchild
Holdings Senior Debt or (iii) following a nonpayment default on Fairchild
Holdings Senior Debt (until (a) such non-payment default shall have been cured
or waived, (b) certain events of default under the Holdings PIK Note shall have
occurred, (c) the Senior Credit Facilities or Notes shall have become due and
payable upon acceleration or (d) 180 days shall have elapsed after notice of
such non-payment default has been received by Fairchild Holdings). Except for
certain events of bankruptcy, the consent of Holdings PIK Note Holders holding
25% or more of the principal amount of the Holdings PIK Note is required to
accelerate the payment of principal upon an event of default. If any Fairchild
Holdings Senior Debt is outstanding at the time of an acceleration of the
Holdings PIK Note, the Holdings PIK Note will become due and payable upon the
earlier of acceleration of such Fairchild Holdings Senior Debt or thirty days
following notice of acceleration of the Holdings PIK Note being given to the
agent for Fairchild Holdings Senior Debt holders. An event of default under the
Holdings PIK Note will include, among other things, failure to pay principal or
interest when due, failure to comply with the material terms of the Holdings PIK
Note following notice, failure to pay certain material indebtedness of Fairchild
Holdings and certain events of bankruptcy or insolvency.
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DESCRIPTION OF THE NOTES
GENERAL
The Existing Notes were issued under an Indenture dated as of March 11, 1997
(the "Indenture"), between the Company, Fairchild Holdings, as Guarantor, and
United States Trust Company of New York, as trustee (the "Trustee"). The terms
of the Indenture apply to the Existing Notes and to the Exchange Notes to be
issued in exchange therefor pursuant to the Exchange Offer (all such Notes being
referred to herein collectively as the "Notes"). The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act.
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon request
to the Company. The following summary of certain provisions of the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended. Capitalized terms used herein and not
otherwise defined have the meanings set forth in the section "--Certain
Definitions."
The Notes may be exchanged or transferred at the office or agency of the
Company which, unless otherwise provided by the Company, will be the offices of
the Trustee. The Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge shall be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $300.0 million aggregate principal amount, and will mature on March
15, 2007. The Notes will bear interest at the rate per annum shown on the cover
page hereof from March 11, 1997, or from the most recent date to which interest
has been paid or provided for, payable semiannually to Holders of record at the
close of business on the March 1 or September 1 immediately preceding the
interest payment date on and of each year, commencing September 15, 1997. The
Company will pay interest on overdue principal at 1% per annum in excess of such
rate, and it will pay interest on overdue installments of interest at such
higher rate to the extent lawful.
The interest rate on the Notes is subject to increase in certain
circumstances if the Company does not file a registration statement relating to
the Registered Exchange Offer or if the registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied,
all as further described under "--Registered Exchange Offer; Registration
Rights."
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to March 15, 2002. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest (if any) to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on
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the relevant interest payment date), if redeemed during the 12-month period
commencing on March 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ---------------------- -----------
<S> <C>
2002.................. 105.063%
2003.................. 103.375
2004.................. 101.688
2005 and thereafter... 100.000
</TABLE>
In addition, at any time and from time to time prior to March 15, 2000, the
Company may redeem in the aggregate up to $105.0 million of the original
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price (expressed as a percentage of principal amount)
of 110.0% plus accrued and unpaid interest (if any) to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER,
that at least $150.0 million aggregate principal amount of the Notes must remain
outstanding after each such redemption.
MANDATORY REDEMPTION
The Indenture requires the Company to provide for the retirement, by
redemption, of $150.0 million principal amount of the Notes on March 15, 2005
and $75.0 million principal amount of the Notes on March 15, 2006, in each case
at a redemption price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest (if any) to the redemption date. Such redemptions
are calculated to retire approximately 75% of the principal amount of the Notes
prior to maturity. The Company may, at its option, receive credits against such
mandatory redemptions for the principal amount of Notes acquired or redeemed
(other than through this mandatory redemption provision) by the Company and
surrendered to the Trustee for cancellation.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a PRO RATA basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
GUARANTIES
The obligations of the Company pursuant to the Notes, including the
repurchase obligation resulting from a Change of Control, will be
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis, by Fairchild Holdings and by each of the Subsidiary Guarantors. Each
Subsidiary Guaranty will be limited in amount to an amount not to exceed the
maximum amount that can be guaranteed by the applicable Subsidiary Guarantor
without rendering the Subsidiary Guaranty, as it relates to such Subsidiary
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
If a Subsidiary Guaranty were to be rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and other contingent
liabilities) of the applicable Subsidiary Guarantor, and, depending on the
amount of such indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guaranty could be reduced to zero. See "Risk Factors--Ranking of the
Notes and Guaranty."
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Pursuant to the Indenture, Fairchild Holdings or a Subsidiary Guarantor may
consolidate with, merge with or into, or transfer all or substantially all its
assets to any other Person to the extent described below under "--Certain
Covenants--Merger and Consolidation"; PROVIDED, HOWEVER, that if such other
Person is not the Company, Fairchild Holdings' obligations under the Fairchild
Holdings Guaranty or such Subsidiary Guarantor's obligations under its
Subsidiary Guaranty, as the case may be, must be expressly assumed by such other
Person. However, upon the sale or other disposition (including by way of
consolidation or merger) of a Subsidiary Guarantor or the sale or disposition of
all or substantially all the assets of a Subsidiary Guarantor (in each case
other than to the Company or an Affiliate of the Company) permitted by the
Indenture, such Subsidiary Guarantor will be released and relieved from all its
obligations under its Subsidiary Guaranty.
RANKING
The indebtedness evidenced by the Notes, the Fairchild Holdings Guaranty and
the Subsidiary Guaranties are senior subordinated obligations of the Company,
Fairchild Holdings and the Subsidiary Guarantors, as the case may be. The
payment of the principal of, premium (if any) and interest on the Notes and the
payment of the Fairchild Holdings Guaranty and any Subsidiary Guaranty is
subordinate in right of payment, as set forth in the Indenture, to the prior
payment in full in cash of all Obligations with respect to Senior Indebtedness
of the Company, Fairchild Holdings or the relevant Subsidiary Guarantor, as the
case may be, whether outstanding on the Issue Date or thereafter incurred,
including the obligations of the Company, Fairchild Holdings and such Subsidiary
Guarantor under the Credit Agreement.
As of February 23, 1997, after giving pro forma effect to the Transactions,
(i) the Senior Indebtedness of the Company would have been approximately $120.0
million, all of which would have been secured indebtedness under the Credit
Agreement and (ii) the Senior Indebtedness of Fairchild Holdings would have been
approximately $120.0 million, consisting of the Fairchild Holdings' senior
guaranty of the Company's obligations under the Credit Agreement. Although the
Indenture contains limitations on the amount of additional Indebtedness that the
Company and the Subsidiary Guarantors may incur, under certain circumstances the
amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness."
A substantial portion of the operations of the Company are conducted through
its subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries, and claims of preferred stockholders (if any) of
such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including holders of the Notes, even if such obligations do not constitute
Senior Indebtedness. The Notes, the Fairchild Holdings Guaranty and each
Subsidiary Guaranty, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred stockholders (if any) of subsidiaries
of the Company (other than the Subsidiary Guarantors). As of February 23, 1997,
after giving pro forma effect to the Transactions, the total liabilities of the
Company's subsidiaries (other than the Subsidiary Guarantors) would have been
approximately $21.6 million, excluding distributor reserves. Although the
Indenture limits the incurrence of Indebtedness and preferred stock of certain
of the Company's subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the Indenture does not impose any
limitation on the incurrence by such subsidiaries of liabilities that are not
considered Indebtedness or Preferred Stock under the Indenture. See "--Certain
Covenants--Limitation on Indebtedness."
Only Indebtedness of the Company, Fairchild Holdings or a Subsidiary
Guarantor that is Senior Indebtedness will rank senior to the Notes, the
Fairchild Holdings Guaranty and the relevant Subsidiary Guaranty in accordance
with the provisions of the Indenture. The Notes, the Fairchild Holdings Guaranty
and each Subsidiary Guaranty will in all respects rank PARI PASSU with all other
Senior Subordinated Indebtedness of the Company, Fairchild Holdings and the
relevant Subsidiary Guarantor, respectively. The Company, Fairchild Holdings and
each Subsidiary Guarantor has agreed in the Indenture that it will not
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Incur, directly or indirectly, any Indebtedness that is subordinate or junior in
ranking in right of payment to its Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinated or junior to Secured Indebtedness merely because it is
unsecured.
The Company may not pay (in cash, property or other assets) principal of,
premium (if any) or interest on, the Notes or make any deposit pursuant to the
provisions described under "--Defeasance" below and may not repurchase, redeem
or otherwise retire any Notes (collectively, "pay the Notes") if (i) any
Obligations with respect to Senior Indebtedness are not paid when due or (ii)
any other default on Senior Indebtedness occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
the default has been cured or waived and any such acceleration has been
rescinded or such Senior Indebtedness has been paid in full in cash. However,
the Company may pay the Notes without regard to the foregoing if the Company and
the Trustee receive written notice approving such payment from the
Representative of the Senior Indebtedness with respect to which either of the
events set forth in clause (i) or (ii) of the immediately preceding sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the second preceding sentence) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to the Company) of written notice (a "Blockage Notice") of such default
from the Representative of the holders of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because no defaults continue in existence which
would permit the acceleration of the maturity of any Designated Senior
Indebtedness at such time or (iii) because such Designated Senior Indebtedness
has been repaid in full in cash). Notwithstanding the provisions described in
the immediately preceding sentence (but subject to the provisions described in
the first sentence of this paragraph), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Notes after the end of such Payment Blockage Period. The Notes shall not
be subject to more than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
Upon any payment or distribution of assets of the Company upon any
liquidation, dissolution, winding up, assignment for the benefit of creditors or
marshalling of assets of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, the holders of Senior Indebtedness
will be entitled to receive payment in full in cash of all Obligations with
respect to such Senior Indebtedness (including all interest accruing subsequent
to the filing of a petition in bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) before the Noteholders are entitled to receive any
payment or distribution, and until all Obligations with respect to Senior
Indebtedness are paid in full in cash, any payment or distribution to which
Noteholders would be entitled but for the subordination provisions of the
Indenture will be made to holders of such Senior Indebtedness as their interests
may appear. If a distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them, such Noteholders
are required to hold it in trust for the holders of Senior Indebtedness and pay
it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
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The obligations of Fairchild Holdings under the Fairchild Holdings Guaranty
and of a Subsidiary Guarantor under its Subsidiary Guaranty are senior
subordinated obligations. As such, the rights of Noteholders to receive payment
by Fairchild Holdings or by a Subsidiary Guarantor pursuant to the Fairchild
Holdings Guaranty or a Subsidiary Guaranty will be subordinated in right of
payment to the rights of holders of Senior Indebtedness of Fairchild Holdings or
such Subsidiary Guarantor, as the case may be. The terms of the subordination
provisions described above with respect to the Company's obligations under the
Notes apply equally to Fairchild Holdings and a Subsidiary Guarantor and the
obligations of Fairchild Holdings and such Subsidiary Guarantor under the
Fairchild Holdings Guaranty or a Subsidiary Guaranty, as the case may be.
By reason of the subordination provisions contained in the Indenture, in the
event of insolvency, creditors of the Company, Fairchild Holdings or a
Subsidiary Guarantor who are holders of Senior Indebtedness of the Company,
Fairchild Holdings or a Subsidiary Guarantor, as the case may be, may recover
more, ratably, than the Noteholders, and creditors of the Company who are not
holders of Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "--Defeasance", if the foregoing
subordination provisions were not violated at the time the respective amounts
were deposited pursuant to such defeasance provisions.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes will be issued in the form of a Global Note except as
described below. The Global Note will be deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary or its nominee. Except
as set forth below, the Global Note may be transferred, in whole and not in
part, only to the Depositary or another nominee of the Depositary. Investors may
hold their beneficial interests in the Global Note directly through the
Depositary if they have an account with the Depositary or indirectly through
organizations which have accounts with the Depositary.
Notes that are (i) originally issued to institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that
are not qualified institutional buyers ("QIBs") or (ii) issued as described
below under "--Certificated Notes" will be issued in definitive form. Upon the
transfer of a Note in definitive form, such Note will, unless the Global Note
has previously been exchanged for Notes in definitive form, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depositary's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of
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participants. The accounts to be credited shall be designated by the Initial
Purchasers of such Notes. Ownership of beneficial interests in the Global Note
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Note will be shown
on, and the transfer of those ownership interests will be effected only through,
records maintained by the Depositary (with respect to participants' interest)
and such participants (with respect to the owners of beneficial interests in the
Global Note other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Notes in definitive form
and will not be considered to be the owners or holders of any Notes under the
Global Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Note desires to take
any action that the Depositary, as the holder of the Global Note, is entitled to
take, the Depositary would authorize the participants to take such action, and
that the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global Note
registered in the name of and held by the Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
and holder of the Global Note.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depositary or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depositary and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of U.S.
$1,000 and integral multiples thereof if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global Note or
if at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act,
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(ii) the Company in its discretion at any time determines not to have all of the
Notes represented by the Global Note or (iii) a default entitling the holders of
the Notes to accelerate the maturity thereof has occurred and is continuing. Any
Note that is exchangeable pursuant to the preceding sentence is exchangeable for
certificated Notes issuable in authorized denominations and registered in such
names as the Depositary shall direct. Subject to the foregoing, the Global Note
is not exchangeable, except for a Global Note of the same aggregate denomination
to be registered in the name of the Depositary or its nominee. In addition, such
certificates will bear the legend referred to under "Transfer Restrictions"
(unless the Company determines otherwise in accordance with applicable law)
subject, with respect to such Notes, to the provisions of such legend.
SAME-DAY PAYMENT
The Indenture requires that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest (if any) to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) prior to the earlier to occur of (A) the first public offering of
common stock of Fairchild Holdings or (B) the first public offering of
common stock of the Company, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of a majority in the aggregate of the total
voting power of the Voting Stock of the Company, whether as a result of
issuance of securities of Fairchild Holdings or the Company, any merger,
consolidation, liquidation or dissolution of Fairchild Holdings or the
Company, any direct or indirect transfer of securities by Fairchild Holdings
or otherwise (for purposes of this clause (i) and clauses (ii) and (iv)
below, the Permitted Holders shall be deemed to beneficially own any Voting
Stock of a Person (the "specified entity") held by any other Person (the
"parent entity") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent entity); PROVIDED, HOWEVER, that
notwithstanding the foregoing Citicorp Venture Capital Ltd. ("CVC") shall be
deemed to beneficially own a majority of the voting power of the Voting
Stock of Sterling (or any successor) so long as CVC, employees, officers and
directors of CVC and corporations, partnerships and other entities at least
a majority of the equity in which is held in the aggregate by CVC and its
employees, officers and directors hold in the aggregate no less than a
majority of the economic interests in Sterling (or such successor);
(ii) after the earlier to occur of (A) the first public offering of
common stock of Fairchild Holdings or (B) the first public offering of the
common stock of the Company, any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (i) above,
except that for purposes of this clause (ii) such person shall be deemed to
have "beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company; PROVIDED, HOWEVER, that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors (for
the purposes of this clause (ii), such other person shall be deemed to
beneficially own any Voting
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Stock of a specified entity held by a parent entity, if such other person is
the beneficial owner (as defined in this clause (ii)), directly or
indirectly, of more than 35% of the voting power of the Voting Stock of such
parent entity and the Permitted Holders beneficially own (as defined in
clause (i) above), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent entity and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of such
parent entity);
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors (a) whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or (b) who were elected
to the Board of Directors pursuant to the Stockholders' Agreement) cease for
any reason to constitute a majority of the Board of Directors then in
office; or
(iv) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale
of all or substantially all the assets of the Company to another Person
(other than a Person that is controlled by the Permitted Holders), if the
securities of the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving Person or transferee that represent, immediately
after such transaction, at least a majority of the aggregate voting power of
the Voting Stock of the surviving Person or transferee.
Within 30 days following any Change of Control (but subject to compliance
with the immediately succeeding paragraph), the Company shall mail a notice to
each Holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such Holder has the right to require the Company to purchase
such Holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest (if any) to the date of purchase
(subject to the right of holders of record on the relevant record date to
receive interest on the relevant interest payment date); (2) the circumstances
and relevant facts regarding such Change of Control; (3) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its Notes purchased.
If the terms of the Credit Agreement prohibit the Company from making the
foregoing offer upon a Change of Control or from purchasing any Notes pursuant
thereto, prior to the mailing of the notice to Holders described in the
preceding paragraph, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness outstanding
under the Credit Agreement or offer to repay in full all such indebtedness and
repay the indebtedness of each lender who has accepted such offer or (ii) obtain
the requisite consent under the Credit Agreement to permit the purchase of the
Notes as described above. The Company must first comply with the covenant
described in the preceding sentence before it will be required to purchase Notes
in the event of a Change of Control; PROVIDED, HOWEVER, that the Company's
failure to comply with the covenant described in the preceding sentence or to
make a Change of Control offer because of any such failure shall constitute a
Default described in clause (iv) under "--Defaults" below (and not under clause
(ii) thereof). As a result of the foregoing, a holder of the Notes may not be
able to compel the Company to purchase the Notes unless the Company is able at
the time to refinance all indebtedness outstanding under the Credit Agreement or
obtain requisite consents under the Credit Agreement.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes
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pursuant to the covenant described hereunder. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
covenant described hereunder, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the covenant described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenants described under "--Certain Covenants--Limitation on Indebtedness".
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the Notes then outstanding. Except for the
limitations contained in such covenants, however, the Indenture does not contain
any covenants or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
The Credit Agreement prohibits the Company from purchasing any Notes, and
also provides that the occurrence of certain change of control events with
respect to the Company would constitute a default thereunder. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to comply with this covenant would constitute a
Default under the Indenture which would, in turn, constitute a default under the
Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payment to the Holders of Notes.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. The
provisions under the Indenture relative to the Company's obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness
except that the Company may Incur Indebtedness if, after giving effect thereto,
the Consolidated Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness of the Company or any Restricted Subsidiary Incurred
pursuant to the Revolving Credit Facilities; PROVIDED, HOWEVER, that,
immediately after giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness incurred under this clause (1) and
then outstanding does not exceed the greater of (A) $75.0 million and (B)
the sum of 50% of the
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book value of the inventory of the Company and its Restricted
Subsidiaries and 65% of the book value of the accounts receivables of the
Company and its Restricted Subsidiaries;
(2) Indebtedness of the Company Incurred pursuant to the Term Loan
Facilities; PROVIDED, HOWEVER, that, after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness Incurred
under this clause (2) and then outstanding does not exceed $120 million
less the aggregate sum of all principal payments actually made from time
to time after the Issue Date with respect to such Indebtedness (other
than principal payments made from any permitted Refinancings thereof);
(3) Indebtedness of the Company or any Restricted Subsidiary owed to
and held by the Company or a Wholly Owned Subsidiary; PROVIDED, HOWEVER,
that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
the Company or another Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(4) Indebtedness of the Company or any Restricted Subsidiary owed to
and held by any Restricted Subsidiary (other than a Wholly Owned
Subsidiary); PROVIDED, HOWEVER, that (i) any such Indebtedness shall be
unsecured Subordinated Obligations of the Company or such Restricted
Subsidiary, as applicable, and (ii) any subsequent issuance or transfer
of any Capital Stock of such Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company, a Wholly Owned
Subsidiary or another Restricted Subsidiary) shall be deemed to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(5) Indebtedness consisting of the Notes and the Exchange Notes;
(6) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3), (4) or (5) of this
covenant);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (5), (6) or this clause
(7);
(8) Hedging Obligations of the Company or any Restricted Subsidiary
under or with respect to Interest Rate Agreements and Currency Agreements
entered into in the ordinary course of business and not for the purpose
of speculation;
(9) Indebtedness of the Company or any Restricted Subsidiary in
respect of performance bonds and surety or appeal bonds entered into by
the Company and the Restricted Subsidiaries in the ordinary course of
their business;
(10) Indebtedness consisting of the Subsidiary Guaranties and the
Guarantees of Indebtedness Incurred pursuant to paragraph (a) or pursuant
to clause (1), (2), (5), (6) and (7) above and (14) below;
(11) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business, provided that such Indebtedness is satisfied within five
business days of Incurrence;
(12) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnification, adjustment of purchase price or similar
obligations, in each case incurred in connection with the disposition of
any assets of the Company or any Restricted Subsidiary in a principal
amount not to exceed the gross proceeds actually received by the Company
or any Restricted Subsidiary in connection with such disposition;
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(13) Indebtedness of a Foreign Subsidiary Incurred to finance the
purchase, lease or improvement of property (real or personal) or
equipment, in each case incurred no more than 180 days after such
purchase, lease or improvement of such property, and any Refinancing
Indebtedness in respect of such Indebtedness; PROVIDED, HOWEVER, that,
except in the case of the Incurrence of any such Refinancing
Indebtedness, at the time of the Incurrence of such Indebtedness and
after giving effect thereto, (i) the Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) above and (ii)
the aggregate amount of all Indebtedness Incurred pursuant to this clause
(13) and then outstanding (including any such Refinancing Indebtedness)
shall not exceed 20% of Consolidated Net Tangible Assets as of the end of
the most recent fiscal quarter ending at least 45 days prior to the date
of such Incurrence; and
(14) Indebtedness of the Company in an aggregate principal amount
which, together with all other Indebtedness of the Company and the
Restricted Subsidiaries outstanding on the date of such Incurrence (other
than Indebtedness permitted by clauses (1) through (13) above or
paragraph (a) above) does not exceed $50.0 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes or the relevant Subsidiary
Guaranty, as applicable, to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, the Company, in its
sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and classified
in more than one of the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not,
and shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness
if such Indebtedness is subordinate or junior in ranking in any respect to
any Senior Indebtedness of the Company or such Subsidiary Guarantor, as
applicable, unless such Indebtedness is Senior Subordinated Indebtedness or
is expressly subordinated in right of payment to Senior Subordinated
Indebtedness or (ii) any Secured Indebtedness (other than trade payables
incurred in the ordinary course of business) that is not Senior Indebtedness
unless contemporaneously therewith effective provision is made to secure the
Notes or the relevant Subsidiary Guaranty, as applicable, equally and
ratably with such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) the Company is not able to Incur
an additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under "--Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the Notes
are originally issued to the end of the most recent fiscal quarter ending
at least 45 days (or, if less, the number of days after the end of such
fiscal quarter as the consolidated financial statements of the Company
shall be provided to the Noteholders pursuant
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to the Indenture) prior to the date of such Restricted Payment (or, in
case such Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees to the extent
that the purchase by such plan or trust is financed by Indebtedness of
such plan or trust to the Company or any Subsidiary or Indebtedness
Guaranteed by the Company or any Subsidiary);
(C) the amount by which Indebtedness of the Company or any Restricted
Subsidiary is reduced on the Company's consolidated balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the Company or any
Restricted Subsidiary convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company
or any Restricted Subsidiary upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets subsequent
to the Issue Date, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; PROVIDED, HOWEVER, that the foregoing sum shall not exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees to the extent that the
purchase by such plan or trust is financed by Indebtedness of such plan
or trust to the Company or any Subsidiary of the Company or Indebtedness
Guaranteed by the Company or any Subsidiary of the Company); PROVIDED,
HOWEVER, that (A) such Restricted Payment shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness which is permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness"; PROVIDED,
HOWEVER, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments;
(iii) any purchase or redemption of Disqualified Stock of the Company
or a Restricted Subsidiary made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Disqualified Stock of the
Company or a Restricted Subsidiary which is permitted to be Incurred
pursuant to the covenant described under "--Limitation on Indebtedness";
PROVIDED, HOWEVER,
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that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(iv) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"--Limitation on Sales or Assets and Subsidiary Stock"; PROVIDED,
HOWEVER, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the Notes pursuant to the
covenant described under "--Change of Control" above (including the
purchase of the Notes tendered), any purchase or redemption of
Subordinated Obligations required pursuant to the terms thereof as a
result of such Change of Control at a purchase or redemption price not to
exceed the outstanding principal amount thereof, plus accrued and unpaid
interest (if any); PROVIDED, HOWEVER, that (A) at the time of such
purchase or redemption no Default shall have occurred and be continuing
(or would result therefrom), (B) the Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under "--Limitation on Indebtedness" after giving pro
forma effect to such Restricted Payment and (C) such purchase or
redemption shall be included in the calculation of the amount of
Restricted Payments;
(vi) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; PROVIDED, HOWEVER, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
result therefrom); PROVIDED FURTHER, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(vii) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its
Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of
Directors under which such individuals purchase or sell or are granted
the option to purchase or sell, shares of such common stock; PROVIDED,
HOWEVER, that the aggregate amount of such repurchases shall not exceed
the sum of $7.0 million and the Net Cash Proceeds from the sale of
Capital Stock to members of management or directors of the Company and
its Subsidiaries that occurs after the Issue Date (to the extent the Net
Cash Proceeds from the sale of such Capital Stock have not otherwise been
applied to the payment of Restricted Payments by virtue of clause (3)(B)
of paragraph (a) above); PROVIDED FURTHER, HOWEVER, that (A) such
repurchases shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from the calculation of amounts under clause (3)(B) of paragraph
(a) above;
(viii) dividends or advances to Fairchild Holdings in an amount
necessary to pay holding company expenses, such amount not to exceed
$500,000 in any fiscal year of the Company; PROVIDED, HOWEVER, that such
dividends and advances shall be excluded in the calculation of the amount
of Restricted Payments; or
(ix) Restricted Payments not exceeding $25.0 million in the
aggregate; PROVIDED, HOWEVER, that (A) at the time of such Restricted
Payments, no Default shall have occurred and be continuing (or result
therefrom) and (B) such Restricted Payments shall be included in the
calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or
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become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock to the Company or a Restricted Subsidiary
or pay any Indebtedness owed to the Company, (b) make any loans or advances
to the Company or (c) transfer any of its property or assets to the Company,
except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the Credit
Agreement as in effect on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was acquired by
the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii)
or contained in any amendment to an agreement referred to in clause (i)
or (ii) of this covenant or this clause (iii); PROVIDED, HOWEVER, that
the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment are
no more restrictive in any material respect than the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in such
agreements;
(iv) any such encumbrance or restriction consisting of customary non
assignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(vii) any restriction in any agreement that is not more restrictive
than the restrictions under the terms of the Credit Agreement as in
effect on the Issue Date.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the
value of all non-cash consideration), as determined in good faith by the
Board of Directors, of the shares and assets subject to such Asset
Disposition and at least 85% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or cash
equivalents and (ii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company elects
(or is required by the terms of any Indebtedness), to prepay, repay, redeem
or purchase Senior Indebtedness or Indebtedness (other than any Disqualified
Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within one year from the
later of the date of such Asset Disposition and the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to the
extent the Company elects, to acquire Additional Assets within one year from
the later of the date of such Asset Disposition and the receipt of such Net
Available Cash; (C) third, to the extent of the
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balance of such Net Available Cash after application in accordance with
clauses (A) and (B), to make an offer to the holders of the Notes (and to
holders of other Senior Subordinated Indebtedness designated by the Company)
to purchase Notes (and such other Senior Subordinated Indebtedness) pursuant
to and subject to the conditions contained in the Indenture; and (D) fourth,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C) to (x) the acquisition by the
Company or any Wholly Owned Subsidiary of Additional Assets or (y) the
prepayment, repayment or purchase of Indebtedness (other than any
Disqualified Stock) of the Company (other than Indebtedness owed to an
Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each
case within one year from the later of the receipt of such Net Available
Cash and the date the offer described in clause (b) below is consummated;
PROVIDED, HOWEVER, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A), (C) or (D) above, the
Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, the Company and the Restricted Subsidiaries shall not be required
to apply any Net Available Cash in accordance with this paragraph except to
the extent that the aggregate Net Available Cash from all Asset Dispositions
which are not applied in accordance with this paragraph exceeds $10 million.
Pending application of Net Available Cash pursuant to this covenant, such
Net Available Cash shall be invested in Permitted Investments or used to
reduce loans outstanding under any revolving credit facility.
For the purposes of this covenant, the following are deemed to be cash
or cash equivalents: (x) the assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
the Notes (and other Senior Subordinated Indebtedness) pursuant to clause
(a)(ii)(C) above, the Company will be required to purchase Notes tendered
pursuant to an offer by the Company for the Notes (and other Senior
Subordinated Indebtedness) at a purchase price of 100% of their principal
amount (without premium) plus accrued but unpaid interest (or, in respect of
such other Senior Subordinated Indebtedness, such lesser price, if any, as
may be provided for by the terms of such Senior Subordinated Indebtedness)
in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase
price of Notes (and any other Senior Subordinated Indebtedness) tendered
pursuant to such offer is less than the Net Available Cash allotted to the
purchase thereof, the Company will be required to apply the remaining Net
Available Cash in accordance with clause (a)(ii)(D) above. The Company shall
not be required to make such an offer to purchase Notes (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Net Available
Cash available therefor is less than $10 million (which lesser amount shall
be carried forward for purposes of determining whether such an offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Notes pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange
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of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
the terms thereof (1) are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (2) if such
Affiliate Transaction involves an amount in excess of $1.0 million, (i) are set
forth in writing and (ii) have been approved by a majority of the members of the
Board of Directors having no personal stake in such Affiliate Transaction and
(3) if such Affiliate Transaction involves as amount in excess of $10.0 million,
have been determined by (A) a nationally recognized investment banking firm to
be fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries or (B) an accounting or appraisal firm nationally recognized in
making such determinations to be on terms that are not less favorable to the
Company and its Restricted Subsidiaries than the terms that could be obtained in
an arms-length transaction from a Person that is not an Affiliate of the
Company.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments", (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iii) the grant of stock options or similar
rights to employees and directors of the Company pursuant to plans approved by
the Board of Directors, (iv) loans or advances to employees in the ordinary
course of business in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $5.0 million in the
aggregate outstanding at any one time, (v) reasonable fees, compensation or
employee benefit arrangements to and indemnity provided for the benefit of
directors, officers or employees of the Company or any Subsidiary in the
ordinary course of business, (vi) any Affiliate Transaction between the Company
and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries, (vii) any
Affiliate Transaction with National Semiconductor pursuant to written agreements
in effect on the Issue Date and as amended, renewed or extended from time to
time; PROVIDED, HOWEVER, that any such amendment, renewal or extension shall not
contain terms which are materially less favorable to the Company than those in
the agreements in effect on the Issue Date and (viii) the issuance or sale of
any Capital Stock (other than Disqualified Stock) of the Company.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any Capital
Stock of such Restricted Subsidiary, (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
the covenant described under "--Limitation on Restricted Payments" if made on
the date of such issuance, sale or other disposition or (iv) directors'
qualifying shares.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing, (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
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additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "--Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture; PROVIDED, HOWEVER, that clauses
(iii) and (iv) above shall not apply if, in the good faith determination of the
Board of Directors, whose determination shall be evidenced by a resolution of
the Board of Directors, the principal purpose and effect of such transaction is
to change the jurisdiction of incorporation of the Company.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
The Company will not permit any Subsidiary Guarantor to consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, all or substantially all of its assets to any Person unless:
(i) the resulting, surviving or transferee Person (if not such Subsidiary) shall
be a Person organized and existing under the laws of the jurisdiction under
which such Subsidiary was organized or under the laws of the United States of
America, or any State thereof or the District of Columbia, and such Person shall
expressly assume, by executing a Guaranty Agreement, all the obligations of such
Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (iii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such Guaranty Agreement, if any, complies with the
Indenture. The provisions of clauses (i) and (ii) above shall not apply to any
one or more transactions which constitute an Asset Disposition if the Company
has complied with the applicable provisions of the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock" above.
Pursuant to the Indenture, Fairchild Holdings covenants not to merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless: (i)
the resulting, surviving or transferee Person (if not Fairchild Holdings) shall
be a Person organized and existing under the laws of the jurisdiction under
which Fairchild Holdings was organized or under the laws of the United States of
America, or any State thereof or the District of Columbia, and such Person shall
expressly assume, by executing a Guaranty Agreement, all the obligations of
Fairchild Holdings, if any, under the Fairchild Holdings Guaranty; (ii)
immediately after giving effect to such transaction or transactions on a pro
forma basis (and treating any Indebtedness which becomes an obligation of the
resulting, surviving or transferee Person as a result of such transaction as
having been issued by such Person at the time of such transaction), no Default
shall have occurred and be continuing; and (iii) the Company delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such Guaranty Agreement, if any,
complies with the Indenture.
FUTURE GUARANTORS. In the event that, after the Issue Date, any Restricted
Subsidiary (other than a Foreign Subsidiary) (i) Incurs any Indebtedness
pursuant to paragraph (a) or pursuant to clause (1) or (10) of paragraph (b) of
the covenant described under "--Certain Covenants--Limitation on Indebtedness"
above and (ii) until the termination of the Credit Agreement, either has
Guaranteed or will as a result of such Incurrence be required to Guarantee any
Obligations under the Credit Agreement, the Company shall cause such Restricted
Subsidiary to Guarantee the Notes pursuant to a Subsidiary Guaranty on the terms
and conditions set forth in the Indenture and shall cause all Indebtedness of
such Restricted
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Subsidiary owing to the Company or any other Subsidiary of the Company and not
previously discharged to be converted into Capital Stock of such Restricted
Subsidiary (other than Disqualified Stock).
SEC REPORTS. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Trustee and Noteholders
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections; PROVIDED, HOWEVER,
that the Company shall not be required to file any report, document or other
information with the SEC if the SEC does not permit such filing.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations in the covenants
described above under "Change of Control" (other than a failure to purchase
Notes) or under "--Certain Covenants" under "--Limitation on Indebtedness",
"--Limitation on Restricted Payments", "--Limitation on Restrictions on
Distributions from Restricted Subsidiaries", "-- Limitation on Sales of Assets
and Subsidiary Stock" (other than a failure to purchase Notes after an offer to
purchase same has been made in accordance with said covenant), "--Limitation on
Affiliate Transactions", "--Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries", "--Future Guarantors" or "--SEC Reports", (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Company or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $10 million
(the "cross acceleration provision"), (vii) certain events of bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary (the
"bankruptcy provisions"), (viii) any judgment or decree for the payment of money
in excess of $10 million is entered against the Company or a Significant
Subsidiary, remains outstanding for a period of 60 days following such judgment
and is not discharged, waived or stayed within 10 days after notice (the
"judgment default provision") or (ix) the Parent Guaranty or any Subsidiary
Guaranty ceases to be in full force and effect (other than in accordance with
the terms of the Parent Guaranty or such Subsidiary Guaranty) or Parent or any
Subsidiary Guarantor denies or disaffirms its obligations under the Parent
Guaranty or its Subsidiary Guaranty, as the case may be. However, a default
under clauses (iv), (v) and (viii) will not constitute an Event of Default until
the Trustee or the holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately; PROVIDED, HOWEVER, that if upon such declaration there are
any amounts outstanding under the Credit Agreement and the amounts thereunder
have not been accelerated, such principal and interest shall be due and payable
upon the earlier of the time such amounts are accelerated or five Business Days
after receipt by the Company and the Representative under the Credit Agreement
of such declaration. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders
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of the Notes. Under certain circumstances, the holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note affected thereby, no amendment may, among other things, (i)
reduce the amount of Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the premium payable upon the redemption of any Note or change the time at which
any Note may be redeemed as described under "-- Optional Redemption" above or
shall be redeemed as described under "--Mandatory Redemption" above, (v) make
any Note payable in money other than that stated in the Note, (vi) impair the
right of any holder of the Notes to receive payment of principal of and interest
on such holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such holder's Notes,
(vii) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions, (viii) make any change to the subordination
provisions of the Indenture that would adversely affect the Noteholders or (ix)
make any change in the Parent Guaranty or any Subsidiary Guaranty that would
adversely affect the Noteholders.
Without the consent of any holder of the Notes, the Company and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor
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corporation of the obligations of the Company under the Indenture, to provide
for uncertificated Notes in addition to or in place of certificated Notes
(provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
guarantees with respect to the Notes, to release a Subsidiary Guaranty when
permitted by the Indenture, to secure the Notes, to add to the covenants of the
Company for the benefit of the holders of the Notes or to surrender any right or
power conferred upon the Company, to make any change that does not adversely
affect the rights of any holder of the Notes or to comply with any requirement
of the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "--Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "--Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"--Defaults" above and the limitations contained in clauses (iii) and (iv) under
"--Certain Covenants--Merger and Consolidation" above ("covenant defeasance").
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The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above. If the Company exercises its legal
defeasance option or its covenant defeasance option, Fairchild Holdings and each
Subsidiary Guarantor will be released from all of its obligations with respect
to the Fairchild Holdings Guaranty or its Subsidiary Guaranty, as the case may
be.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"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" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by
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contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the provisions described
under "--Certain Covenants--Limitation on Restricted Payments", "--Certain
Covenants--Limitation on Affiliate Transactions" and "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate"
shall also mean any beneficial owner of Capital Stock representing 10% or more
of the total voting power of the Voting Stock (on a fully diluted basis) of the
Company or of rights or warrants to purchase such Capital Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (x) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (y) for purposes of the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only,
a disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments" and (z)
disposition of assets with a fair market value of less than $100,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be provided to the Noteholders
pursuant to the Indenture) prior to the date of such determination to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, (2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently repaid
and has not been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
Interest Expense for such period shall be calculated on a pro forma basis as if
such discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (4) if since the beginning of
such period the Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate
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Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Current Liabilities" as of the date of determination means the
aggregate amount of liabilities of the Company and its consolidated Restricted
Subsidiaries which may properly be classified as current liabilities (including
taxes accrued as estimated), on a consolidated basis, after eliminating (i) all
intercompany items between the Company and any Restricted Subsidiary and (ii)
all current maturities of long-term Indebtedness, all as determined in
accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication, (i)
interest expense attributable to Capital Lease Obligations and the interest
expense attributable to leases constituting part of a Sale/ Leaseback
Transaction, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends
accrued by consolidated Restricted Subsidiaries in respect of all Preferred
Stock held by Persons other than the Company or a Restricted Subsidiary, (viii)
interest incurred in connection with Investments in discontinued operations,
(ix) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by (or secured by the assets of) the Company or
any Restricted Subsidiary and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such Person
is not a Restricted Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) the Company's equity in a net loss of any
such Person for such period shall be included in determining such
Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by such Restricted Subsidiary consistent
with such restrictions during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition of
any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not
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sold or otherwise disposed of in the ordinary course of business and any
gain (or loss) realized upon the sale or other disposition of any Capital
Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants-- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Tangible Assets" as of any date of determination means the
total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a consolidated balance sheet of
the Company and its consolidated Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, and after giving effect to purchase
accounting and after deducting therefrom Consolidated Current Liabilities and,
to the extent otherwise included, the amounts of: (i) minority interests in
consolidated Subsidiaries held by Persons other than the Company or a Restricted
Subsidiary; (ii) excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the Board of Directors; (iii) any
revaluation or other write-up in book value of assets subsequent to the Issue
Date as a result of a change in the method of valuation in accordance with GAAP
consistently applied; (iv) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (v) treasury stock; (vi) cash set apart and held in a
sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities; and (vii) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Credit Agreement" means the Credit Agreement by and among Fairchild
Holdings, the Company, certain of its Subsidiaries, the lenders referred to
therein, Bankers Trust Company, as Administrative Agent, Credit Suisse First
Boston, as Syndication Agent, and Canadian Imperial Bank of Commerce, as
Documentation Agent, together with the related documents thereto (including
without limitation the term loans and revolving loans thereunder, any guarantees
and security documents), as amended, extended, renewed, restated, supplemented
or otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement (and related document) governing Indebtedness incurred to refund or
refinance, in whole or in part, the borrowings and commitments then outstanding
or permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"Designated Senior Indebtedness" means (i) the Bank Indebtedness; PROVIDED,
HOWEVER, that Bank Indebtedness outstanding under any Credit Agreement that
Refinanced in part, but not in whole, the previously outstanding Bank
Indebtedness shall only constitute Designated Senior Indebtedness if it meets
the requirements of succeeding clause (ii); and (ii) any other Senior
Indebtedness of the Company which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $10
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "Change of Control" and under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock".
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period) and (d) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fairchild Holdings" means FSC Semiconductor Corporation, a Delaware
corporation, and any successor corporation.
"Fairchild Holdings Guaranty" means the Guarantee by Fairchild Holdings of
the Company's obligations with respect to the Notes contained in the Indenture.
"Foreign Subsidiary" means any Restricted Subsidiary not created or
organized in the United States or any state thereof and that conducts
substantially all its operations outside of the United States.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as
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approved by a significant segment of the accounting profession and (iv) the
rules and regulations of the SEC governing the inclusion of financial statements
(including pro forma financial statements) in periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements from
the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the Trustee, pursuant to which Fairchild Holdings or a Subsidiary Guarantor
becomes subject to the applicable terms and conditions of the Indenture.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following payment on the letter of credit);
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(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property
or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however, that
the amount outstanding at any time of any Indebtedness issued with original
issue discount shall be deemed to be the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
indebtedness at such time as determined in accordance with GAAP.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of the lender) or other extensions
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants--Limitation on Restricted
Payments", (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or
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assets or received in any other non-cash form), in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be, repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition and (iv) the deduction of appropriate amounts provided
by the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset Disposition
and retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
and other amounts payable pursuant to the documentation governing such
Indebtedness.
"Permitted Holders" means (i) CVC, (ii) any officer, employee or director of
CVC or any trust, partnership or other entity established solely for the benefit
of such officers, employees or directors, (iii) any officer, employee or
director of Fairchild Holdings, the Company or any Subsidiary or any trust,
partnership or other entity established solely for the benefit of such officers,
employees or directors, and (iv) in the case of any individual, any Permitted
Transferee of such individual (as defined in the Stockholders Agreement), except
a Permitted Transferee by virtue of Section 3.4(b)(iv) thereof; PROVIDED,
HOWEVER, that in no event shall individuals collectively be deemed to be
"Permitted Holders" with respect to more than 30% of the total voting power of
Fairchild Holdings or the Company.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; provided, however, that the
primary business of such Restricted Subsidiary is a Related Business; (ii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; provided, however, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company or any Restricted Subsidiary
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that
such trade terms may include such concessionaire trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of the Company or such Restricted Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; and (viii) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock".
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
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"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of (i) the Company or (ii) Fairchild Holdings (to the extent the
proceeds thereof are contemporaneously contributed to the Company), in each case
pursuant to an effective registration statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of the Company and the Restricted Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company; provided, however, that if and for
so long as any Senior Indebtedness lacks such a representative, then the
Representative for such Senior Indebtedness shall at all times be the holders of
a majority in outstanding principal amount of such senior Indebtedness.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than PRO RATA dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal
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installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) the making of any Investment in any Person (other than a
Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Revolving Credit Facilities" means the revolving credit facility contained
in the Credit Agreement and any other facility or financing arrangement that
Refinances or replaces, in whole or in part, any such revolving credit facility.
"Sale/ Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" of any Person means all (i) Bank Indebtedness of or
guaranteed by such Person, whether outstanding on the Issue Date or thereafter
Incurred, and (ii) Indebtedness of such Person, whether outstanding on the Issue
Date or thereafter Incurred, including interest thereon, in respect of (A)
Indebtedness for money borrowed, (B) Indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable and (C) Hedging Obligations, unless, in the case
of (i) and (ii), in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the obligations under the Notes; PROVIDED,
HOWEVER, that Senior Indebtedness shall not include (1) any obligation of such
Person to any subsidiary of such Person, (2) any liability for Federal, state,
local or other taxes owed or owing by such Person, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior by its terms to any other Indebtedness
or other obligation of such Person or (5) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of the Indenture (but as to
any such Indebtedness under the Credit Agreement, no such violation shall be
deemed to exist if the Representative of the Lenders thereunder shall have
received an officers' certificate of the Company to the effect that the issuance
of such Indebtedness does not violate such covenant and setting forth in
reasonable detail the reasons therefor).
"Senior Subordinated Indebtedness" means (i) with respect to the Company,
the Notes and any other Indebtedness of the Company that specifically provides
that such Indebtedness is to rank PARI PASSU with the Notes in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness of the Company
and (ii) with respect to Fairchild Holdings or a Subsidiary Guarantor, their
respective Guarantees of the Notes and any other indebtedness of such Person
that specifically provides that such Indebtedness rank PARI PASSU with such
Guarantee in respect of payment and is not subordinated by its terms in respect
of payment to any Indebtedness or other obligation of such Person which is not
Senior Indebtedness of such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Stockholders' Agreement" means the Securities Purchase and Holders
Agreement among the stockholders of Fairchild Holdings, as in effect on the
Issue Date.
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"Subordinated Obligation" means any Indebtedness of the Company or any
Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to, in the case of
the Company, the Notes or, in the case of such Subsidiary Guarantor, its
Subsidiary Guaranty, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) 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 (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Subsidiary Guarantor" means any subsidiary of the Company that Guarantees
the Company's obligations with respect to the Notes.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group,
and
(v) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that Refinances
in whole or in part any such term loan facility.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or
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holds any Lien on any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the covenant described under
"--Certain Covenants--Limitation on Restricted Payments". The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such designation (x)
the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "--Certain Covenants--Limitation on Indebtedness"
and (y) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of the Exchange Offer to a holder of Existing Notes that
is an individual citizen or resident of the United States or a United States
corporation that purchased the Existing Notes pursuant to their original issue
(a "U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
Existing Notes, and the Exchange Notes received therefor, that are held as
"capital assets" within the meaning of Section 1221 of the Code by U.S. Holders.
It does not discuss state, local, or foreign tax consequences, nor does it
discuss tax consequences to subsequent purchasers (persons who did not purchase
the Existing Notes pursuant to their original issue), or to categories of
holders that are subject to special rules, such as foreign persons, tax-exempt
organizations, insurance companies, banks and dealers in stocks and securities.
Tax consequences may vary depending on the particular status of an investor. No
rulings will be sought from the Internal Revenue Service with respect to the
federal income tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
NOTES FOR EXCHANGE NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES
FOR EXCHANGE NOTES.
THE EXCHANGE OFFER
The exchange of Existing Notes pursuant to the Exchange Offer should be
treated as a continuation of the corresponding Existing Notes because the terms
of the Exchange Notes are not materially different from the terms of the
Existing Notes. Accordingly, such exchange should not constitute a taxable event
to U.S. Holders and, therefore, (i) no gain or loss should be realized by U.S.
Holders upon receipt of an Exchange Note, (ii) the holding period of the
Exchange Note should include the holding period of the Existing Note exchanged
therefor and (iii) the adjusted tax basis of the Exchange Note should be the
same as the adjusted tax basis of the Existing Note exchanged therefor
immediately before the exchange.
STATED INTEREST
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Notes are not considered to have been issued with
original issue discount for federal income tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or retirement
of a Note in an amount equal to the difference between the amount realized on
the sale, exchange or retirement and the tax basis of the Note. Gain or loss
recognized on the sale, exchange or retirement of a Note (excluding amounts
received in respect of accrued interest, which will be taxable as ordinary
interest income) generally will be capital gain or loss and will be long-term
capital gain or loss, if the Note was held for more than one year.
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof.
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This withholding generally applies if the U.S. Holder fails to furnish his or
her social security number or other taxpayer identification number in the
specified manner and in certain circumstances. Any amount withheld from a
payment to a U.S. Holder under the backup withholding rules is allowable as a
credit against such U.S Holder's federal income tax liability, provided that the
required information is furnished to the IRS. Corporations and certain other
entities described in the Code and Treasury regulations are exempt from backup
withholding if their exempt status is properly established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Existing
Notes where such Existing Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 199 , all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes offered hereby will
be passed upon by Dechert Price & Rhoads, Philadelphia, Pennsylvania.
EXPERTS
The financial statements of the Fairchild Semiconductor business of National
Semiconductor Corporation have been included herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation the Unaudited Supplemental Data set
forth in the Unaudited Pro Forma Combined Condensed Financial Statements and
Unaudited Supplemental Data and the statements under "Business--Business
Strategy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "--Liquidity and Capital Resources", are
forward-looking statements. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
or management's expectations ("Cautionary Statements") are disclosed in this
Prospectus, including without limitation in conjunction with the forward-looking
statements included in this Prospectus and under "Risk Factors." All written and
oral forward-looking statements made following consummation of the Transactions
which are attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
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GLOSSARY
<TABLE>
<S> <C>
ASIC.............................. Application Specific Integrated Circuit. A
custom-designed integrated circuit that performs
specific functions which would otherwise require a
number of off-the-shelf integrated circuits to perform.
The use of an ASIC in place of a conventional integrated
circuit reduces product size and cost and also improves
reliability.
ASSP.............................. Application Specific Standard Product. A standard
integrated circuit designed for a specific product or
application, such as a VCR, stereo or microwave.
Back end.......................... The process that assembles the die into the final
package and performs the final test.
BiCMOS............................ BiCMOS is a hybrid of CMOS and bipolar technologies
developed to combine the high speed characteristics of
bipolar technologies with the low power consumption and
high integration of CMOS technologies.
Bipolar........................... A manufacturing process that uses two opposite
electrical poles to build semiconductors.
CAD............................... Computer aided design.
CIM............................... Computer integrated manufacturing.
CMOS.............................. Complementary Metal Oxide Semiconductor. Currently the
most common IC fabrication process technology, CMOS is
one of the latest fabrication techniques to use metal
oxide semiconductor transistors.
Die............................... A piece of a semiconductor wafer containing the
circuitry of a single chip.
Diode............................. An electronic device that allows current to flow in only
one direction.
Discrete.......................... A single individually packaged component.
DMOS.............................. Diffused Metal Oxide Semiconductor. A process technology
used in power discrete fabrication.
DRAM.............................. Dynamic Random Access Memory. A type of volatile memory
product that is used in electronic systems to store data
and program instructions. It is the most common type of
RAM and must be refreshed with electricity thousands of
times per second or else its memory will fade away.
EEPROM............................ Electrically Erasable and Programmable Read-Only Memory.
A form of non-volatile memory that can be erased
electronically before being reprogrammed.
EPROM............................. Electrically Programmable Read-Only Memory. Non-volatile
memory which may be erased by exposure to ultraviolet
light and which can be reprogrammed only by an external
programming unit.
Fab............................... The facility that fabricates the wafer.
FACT-TM-.......................... Fairchild Advanced CMOS Technology.
FAST-Registered Trademark-........ Fairchild Advanced Schottky Technology.
</TABLE>
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<TABLE>
<S> <C>
FET............................... Field Effect Transistor.
Flash Memory...................... A type of non-volatile memory, similar to an EEPROM in
that it is erasable and reprogrammable. The difference
is that it must be erased and reprogrammed in sectors,
not individual bits.
Foundry........................... A wafer fab that manufactures silicon for another
business.
IC................................ Integrated Circuit. A combination of two or more
transistors on a base material, usually silicon. All
semiconductor chips, including memory chips and logic
chips, are just very complicated ICs with thousands of
transistors.
Lead Frames....................... A conductive frame that brings the electrical signals to
and from the die.
Logic Product..................... A product that contains digital integrated circuits that
move and shape, rather than store, information.
Mask.............................. A piece of glass on which an IC's circuitry design is
laid out. Integrated circuits may require up to 20
different layers of design, each with its own mask. In
the IC production process, a light shines through the
mask leaving an image of the design on the wafer. Also
known as a reticle.
Mb................................ Mega Bit. One million (or 1,048,576) bits as a unit of
data size or memory capacity.
Memory............................ A group of integrated circuits that a computer uses to
store data and programs, such as ROM, RAM, DRAM, SRAM,
EEPROM and EPROM.
Mhz............................... Megahertz. One million cycles per second. Typically
measures the clock speed of microprocessors.
Micron............................ 1/25,000 of an inch. Circuity on an IC typically follows
lines that are less than one micron wide.
MOS............................... Metal Oxide Semiconductor.
MOSFET............................ Metal Oxide Semiconductor FET.
Motherboard....................... The main piece of circuitry inside a PC.
Non-volatile Memory............... Memory products which retain their data content without
the need for constant power supply.
Package........................... A protective case that surrounds the die, consisting of
a plastic housing and a lead frame.
PC................................ Personal Computer.
Planar Technology................. By the later 1950s, transistors were made in batches
through a simple photolithographic technique known as
the mesa process. This process, which led directly to
the creation of the commercially viable integrated
circuit, is a form of contact printing.
A cross section of a typical mesa transistor resembles a
mesa of silicon squatting on top of a foundation of
silicon. The three essential parts of a transistor are
all there: the base is the mesa,
</TABLE>
G-2
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<TABLE>
<S> <C>
the collector is the foundation, and the emitter is a
tiny piece of doped silicon embedded in the base. To
fabricate a mesa transistor, a flat wafer of silicon was
doped with either positive ions or electrons, covered
with a photomask (a photographic plate), exposed to
ultraviolet light and then immersed in an acid bath,
which etched away the exposed area around the mesa.
For all the manufacturing benefits brought about by the
mesa process, it had two major drawbacks: the mesa was
susceptible to both physical harm and contamination, and
the process didn't lend itself to the making of
resistors. Then Jean Hoerni, a Swiss physicist and one
of Fairchild's founders, invented an ingenious way
around these obstacles by creating a flat, or planar,
transistor.
Instead of mounting the mesa, or base, on top of a
foundation of silicon, he diffused it into the
foundation, which served as the collector. Next he
diffused the emittor into the base. (The base was
composed of negatively doped silicon, the collector and
emitor of positively doped silicon; the first planar
device was thus a pnp transistor.) Then he covered the
whole thing with a protective coating of silicon
dioxide, an insulator, leaving certain areas in the base
and the emitter uncovered. He diffused a thin layer of
aluminium into these areas, thereby creating "wires"
that hooked the device up to the outside (this was the
idea of his colleague and Fairchild co-founder, Robert
Noyce). The result was a durable and reliable
transistor, and the all-important breakthrough that made
commercial production of ICs possible.
Plug and Play..................... A protocol that supports automated configuration of add
on cards.
Power Discrete.................... A discrete device that converts, switches or conditions
electricity.
PROM.............................. Programmable Read-Only Memory. Similar to ROM in that
once programmed it can be "read only" and not changed.
Programmable ROM means that customers can program the
integrated circuits themselves, so that the IC need not
be programmed when it is manufactured. The programming
is possible because of a series of fuses in the
circuitry that can be selectively blown to create a
unique type of data.
RAM............................... Random Access Memory. A type of volatile memory, forming
the main memory of a computer where applications and
files are run.
ROM............................... Read-Only Memory. Memory that is programmed by the
manufacturer and cannot be changed. Typically, ROM is
used to provide start-up data when a computer is first
turned on.
SAM............................... Serviceable available market.
</TABLE>
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<TABLE>
<S> <C>
Semiconductor..................... A material with electrical conducting properties in
between those of metals and insulators. (Metals always
conduct and insulators never conduct, but semiconductors
sometimes conduct.) Essentially, semiconductors transmit
electricity only under certain circumstances, such as
when given a positive or negative electric charge.
Therefore, a semiconductor's ability to conduct can be
turned on or off by manipulating those charges and this
allows the semiconductor to act as an electric switch.
The most common semiconductor material is silicon, used
as the base of most semiconductor chips today because it
is relatively inexpensive and easy to create.
SOM............................... Share of Market.
Sort.............................. The process of evaluating die into different grades,
good/bad or speed grades.
SRAM.............................. Static Random Access Memory. A type of volatile memory
product that is used in electronic systems to store data
and program instructions. Unlike the more common DRAM,
it does not need to be refreshed.
Stepper........................... A machine used in the photolithography process in making
wafers. With a stepper, a small portion of the wafer is
aligned with the mask upon which the circuity design is
laid out and is then exposed to strong light. The
machine then "steps" to the next area repeating the
process until the entire wafer has been done. Exposing
only a small area of the wafer at a time allows the
light to be focused more strongly which gives better
resolution of the circuity design.
TAM............................... Total Available Market.
Transistor........................ An individual circuit that can amplify or switch
electric current. This is the building block of all
integrated circuits and semiconductors.
Volatile Memory................... Memory products which lose their data content when the
power supply is switched off.
Wafer............................. Thin, round, flat piece of silicon that is the base of
most integrated circuits.
</TABLE>
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Independent Auditor's Report............................................................................... F-2
Combined Balance Sheets as of May 28, 1995 and May 26, 1996 of
Fairchild Semiconductor Business of National Semiconductor Corporation..................................... F-3
Combined Statement of Operations as of May 29, 1994, May 28, 1995 and
May 26, 1996 of Fairchild Semiconductor Business of National Semiconductor
Corporation................................................................................................ F-4
Notes to Combined Statements............................................................................... F-5
Unaudited Combined Balance Sheets for the Nine Months Ended February 23, 1997
of Fairchild Semiconductor Business of National Semiconductor
Corporation................................................................................................ F-14
Unaudited Combined Statements of Operations for the Nine Months Ended
February 25, 1996 and February 23, 1997 of Fairchild Semiconductor
Business of National Semiconductor Corporation............................................................. F-15
Notes to Unaudited Combined Statements..................................................................... F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
National Semiconductor Corporation:
We have audited the accompanying combined balance sheets of the Fairchild
Semiconductor Business of National Semiconductor Corporation (the "Company" or
the "Business") as of May 28, 1995 and May 26, 1996 and the accompanying
combined statements of operations for each of the years in the three-year period
ended May 26, 1996. These statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audits provide a reasonable basis for our opinion.
The accompanying combined statements were prepared on the basis of
presentation as described in Note 1. The accompanying combined statements
present the combined assets, liabilities and business equity and the related
combined revenues less direct expenses before taxes of the Business, and are not
intended to be a complete presentation of the Business' financial position,
results of operations or cash flows. The results of operations before taxes are
not necessarily indicative of the results of operations before taxes that would
be recorded by the Company on a stand-alone basis.
In our opinion, the accompanying combined statements present fairly, in all
material respects, the combined assets, liabilities and business equity of the
Business as of May 28, 1995 and May 26, 1996 and its combined revenues less
direct expenses before taxes for each of the years in the three-year period
ended May 26, 1996, on the basis described in Note 1, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the combined statements, in 1996 the Business
changed its method of accounting for depreciation.
KPMG Peat Marwick LLP
San Jose, California
December 5, 1996
F-2
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FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
COMBINED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
MAY 28, 1995 MAY 26, 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Inventories........................................................................ $ 68.8 $ 93.1
Prepaid expenses and other......................................................... 8.3 9.6
Miscellaneous Receivables.......................................................... 20.2 9.6
------ ------
Total current assets........................................................... 97.3 112.3
Property, plant and equipment, net................................................... 223.8 318.3
Other assets......................................................................... 2.1 2.1
------ ------
Total assets................................................................... $ 323.2 $ 432.7
------ ------
------ ------
LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable................................................................... $ 69.8 $ 64.6
Accrued expenses................................................................... 20.2 18.9
------ ------
Total current liabilities...................................................... 90.0 83.5
Commitments
Business equity...................................................................... 233.2 349.2
------ ------
Total liabilities and business equity.......................................... $ 323.2 $ 432.7
------ ------
------ ------
</TABLE>
See accompanying notes to combined statements.
F-3
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
MAY 29, MAY 28, MAY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Net sales--trade.................................................................. $ 658.9 $ 629.6 $ 687.8
Contract manufacturing--National Semiconductor.................................... 57.7 50.7 87.6
----------- ----------- -----------
Total revenue................................................................. 716.6 680.3 775.4
Direct and allocated costs and expenses:
Cost of sales..................................................................... 410.6 425.8 472.7
Cost of contract manufacturing--National Semiconductor............................ 57.7 50.7 87.6
Research and development.......................................................... 27.4 31.0 30.3
Selling and marketing............................................................. 55.0 56.8 65.6
General and administrative........................................................ 42.3 43.5 48.4
----------- ----------- -----------
Total operating costs and expenses............................................ 593.0 607.8 704.6
----------- ----------- -----------
123.6 72.5 70.8
Other (income) expense.............................................................. (1.9) (1.8) (1.5)
----------- ----------- -----------
Revenues less direct and allocated expenses before taxes............................ $ 125.5 $ 74.3 $ 72.3
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to combined statements.
F-4
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS
MAY 28, 1995 AND MAY 26, 1996
(1) BASIS OF PRESENTATION
The Fairchild Semiconductor Business ("Fairchild" or the "Business") is
defined as the logic, discrete and memory divisions of National Semiconductor
Corporation ("National Semiconductor"), including flash memory but excluding
public networks, programmable products and mil/aero products. Manufacturing
operations for the Business are primarily conducted in plants in South Portland,
Maine; Salt Lake City, Utah; Cebu, the Philippines; and Penang, Malaysia
(collectively referred to as "Fairchild plants"). Certain manufacturing
operations related to Fairchild products are also performed at National
Semiconductor plants. Similarly, certain Fairchild plants perform manufacturing
operations related to other National Semiconductor product lines.
The accompanying combined balance sheets do not include National
Semiconductor's corporate assets or liabilities not specifically identifiable to
Fairchild. National Semiconductor performs cash management on a centralized
basis and processes related receivables and certain payables, payroll and other
activity for Fairchild. Most of these corporate systems are not designed to
track receivables, liabilities and cash receipts and payments on a business
specific basis. Accordingly, it is not practical to determine certain assets and
liabilities associated with the business; therefore, such assets and liabilities
cannot be included in the accompanying combined balance sheets. Given these
constraints, certain supplemental cash flow information is presented in lieu of
a statement of cash flows. (See Note 9.) Assets and liabilities not specifically
identifiable to the Business include:
(a) Cash, cash equivalents and investments. Activity in Fairchild cash
balances is recorded through the equity account with National Semiconductor.
(b) Trade accounts receivable and related allowances for bad debts and
product returns. Fairchild trade receivable balances are funded immediately
by National Semiconductor through the equity account. Estimated allowances
for product returns are reflected in Fairchild net sales.
(c) Accounts payable related to trade purchases that are made centrally
by National Semiconductor. Such purchases related to Fairchild are allocated
to Fairchild through the equity account.
(d) Accrued liabilities for allocated corporate costs.
The combined statement of operations includes all revenues and costs
attributable to the Business including an allocation of the costs of shared
facilities and overhead of National Semiconductor. In addition, certain costs
incurred at Fairchild plants for the benefit of other National Semiconductor
product lines are allocated from Fairchild to National Semiconductor.
All of the allocations and estimates in the combined statements of
operations are based on assumptions that management believes are reasonable
under the circumstances. However, these allocations and estimates are not
necessarily indicative of the costs that would have resulted if the Business had
been operated on a stand alone basis.
Transactions between the Business and other National Semiconductor
operations have been identified in the combined statements as transactions
between related parties to the extent practicable (See Note 2).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Fairchild's fiscal year ends on the Sunday on or nearest preceding May 31.
F-5
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF COMBINATION
All significant intercompany balances and transactions within the Business
have been eliminated.
REVENUE RECOGNITION
Revenue from the sale of Fairchild semiconductor products is generally
recognized when shipped, with a provision for estimated returns and allowances
recorded at the time of shipment.
RELATED PARTY TRANSACTIONS
Fairchild performs contract manufacturing services for National
Semiconductor. The revenues and expenses for these services are reflected at
cost in the accompanying combined statement of operations.
Manufacturing costs are generally apportioned between National Semiconductor
and Fairchild product lines based upon budgeted and actual factory production
loading. Certain manufacturing costs (e.g., material costs) that are
specifically identifiable with a particular product line are charged or credited
directly without apportionment.
National Semiconductor also performs manufacturing services for Fairchild
and incurs other elements of cost of sales on behalf of Fairchild, including
freight, duty, warehousing, and purchased manufacturing services from third
party vendors. The amounts charged to Fairchild for these items are summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
MAY 29, MAY 28, MAY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Manufacturing services performed by National Semiconductor's Greenock, UK
plant................................................................... $ 18.5 $ 10.1 $ 12.0
Manufacturing services performed by other National Semiconductor plants... 19.5 17.8 19.5
Purchased manufacturing services from third parties....................... 73.9 50.2 42.4
Headquarters, freight, duty, warehousing and other elements of cost of
sales................................................................... 40.3 61.3 58.5
----------- ----------- -----------
$ 152.2 $ 139.4 $ 132.4
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Included in the above amounts transferred from National Semiconductor to
Fairchild, are costs incurred by certain centralized divisional oversight and
logistics departments referred to as NSIL. Although NSIL spending occurs in both
National Semiconductor and Fairchild sites, all such costs are considered to
have originated in National Semiconductor.
A portion of manufacturing costs transferred from National Semiconductor
plants to Fairchild is capitalized into inventory at standard manufacturing cost
and is expensed to cost of sales as related product sales are recognized. The
remainder of manufacturing costs transferred to Fairchild are considered period
costs and are immediately recognized as cost of sales.
F-6
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other operating costs allocated from National Semiconductor plants to
Fairchild and from Fairchild plants to National Semiconductor product lines can
be summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
MAY 29, MAY 28, MAY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Transferred from National Semiconductor to Fairchild, at cost............. $ 112.5 $ 120.9 $ 108.6
----------- ----------- -----------
----------- ----------- -----------
Transferred from Fairchild to National Semiconductor, at cost............. $ 13.7 $ 19.4 $ 27.1
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Where it is possible to specifically identify other operating costs with the
activities of Fairchild or National Semiconductor product lines, these amounts
have been charged or credited directly to Fairchild or National Semiconductor
product lines without allocation or apportionment. Shared or common costs,
including certain general and administrative, sales and marketing, and research
and development, have been allocated from National Semiconductor's corporate
office, selling and marketing locations, and manufacturing sites to Fairchild or
from Fairchild plants to National Semiconductor product lines on a basis which
is considered to fairly and reasonably reflect the utilization of the services
provided to, or benefit obtained by, the business receiving the charge. Although
a number of different approaches are used to allocate costs, there is usually a
predominant basis for each expense category. Accordingly, research and
development expenses have been allocated primarily on dedicated research and
development spending. Selling and marketing expenses have been allocated
primarily on sales volume, and general and administrative expenses have been
allocated primarily on net assets. These cost allocations are not necessarily
indicative of the costs that would be incurred by the Business on a stand-alone
basis.
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates
actual cost on a first-in, first-out basis, or market. The main components of
inventories are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------
MAY 28, MAY 26,
1995 1996
----------- -----------
<S> <C> <C>
(IN MILLIONS)
Raw materials....................................................................... $ 6.6 $ 11.2
Work in process..................................................................... 40.2 58.1
Finished goods...................................................................... 22.0 23.8
----- -----
Total Inventories............................................................. $ 68.8 $ 93.1
----- -----
----- -----
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Effective May 29, 1995,
Fairchild changed its method of accounting for depreciation from the 150 percent
declining balance method to the straight-line method for machinery and equipment
placed in service on or after that date. The change was adopted because it
conforms with predominant industry practice and is expected to result in a more
appropriate
F-7
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
distribution of the cost of the new machinery and equipment over its estimated
useful life. The effect of the change was a decrease in the depreciation charge
related to Fairchild property, plant and equipment of approximately $5.4 million
for fiscal year 1996. Assets placed in service prior to fiscal year 1996 and
assets other than machinery and equipment continue to be depreciated using prior
years' depreciation methods over the assets' remaining estimated useful lives,
or in the case of property under capital lease and leasehold improvements, over
the lesser of the estimated useful life or lease term.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires recognition of impairment of long-lived assets in the event the
carrying value of such assets exceeds the future undiscounted cash flows
attributable to such assets. SFAS No. 121 will become effective in the Business'
fiscal year 1997. Adoption of SFAS No. 121 is not expected to have a material
impact on the Business' financial position or results of operations.
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------
MAY 28, MAY 26,
1995 1996
----------- -----------
<S> <C> <C>
(IN MILLIONS)
Land................................................................................ $ 1.2 $ 1.2
Buildings........................................................................... 115.3 133.7
Machinery and equipment............................................................. 367.2 476.2
Construction in progress............................................................ 59.5 54.3
----------- -----------
Total property, plant and equipment........................................... 543.2 665.4
Less accumulated depreciation....................................................... 319.4 347.1
----------- -----------
$ 223.8 $ 318.3
----------- -----------
----------- -----------
</TABLE>
INTEREST EXPENSE
National Semiconductor had net interest income on a consolidated basis for
all periods presented. Although not material, these amounts have been allocated
to Fairchild on the basis of net assets and are included in other (income)
expense. Management believes this is reasonable, but it is not necessarily
indicative of the cost that would have been incurred if the Business had been
operated on a stand alone basis.
CURRENCIES AND FOREIGN CURRENCY INSTRUMENTS
Fairchild's functional currency for all operations worldwide is the U.S.
dollar. Accordingly, gains and losses from translation of foreign currency
financial statements into U.S. dollars are included in current results. Gains
and losses resulting from foreign currency transactions are also included in
current results.
National Semiconductor uses forward and option contracts to hedge firm
commitments and anticipatory exposures. These exposures primarily comprise sales
of National Semiconductor's products, including Fairchild products, in
currencies other than the U.S. dollar, a majority of which are made through
National
F-8
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Semiconductor's subsidiaries in Europe and Japan. Gains and losses on financial
instruments that are intended to hedge an identifiable firm commitment are
deferred and included in the measurement of the underlying transaction. Gains
and losses on hedges of anticipated transactions are deferred until such time as
the underlying transactions are recognized or immediately when the transaction
is no longer expected to occur. In addition, National Semiconductor uses forward
and option contracts to hedge certain non-U.S. dollar denominated asset and
liability positions. Gains and losses on these contracts are matched with the
corresponding effect of currency movements on these financial positions.
The aggregate translation and transaction gain or loss, net of the gain or
loss from the forward currency contracts or options, is accumulated at the
corporate level by National Semiconductor and allocated to Fairchild based on
its proportionate share of worldwide net assets and is included in other income
and expense. Amounts allocated for 1994, 1995 and 1996 were not significant.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EMPLOYEE STOCK PLANS
National Semiconductor accounts for its stock option and its employee stock
purchase plans in accordance with provisions of the Accounting Principles
Board's Opinion No. 25 ("APB 25"), ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. In
1995, the Financial Accounting Standards Board issued SFAS No. 123, ACCOUNTING
FOR STOCK BASED COMPENSATION. SFAS No. 123 provides an alternative approach to
APB 25 and is effective for fiscal years beginning after December 15, 1995.
Fairchild intends to continue to account for their employee stock plans in
accordance with the provisions of APB 25. While SFAS No. 123 will not have any
impact on the Business' reported financial position or results of operations, it
requires disclosure of the effect on income before taxes as if the alternative
approach had been adopted.
(3) ACCRUED EXPENSES
The components of accrued expenses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------
MAY 28, MAY 26,
1995 1996
----------- -----------
<S> <C> <C>
(IN MILLIONS)
Payroll and employee related accruals..................................... $ 11.8 $ 13.2
Other accruals............................................................ 8.4 5.7
----- -----
Total accrued expenses................................................ $ 20.2 $ 18.9
----- -----
----- -----
</TABLE>
F-9
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(4) RETIREMENT PLANS
Employees of Fairchild participate in several National Semiconductor
retirement, employee benefit, and incentive plans. These include (i) a profit
sharing plan, (ii) a stock bonus plan, and (iii) a salary deferral 401(k) plan.
National Semiconductor also has a stock option plan under which key employees of
Fairchild may be granted nonqualified or incentive stock options to purchase
shares of National Semiconductor common stock. In addition, National
Semiconductor has a stock purchase plan that authorizes the granting of options
and the issuance of common stock to eligible Fairchild employees. Certain key
employees and certain management of Fairchild also participate in various
incentive arrangements based on individual performance and National
Semiconductor/Fairchild profitability.
Fairchild employees in Malaysia participate in a defined contribution plan.
National Semiconductor has funded accruals for this pension plan in accordance
with statutory regulations in Malaysia.
Fairchild employees in the Philippines participate in a defined benefit
plan. At May 26, 1996, the plan had assets of approximately $0.3 million and an
unfunded liability of approximately $2.6 million. The minimum liability required
is not significant.
(5) LEASE COMMITMENTS
Rental expense related to certain facilities and equipment of Fairchild
plants was $4.4 million, $3.0 million, and $4.8 million for the fiscal years
ended 1994, 1995 and 1996, respectively.
Future minimum lease payments under operating leases are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
1997......................................................................... $ 5.4
1998......................................................................... 5.0
1999......................................................................... 4.3
2000......................................................................... 4.2
2001......................................................................... 2.7
Thereafter................................................................... 3.3
-----
Total........................................................................ $ 24.9
-----
-----
</TABLE>
(6) CONTINGENCIES
National Semiconductor is currently a defendant in certain legal actions
relating to Fairchild. In the opinion of management, the outcome of such
litigation will not have a material adverse effect on the business equity or
statement of operations.
National Semiconductor is also involved in certain administrative and
judicial proceedings related to certain environmental matters at Fairchild
locations. The Asset Purchase Agreement provides for National Semiconductor's
retention of certain liabilities arising out of investigative and remedial
action and environmental claims for conditions existing as of the closing at the
above referenced locations. Accordingly, based on information currently
available, management believes that the costs of these matters are not likely to
have a material adverse effect on the business equity or statement of
operations.
F-10
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(7) BUSINESS EQUITY
Business Equity represents National Semiconductor's ownership interest in
the recorded net assets of Fairchild. All cash transactions and intercompany
transactions are reflected in this amount. A summary of activity is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
MAY 29, MAY 28, MAY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Balance at beginning of period.................................. $ 100.8 $ 161.1 $ 233.2
Revenues less expenses.......................................... 125.5 74.3 72.3
Net intercompany activity....................................... (65.2) (2.2) 43.7
----------- ----------- -----------
$ 161.1 $ 233.2 $ 349.2
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(8) INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
The Business operates in one industry segment and is engaged in the design,
development, manufacture and marketing of a wide variety of semiconductor
products for the semiconductor industry and original equipment manufacturers.
Fairchild operates in three main geographic areas. In the information that
follows, sales include local sales and exports made by operations within each
area. To control costs, a substantial portion of Fairchild's products are
transported between various Fairchild and National Semiconductor facilities in
the Americas, Asia and Europe in the process of being manufactured and sold.
Accordingly, it is not meaningful to present interlocation transfers between
Fairchild facilities on a stand alone basis. Sales to unaffiliated customers
have little correlation with the location of manufacture. It is, therefore, not
meaningful to present operating profit by geographic area.
Fairchild conducts a substantial portion of its operations outside of the
U.S. and is subject to risks associated with non-U.S. operations, such as
political risks, currency controls and fluctuations, tariffs, import controls
and air transportation.
<TABLE>
<CAPTION>
AMERICAS EUROPE ASIA CONSOLIDATED
----------- --------- --------- -------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
1994
Sales to unaffiliated customers................................ $ 274.8 $ 142.6 $ 241.5 $ 658.9
----------- --------- --------- ------
----------- --------- --------- ------
1995
Sales to unaffiliated customers................................ $ 238.2 $ 149.9 $ 241.5 $ 629.6
----------- --------- --------- ------
----------- --------- --------- ------
Total assets................................................... $ 212.2 $ 1.9 $ 109.1 $ 323.2
----------- --------- --------- ------
----------- --------- --------- ------
1996
Sales to unaffiliated customers................................ $ 260.3 $ 161.3 $ 266.2 $ 687.8
----------- --------- --------- ------
----------- --------- --------- ------
Total assets................................................... $ 267.9 $ 0.8 $ 164.0 $ 432.7
----------- --------- --------- ------
----------- --------- --------- ------
</TABLE>
F-11
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(9) SUPPLEMENTAL CASH FLOW INFORMATION
As described in Note 1, National Semiconductor's cash management system is
not designed to trace centralized cash and related financing transactions to the
specific cash requirements of the Business. In addition, National
Semiconductor's corporate transaction systems are not designed to track
receivables and certain liabilities and cash receipts and payments on a business
specific basis. Given these constraints, the following data are presented to
facilitate analysis of key components of cash flow activity:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------
MAY 29, MAY 28, MAY 26,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
Operating activities:
Revenues less expenses.......................................................... $ 125.5 $ 74.3 $ 72.3
Depreciation.................................................................... 33.0 39.1 57.6
Loss on disposal of equipment................................................... 2.0 .2 1.8
Increase in inventories......................................................... (5.9) (7.9) (24.3)
Decrease (increase) in miscellaneous receivables................................ 1.7 (8.0) 10.6
Increase in other assets........................................................ (0.4) -- (1.3)
Increase (decrease) in accounts payable and accrued liabilities................. (2.5) 17.4 (6.5)
--------- --------- ---------
Cash flow from operating activities, excluding National Semiconductor financing... 153.4 115.1 110.2
Investing activities:
Capital expenditures............................................................ (88.2) (112.9) (153.9)
--------- --------- ---------
Net financing provided to (from) National Semiconductor*.......................... $ 65.2 $ 2.2 $ (43.7)
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
* The difference between cash flow from operating activities and investing
activities does not necessarily represent the cash flows of the Business, or
the timing of such cash flows, had it operated on a stand alone basis.
(10) SUBSEQUENT EVENT-UNAUDITED
National Semiconductor formed two new entities, Fairchild Semiconductor
Corporation ("Fairchild" or "the Company") and FSC Semiconductor Corporation
("Fairchild Holdings") on February 10, 1997 and March 10, 1997, respectively.
Fairchild Semiconductor Limited, Fairchild Semiconductor GmbH, Fairchild
Semiconductor Asia Pacific Pte. Ltd., Fairchild Semiconductor (Malaysia) Sdn.
Bhd., Fairchild Semiconductor Hong Kong Limited, Fairchild Semiconductor Hong
Kong (Holdings) Limited, Fairchild Semiconductor Japan K.K. and Fairchild
Semiconductor S.r.l. (collectively, the "foreign subsidiaries") were also formed
as wholly owned subsidiaries of Fairchild. On March 11, 1997, National
Semiconductor consummated an Agreement and Plan of Recapitalization under which
the following transactions occurred:
(i) National Semiconductor, pursuant to an Asset Purchase Agreement,
transferred all of the assets and liabilities of the Business to
Fairchild and its subsidiaries in exchange for demand purchase
F-12
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(10) SUBSEQUENT EVENT-UNAUDITED (CONTINUED)
notes of Fairchild and the foreign subsidiaries in the aggregate
principal amount of $401.6 million (the "Purchase Price Notes");
(ii) National Semiconductor transferred all of the capital stock of
Fairchild and approximately $12.8 million in cash to Fairchild Holdings
in exchange for shares of 12% Series A Cumulative Compounding Preferred
Stock of Fairchild Holdings ("Holdings Redeemable Preferred Stock"),
common stock of Fairchild Holdings ("Holdings Common Stock") and a
promissory note of Fairchild Holdings in the principal amount of
approximately $77.0 million ("Holdings PIK Note");
(iii) Fairchild Holdings issued (a) to Sterling Holding Company, LLC
("Sterling") shares of Holdings Preferred Stock and Holdings Common Stock
for approximately $58.5 million in cash and (b) to Kirk P. Pond and
Joseph R. Martin, together with certain other key employees of Fairchild
(the "Management Investors"), Holdings Preferred Stock and Holdings
Common Stock for approximately $6.5 million in cash;
(iv) Fairchild Holdings contributed cash in the amount of approximately
$77.8 million to the capital of the Company;
(v) Fairchild borrowed $120.0 million under the term bank loans and received
net proceeds from the issuance of $300.0 million of 10 1/8% Senior
Subordinated Notes Due 2007 (the "Notes") to settle the Purchase Price
Notes and provide Fairchild with working capital.
The pro forma unaudited combined condensed balance sheet of Fairchild as of
February 23, 1997 and the pro forma unaudited combined condensed results of
operations for the year ended 1996 adjusted to give effect to the transactions
is presented in the Pro Forma Financial Statements, included elsewhere in this
Prospectus.
The Notes are fully and unconditionally guaranteed by Fairchild Holdings.
Fairchild Holdings currently conducts no business and has no significant assets
other than the capital stock of the Company, all of which has been pledged to
secure Fairchild Holdings' obligations under the term bank loans. Thus,
currently there are no resources supporting Fairchild Holdings' guarantee of the
Notes that are in addition to those to which holders of the Notes already have
access as direct creditors of the Company.
Although the Company's U.S. operations are owned directly, its foreign
operations are conducted through the foreign subsidiaries. The foreign
subsidiaries have not guaranteed or otherwise become obligated with respect to
the Notes. The Notes will therefore be effectively subordinated to all existing
and future liabilities, including indebtedness, of the foreign subsidiaries.
F-13
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(10) SUBSEQUENT EVENT-UNAUDITED (CONTINUED)
The following unaudited pro forma combining condensed balance sheet of
Fairchild Holdings is based on the historical financial statements of the
business adjusted to give effect to the transactions and should be read in
conjunction with the Pro Forma Financial Statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PRO FORMA FEBRUARY 23, 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FAIRCHILD FOREIGN COMBINED
HOLDINGS FAIRCHILD SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ------ ------------ -----------
Total current assets................................. $ -- $ 136.7 $ 10.6 $ -- $ 147.3
Property, plant and equipment........................ -- 216.6 87.2 -- 303.8
Deferred income taxes................................ -- 25.0 -- -- 25.0
Other assets......................................... -- 21.3 0.2 -- 21.5
Investment in subsidiaries........................... 154.8 98.2 -- (253.0) --
----------- ----------- ----- ------------ -----------
Total assets....................................... $ 154.8 $ 497.8 $ 98.0 $ (253.0) $ 497.6
----------- ----------- ----- ------------ -----------
----------- ----------- ----- ------------ -----------
Current liabilities.................................. $ -- $ 49.7 $ 24.9 $ -- $ 74.6
Long term bank debt, less current portion............ -- 109.0 -- -- 109.0
Senior Subordinated Notes............................ -- 300.0 -- -- 300.0
Holdings PIK Note.................................... 77.0 -- -- -- 77.0
----------- ----------- ----- ------------ -----------
Total liabilities.................................. 77.0 458.7 24.9 -- 560.6
Holdings Redeemable Preferred Stock.................. 70.0 -- -- -- 70.0
Stockholder's equity:
Holdings Common Stock................................ 7.8 -- -- -- 7.8
Fairchild common stock............................... -- -- -- -- --
Due to parent........................................ -- 39.1 73.1 (253.0) (140.8)
----------- ----------- ----- ------------ -----------
Total Stockholder's equity......................... 7.8 39.1 73.1 (253.0) (133.0)
Total liabilities, Holdings Redeemable Preferred
Stock and stockholder's equity................... $ 154.8 $ 497.8 $ 98.0 $ (253.0) $ 497.6
----------- ----------- ----- ------------ -----------
----------- ----------- ----- ------------ -----------
</TABLE>
The pro forma combined total above is substantially identical to the Pro
Forma Financial Statements except for the inclusion of the Holdings PIK Note of
$77.0 million, the Holdings Redeemable Preferred Stock and the Holdings Common
Stock. The Holdings PIK Note is due in 2008 and bears interest at an annual
interest rate of 11.74%. The Holdings Redeemable Preferred Stock pays cumulative
dividends at a rate of 12% per annum and is mandatorily redeemable in 2009.
The pro forma combined results of operations of Fairchild Holdings would
differ from the pro forma combined condensed results of operations of Fairchild
presented elsewhere in this Prospectus only by the amount of interest on the
Holdings PIK Note, which will be added to the principal amount of the Holdings
PIK Note.
F-14
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO COMBINED STATEMENTS (CONTINUED)
MAY 28, 1995 AND MAY 26, 1996
(10) SUBSEQUENT EVENT-UNAUDITED (CONTINUED)
Summarized historical operating activity for the U.S. operations of the
Business, which were transferred to Fairchild, and the foreign operations of the
Business, which were transferred to the foreign subsidiaries, for each of the
years in the three-year period ended December 31, 1996, can be summarized as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
U.S. operations (Fairchild)--Trade.............................................. $ 274.8 $ 238.2 $ 260.3
U.S. operations (Fairchild)--Intercompany....................................... 611.3 866.2 948.4
Foreign operations (foreign subsidiaries)--Trade................................ 384.1 391.4 427.5
Foreign operations (foreign subsidiaries)--Intercompany......................... 423.4 68.5 65.1
Eliminations.................................................................... (1034.7) (934.7) (1013.5)
--------- --------- ---------
Total......................................................................... $ 658.9 $ 629.6 $ 687.8
--------- --------- ---------
--------- --------- ---------
Revenue less direct and allocated expenses before other (income) and taxes:
U.S. operations (Fairchild)..................................................... $ 168.8 $ 200.2 $ 232.9
Foreign operations (foreign subsidiaries)....................................... (22.0) (109.1) (144.9)
Eliminations.................................................................... (23.2) (18.6) (17.2)
--------- --------- ---------
Total......................................................................... $ 123.6 $ 72.5 $ 70.8
--------- --------- ---------
--------- --------- ---------
Revenue less direct and allocated expenses:
U.S. operations (Fairchild)..................................................... $ 165.4 $ 194.2 $ 225.5
Foreign operations (foreign subsidiaries)....................................... (16.7) (101.3) (136.0)
Eliminations.................................................................... (23.2) (18.6) (17.2)
--------- --------- ---------
Total......................................................................... $ 125.5 $ 74.3 $ 72.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
Intercompany amounts included in revenue above are comprised of sales
between domestic and foreign operations and sales between plants which are
located in the same geographic region.
Upon consummation of the Transactions, Fairchild was a wholly owned
subsidiary of Fairchild Holdings and Fairchild Holdings was owned 15% by
National Semiconductor, 69% by Sterling and 16% by the Management Investors.
F-15
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
FEBRUARY 23, 1997
-----------------
<S> <C>
(UNAUDITED)
ASSETS
Current assets:
Inventories................................................................................ $ 67.3
Prepaid expenses and other................................................................. 8.6
Miscellaneous receivables.................................................................. 9.6
------
Total current assets................................................................... 85.5
Property, plant and equipment, net............................................................. 303.8
Other assets................................................................................... 0.9
------
Total assets........................................................................... $ 390.2
------
------
LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable........................................................................... $ 41.3
Accrued expenses........................................................................... 21.1
Special reserves........................................................................... 13.8
------
Total current liabilities.............................................................. 76.2
Commitments.................................................................................... --
Business equity................................................................................ 314.0
------
Total liabilities and business equity.................................................. $ 390.2
------
------
</TABLE>
See accompanying notes to unaudited combined statements.
F-16
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
FEBRUARY 25, FEBRUARY 23,
1996 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
Revenue:
Net sales--trade................................................................. $ 532.9 $ 433.9
Contract manufacturing--National Semiconductor................................... 63.7 75.8
------ ------
Total revenue................................................................ 596.6 509.7
Direct and allocated costs and expenses:
Cost of sales.................................................................... 356.5 332.4
Cost of contract manufacturing--National Semiconductor........................... 63.7 75.8
Research and development......................................................... 22.7 13.6
Selling and marketing............................................................ 50.0 33.5
General and administrative....................................................... 37.6 39.1
Restructuring.................................................................... -- 5.3
------ ------
Total operating costs and expenses........................................... 530.5 499.7
------ ------
66.1 10.0
Other (income) expense............................................................... (1.5) 0.4
------ ------
Revenues less direct and allocated expenses before taxes............................. $ 67.6 $ 9.6
------ ------
------ ------
</TABLE>
See accompanying notes to unaudited combined statements.
F-17
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO UNAUDITED COMBINED STATEMENTS
FEBRUARY 25, 1996 AND FEBRUARY 23, 1997
(1) BASIS OF PRESENTATION
The unaudited combined statements as of February 23, 1997 and for the nine
months ended February 25, 1996 and February 23, 1997 should be read in
conjunction with Note 1 (Basis of Presentation), Note 2 (Summary of Significant
Accounting Policies), Note 6 (Contingencies) and Note 10 (Subsequent Event)
included in the audited 1996 combined statements of the Fairchild Semiconductor
Business of National Semiconductor Corporation (the Business). Other notes
considered by management to be relevant to the accompanying unaudited combined
statements are included herein.
The unaudited combined statements for the Business are based principally on
National Semiconductor Corporation's (National Semiconductor) internal results
and, in the opinion of management, reflect, consistent with the audited 1996
statements, appropriate adjustments to more closely present the results of
operations in accordance with generally accepted accounting principles.
(2) RELATED PARTY TRANSACTIONS
As discussed in Note 2 (Summary of Significant Accounting Policies) of the
audited 1996 combined statements of the Business, certain costs are allocated
from National Semiconductor to Fairchild. The amounts charged to Fairchild from
National Semiconductor for manufacturing services and other elements of cost of
sales are summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
FEBRUARY 25 FEBRUARY 23,
1996 1997
------------ ------------
<S> <C> <C>
(IN MILLIONS)
Manufacturing services performed by National Semiconductor's
Greenock, UK plant.............................................. $ 6.6 $ --
Manufacturing services performed by other National Semiconductor
plants.......................................................... 21.9 11.8
Purchased manufacturing services from third parties............... 34.4 20.0
Headquarters, freight, duty, warehousing and other elements of
cost of sales................................................... 41.6 36.4
------------ ------------
$ 104.5 $ 68.2
------------ ------------
------------ ------------
</TABLE>
F-18
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO UNAUDITED COMBINED STATEMENTS (CONTINUED)
FEBRUARY 25, 1996 AND FEBRUARY 23, 1997
(2) RELATED PARTY TRANSACTIONS (CONTINUED)
Other operating costs allocated from National Semiconductor plants to
Fairchild and from Fairchild plants to National Semiconductor product lines can
be summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
FEBRUARY 25, FEBRUARY 23,
1996 1997
------------- -------------
<S> <C> <C>
(IN MILLIONS)
Transferred from National Semiconductor to Fairchild, at cost..... $ 97.9 $ 60.6
----- -----
----- -----
Transferred from Fairchild to National Semiconductor, at cost..... $ 19.7 $ 9.2
----- -----
----- -----
</TABLE>
(3) INVENTORIES
Inventories are stated at the lower of standard cost, which approximates
actual cost on a first-in, first-out basis, or market. The main components of
inventories are as follows:
<TABLE>
<CAPTION>
FEBRUARY 23,
1997
-------------
<S> <C>
(IN MILLIONS)
Raw materials............................................................................. $ 7.5
Work in process........................................................................... 42.1
Finished goods............................................................................ 17.7
-----
Total inventories..................................................................... $ 67.3
-----
-----
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
FEBRUARY 23,
1997
-------------
<S> <C>
(IN MILLIONS)
Land...................................................................................... $ 1.2
Buildings................................................................................. 137.5
Machinery and equipment................................................................... 511.5
Construction in progress.................................................................. 29.5
------
Total property, plant and equipment................................................. 679.7
Less accumulated depreciation............................................................. 375.9
------
$ 303.8
------
------
</TABLE>
F-19
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO UNAUDITED COMBINED STATEMENTS (CONTINUED)
FEBRUARY 25, 1996 AND FEBRUARY 23, 1997
(5) ACCRUED EXPENSES
The components of accrued expenses are as follows:
<TABLE>
<CAPTION>
FEBRUARY 23,
1997
---------------
<S> <C>
(IN MILLIONS)
Payroll and employee related accruals..................................................... $ 15.3
Other accruals............................................................................ 5.8
-----
Total accrued expenses.............................................................. $ 21.1
-----
-----
</TABLE>
(6) LEASE COMMITMENTS
Rental expense related to certain facilities and equipment of Fairchild
plants was $3.5 million, and $3.8 million for the nine months ended February 25,
1996 and February 23, 1997, respectively.
Future minimum lease payments under operating leases are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Fiscal years ended:
1997 (three months ending).................................................... $ 1.4
1998.......................................................................... 5.0
1999.......................................................................... 4.3
2000.......................................................................... 4.2
2001.......................................................................... 2.7
Thereafter.................................................................... 3.3
-----
Total..................................................................... $ 20.9
-----
-----
</TABLE>
(7) BUSINESS EQUITY
Business Equity represents National Semiconductor's ownership interest in
the recorded net assets of Fairchild. All cash transactions and intercompany
transactions flow through the equity account. A summary of activity is as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 23,
1997
-----------------
<S> <C>
(IN MILLIONS)
Balance at beginning of period........................................................ $ 349.2
Revenue less expenses................................................................. 9.6
Net intercompany activity............................................................. (44.8)
------
$ 314.0
------
------
</TABLE>
F-20
<PAGE>
FAIRCHILD SEMICONDUCTOR BUSINESS OF NATIONAL
SEMICONDUCTOR CORPORATION
NOTES TO UNAUDITED COMBINED STATEMENTS (CONTINUED)
FEBRUARY 25, 1996 AND FEBRUARY 23, 1997
(8) GENERAL AND ADMINISTRATIVE EXPENSES
In the nine months ended February 23, 1997, the Business recorded $14.1
million of retention and incentive bonuses in general and administrative
expenses. In the nine months ended February 23, 1997, $300,000 of these bonuses
were paid. The remaining $13.8 million is recorded on the balance sheet as
special reserves.
(9) RESTRUCTURING
In June 1996, National Semiconductor announced a restructuring of its
operations and the intent to pursue a sale or partial financing of the Business.
In connection with the restructuring, the Business recorded a $5.3 million
non-recurring charge related to work force reductions. In the nine months ended
February 23, 1997, $5.3 million of severance was paid to terminated employees.
(10) SUPPLEMENTAL CASH FLOW INFORMATION
As described in Note 1 to the audited 1996 statements of Fairchild, National
Semiconductor's cash management system is not designed to trace centralized cash
and related financing transactions to the specific cash requirements of the
Business. In addition, National Semiconductor's corporate transaction systems
are not designed to track receivables and certain liabilities and cash receipts
and payments on a business specific basis. Given these constraints, the
following data are presented to facilitate analysis of key components of cash
flow activity:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
FEBRUARY 25, FEBRUARY 23,
1996 1997
------------ -------------
<S> <C> <C>
(IN MILLIONS)
Operating activities:
Revenue less expenses................................................... $ 67.6 $ 9.6
Depreciation............................................................ 40.5 50.8
Loss on disposal of property, plant and equipment....................... 0.6 0.4
Decrease (increase) in inventories...................................... (27.5) 25.8
Decrease (increase) in miscellaneous receivables........................ 9.3 --
Decrease (increase) in other assets..................................... 1.2 2.2
Increase (decrease) in accounts payable and accrued liabilities......... (14.6) (21.1)
Increase in special reserves............................................ -- 13.8
------------ ------
Cash flow from operating activities, excluding National Semiconductor
financing................................................................. 77.1 81.5
Investing activities:
Capital expenditures.................................................... (120.7) (33.4)
Transfers of capital equipment from National Semiconductor.............. -- (3.3)
------------ ------
Net financing provided to (from) National Semiconductor*.................... $ (43.6) $ 44.8
------------ ------
------------ ------
</TABLE>
- ------------------------
* The difference between cash flow from operating activities and investing
activities does not necessarily represent the cash flows of the Business, or
the timing of such cash flows, had it operated on a stand alone basis.
F-21
<PAGE>
- -------------------------------------------
-------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus, and,
if given or made, such information or representation must not be relied upon as
having been authorized. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any securities other than those to which it
relates, nor does it constitute an offer to sell or the solicitation of an offer
to buy such securities in any circumstances in which such solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Available Information........................... 2
Summary......................................... 3
Risk Factors.................................... 15
Use of Proceeds................................. 23
Pro Forma Capitalization........................ 23
Unaudited Pro Forma Combined Condensed Financial
Statements.................................... 24
Unaudited Supplemental Financial Data........... 29
Selected Combined Financial Data................ 31
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 32
The Exchange Offer.............................. 39
Industry Overview............................... 46
Business........................................ 50
The Transactions................................ 60
Management...................................... 64
Ownership of Capital Stock...................... 71
Description of Certain Indebtedness............. 74
Description of the Notes........................ 78
Certain Federal Income Tax Consequences......... 111
Plan of Distribution............................ 112
Legal Matters................................... 112
Experts......................................... 112
Disclosure Regarding Forward Looking
Statements.................................... 113
Glossary........................................ G-1
Index to Financial Statements................... F-1
</TABLE>
--------------
Until all dealers effecting transactions in the Notes, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
[LOGO]
$300,000,000
10 1/8% Senior Subordinated
Notes Due 2007
PROSPECTUS
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
Section 145 further provides that nothing in the above-described provisions
shall be deemed exclusive of any other rights to indemnification or advancement
of expenses to which any person may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
The Bylaws of the Company provide for the indemnification of any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that such person is or
was a director or officer of the Company or a constituent corporation absorbed
in a consolidation or merger, or is or was serving at the request of the Company
or a constituent corporation absorbed in a consolidation or merger, as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or is or was a director or officer of the Company serving at
its request as an administrator, trustee or other fiduciary of one or more of
the employee benefit plans of the Company or other enterprise, against expenses
(including attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law. The Bylaws of the
Company also provide that such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled as a matter of law
or under any by-law, agreement, vote of stockholders or otherwise.
II-1
<PAGE>
Section 102(b)(7) of the Delaware General Corporation Law provides that a
corporation may in its certificate of incorporation eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability: for any breach of the director's duty of loyalty to the corporation
or its stockholders; for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; under Section 174 of the
Delaware General Corporation Law (pertaining to certain prohibited acts
including unlawful payment of dividends or unlawful purchase or redemption of
the corporation's capital stock); or for any transaction from which the director
derived an improper personal benefit. The Certificate of Incorporation of the
Company contains a provision so limiting the personal liability of directors of
the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.01* Agreement and Plan of Recapitalization dated January 24, 1997 between Sterling Holding Company, LLC
("Sterling") and National Semiconductor Corporation ("National Semiconductor").
2.02* Asset Purchase Agreement dated as of March 11, 1997 between the Company and National Semiconductor.
3.01 Certificate of Incorporation of the Company.
3.02 Bylaws of the Company.
3.03 Certificate of Incorporation of Fairchild Holdings.
3.04 Bylaws of Fairchild Holdings.
4.01 Indenture dated as of March 11, 1997 among the Company, Fairchild Holdings, as Guarantor and United
States Trust Company of New York, as Trustee.
4.02 Registration Rights Agreement dated March 6, 1997 among the Company, Fairchild Holdings, as
Guarantor, Credit Suisse First Boston Corporation, BT Securities Corporation and CIBC Wood Gundy
Securities Corp.
4.03 Form of 10-1/8% Senior Subordinated Notes Due 2007 (included in Exhibit 4.01).
5.01** Opinion of Dechert Price & Rhoads.
10.01*** Technology Licensing and Transfer Agreement dated March 11, 1997 between National Semiconductor and
the Company.
10.02 Transition Services Agreement dated March 11, 1997 between National Semiconductor and the Company.
10.03*** Fairchild Foundry Services Agreement dated March 11, 1997 between National Semiconductor and the
Company.
10.04*** Revenue Side Letter dated March 11, 1997 between National Semiconductor and the Company.
10.05*** Fairchild Assembly Services Agreement dated March 11, 1997 between National Semiconductor and the
Company.
10.06*** National Foundry Services Agreement dated March 11, 1997 between National Semiconductor and the
Company.
10.07*** National Assembly Services Agreement dated March 11, 1997 between National Semiconductor and the
Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.08*** Mil/Aero Wafer and Services Agreement dated March 11, 1997 between National Semiconductor and the
Company.
10.09 Shared Services Agreement (South Portland) dated March 11, 1997 between National Semiconductor and
the Company.
10.10 Credit Agreement dated March 11, 1997 among the Company, Fairchild Holdings, Various Banks, Bankers
Trust Company, Credit Suisse First Boston Corporation and Canadian Imperial Bank of Commerce.
10.11*** Corporate Agreement dated February 20, 1992 between Torex Semiconductor Ltd. and National
Semiconductor.
10.12*** Assembly/Test Subcontract Agreement dated January 9, 1997 between NS Electronics Bangkok (1993) Ltd.
and National Semiconductor.
10.13*** Supply Agreement dated January 20, 1996 between National Semiconductor and Dynacraft Industries Sdn.
Bhd.
10.14*** Licensing and Manufacturing Agreement dated April 27, 1990 between National Semiconductor and
Waferscale Integration, Inc.
10.15 Qualified Titles Corresponding to Registry Title Nos. 19, 44 and 3400-Mk 12 from the State of Penang,
Malaysia and corresponding Sale and Puchase Agreements, each dated March 11, 1997, between National
Semiconductor Sdn. Bhd. and Fairchild Semiconductor Sdn. Bhd.
10.16 Lease Agreement dated October 10, 1979 between Export Processing Zone Authority and Fairchild
Semiconductor (Honk Kong) Limited, and Supplemental Agreements thereto dated May 1, 1982; December
12, 1983; August 17, 1984; March 10, 1987; February 16, 1990; August 25, 1994; May 29, 1995; June 7,
1995; November 9, 1995; and October 24, 1996.
10.17 Lease for Santa Clara Facilities dated as of March 11, 1997 between National Semiconductor and the
Company.
10.18 Shared Facilities Agreement (South Portland) dated March 11, 1997 between National Semiconductor and
the Company.
10.19 Environmental Side Letter dated March 11, 1997 between National Semiconductor and the Company.
10.20 Master Sublease Agreement dated March 11, 1997 between National Semiconductor and the Company and
Master Lease Agreement dated December 13, 1994 between General Electric Capital Corporation and
National Semiconductor.
10.21 Fairchild NSC Deferred Compensation Plan Trust established effective March 11, 1997.
10.22 Fairchild NSC Deferred Compensation Plan assumed and continued, effective March 11, 1997 (included as
Schedule A to Exhibit 10.21).
10.23 Fairchild Benefit Restoration Plan.
10.24 Fairchild Incentive Plan.
10.25 FSC Semiconductor Corporation Executive Officer Incentive Plan.
10.26 FSC Semiconductor Corporation Stock Option Plan.
10.27 Employment Agreement dated March 11, 1997 among the Company, Fairchild Holdings, Sterling and Kirk P.
Pond.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.28 Employment Agreement dated March 11, 1997 among the Company, Fairchild Holdings, Sterling and Joseph
R. Martin.
12.01 Statement of Ratio of Earnings to Fixed Charges.
21.01 Subsidiaries of the Company.
23.01** Consent of Dechert Price & Rhoads (included in the opinion filed as Exhibit 5.01).
23.02 Consent of KPMG Peat Marwick LLP.
24.01 Power of Attorney (included on the signature page).
25.01 Statement of Eligibility and Qualification of United States Trust Company of New York on Form T-1.
27.01 Financial Data Schedule.
99.01 Form of Letter of Transmittal.
99.02 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the contents
of all schedules and the Registrants agree to furnish supplementally copies
of such schedules to the Commission upon request.
** To be supplied by amendment.
*** Omitted in accordance with an application for confidential treatment filed
with the Commission.
(b) Financial Statement Schedules:
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
II-4
<PAGE>
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
South Portland, State of Maine, on the 12th day of May 1997.
FAIRCHILD SEMICONDUCTOR CORPORATION
By: KIRK P. POND
------------------------------------------
Chairman of the Board of Directors,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Joseph R. Martin, Daniel
E. Boxer and Paul C. Schorr IV, any of whom may act without the joinder of
either of the others, as his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities at the above-named Registrant on May 12, 1997.
SIGNATURE TITLE
- ------------------------------ ------------------------------------------
KIRK P. POND Chairman of the Board of Directors,
- ------------------------------ President and Chief Executive Officer
Kirk P. Pond (principal executive officer)
JOSEPH R. MARTIN Executive Vice President,
- ------------------------------ Chief Financial Officer and Director
Joseph R. Martin (principal financial and accounting
officer)
BRIAN L. HALLA Director
- ------------------------------
Brian L. Halla
WILLIAM N. STOUT Director
- ------------------------------
William N. Stout
RICHARD M. CASHIN, JR. Director
- ------------------------------
Richard M. Cashin, Jr.
PAUL C. SCHORR IV Director
- ------------------------------
Paul C. Schorr IV
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
South Portland, State of Maine, on the 12th day of May 1997.
FSC SEMICONDUCTOR CORPORATION
By: KIRK P. POND
------------------------------------------
Chairman of the Board of Directors,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Joseph R. Martin, Daniel
E. Boxer and Paul C. Schorr IV, any of whom may act without the joinder of
either of the others, as his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities at the above-named Registrant on May 12, 1997.
SIGNATURE TITLE
- ------------------------------ ------------------------------------------
KIRK P. POND Chairman of the Board of Directors,
- ------------------------------ President and Chief Executive Officer
Kirk P. Pond (principal executive officer)
JOSEPH R. MARTIN Executive Vice President,
- ------------------------------ Chief Financial Officer and Director
Joseph R. Martin (principal financial and accounting
officer)
BRIAN L. HALLA Director
- ------------------------------
Brian L. Halla
WILLIAM N. STOUT Director
- ------------------------------
William N. Stout
RICHARD M. CASHIN, JR. Director
- ------------------------------
Richard M. Cashin, Jr.
PAUL C. SCHORR IV Director
- ------------------------------
Paul C. Schorr IV
II-7
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Exhibit 2.01
AGREEMENT AND PLAN OF RECAPITALIZATION
between
STERLING HOLDING COMPANY, LLC
and
NATIONAL SEMICONDUCTOR CORPORATION
Dated January 24, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II RECAPITALIZATION 5
2.1. Formation of Fairchild Companies.............................. 5
2.2. Transactions at Closing....................................... 5
2.3. The Closing................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NSC 7
3.1. Organization.................................................. 7
3.2. Corporate Power and Authority; Effect of Agreement............ 7
3.3. Consents...................................................... 8
3.4. Litigation.................................................... 8
3.5. Brokers....................................................... 8
3.6. Purchase for Investment....................................... 8
3.7. Asset Purchase Agreement Representations...................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTOR 9
4.1. Organization.................................................. 9
4.2. Power and Authority; Effect of Agreement...................... 9
4.3. Consents...................................................... 9
4.4. Litigation.................................................... 10
4.5. Brokers....................................................... 10
4.6. Purchase for Investment....................................... 10
4.7. Financing..................................................... 10
4.8. Ownership of Investor......................................... 10
4.9. Inspections................................................... 10
4.10. Asset Agreement............................................... 11
ARTICLE V COVENANTS OF NSC 11
5.1. Fulfillment of Agreements..................................... 11
5.2. Access, Information and Documents............................. 11
5.3. Consents...................................................... 12
5.4. Conduct of Business........................................... 12
5.5. Capitalization; Liabilities................................... 13
5.6. Competing Financings.......................................... 14
ARTICLE VI COVENANTS OF INVESTOR 14
6.1. Fulfillment of Agreements..................................... 14
6.2. Consents...................................................... 14
6.3. Financing..................................................... 14
ARTICLE VII CONDITIONS TO INVESTOR'S OBLIGATIONS 14
(i)
<PAGE>
7.1. Bringdown of Representations and Warranties................... 15
7.2. Performance and Compliance.................................... 15
7.3. Opinion of Counsel............................................ 15
7.4. Satisfactory Instruments...................................... 15
7.5. Required Consents............................................. 15
7.6. Litigation.................................................... 16
7.7. Ancillary Agreements.......................................... 16
7.8. Absence of Changes............................................ 16
7.9. Timely Satisfaction of Conditions............................. 16
ARTICLE VIII CONDITIONS TO NSC'S OBLIGATIONS 17
8.1. Bringdown of Representations and Warranties................... 17
8.2. Performance and Compliance.................................... 17
8.3. Opinion of Counsel............................................ 17
8.4. Satisfactory Instruments...................................... 17
8.5. Required Consents............................................. 17
8.6. Litigation.................................................... 18
8.7. Ancillary Agreements.......................................... 18
ARTICLE IX CERTAIN ADDITIONAL COVENANTS 18
9.1. Termination................................................... 18
9.2. Costs, Expenses and Taxes..................................... 19
9.3. Hart-Scott-Rodino Antitrust Improvements Act of 1976.......... 19
9.4. No Setoff..................................................... 19
ARTICLE X INDEMNIFICATION 19
10.1. Indemnification By NSC........................................ 19
10.2. Indemnification by Investor................................... 20
10.3. General Indemnification Procedures............................ 20
ARTICLE XI MISCELLANEOUS 22
11.1. Nature and Survival of Representations........................ 22
11.2. Notices....................................................... 22
11.3. Entire Agreement.............................................. 23
11.4. Assignment; Binding Effect; Severability...................... 23
11.5. Governing Law................................................. 24
11.6. Execution in Counterparts..................................... 24
11.7. Public Announcement........................................... 24
11.8. No Third Party Beneficiaries.................................. 24
11.9. Headings...................................................... 24
11.10. Further Assurances............................................ 24
11.11. Amendment and Waiver.......................................... 25
(ii)
<PAGE>
EXHIBITS
1-A NSC Note
1-B Purchase Price Note
2.1-A Fairchild Charter
2.1-B Fairchild Parent Charter
2.2-A Asset Agreement
2.2-C-1 Technology Licensing and Transfer Agreement
2.2-C-2 Transition Services Agreement
2.2-C-3 Fairchild Foundry Services Agreement
2.2-C-4 Revenue Side Letter
2.2-C-5 Fairchild Assembly Services Agreement
2.2-C-6 National Foundry Services Agreement
2.2-C-7 National Assembly Services Agreement
2.2-C-8 Mil/Aero Wafer Services Agreement
2.2-C-9 Shared Facilities Agreement (for South Portland Site)
2.2-C-10 Shared Services Agreement (for South Portland Site)
2.2-C-11 Shared Services and Occupancy Agreement (for Santa Clara Site)
2.2-D Shareholders Agreement
4.7A Commitment from Credit Suisse First Boston, Bankers Trust New York
Corporation and CIBC Wood Gundy Securities Corp.
4.7B Commitment from Bankers Trust Company, Credit Suisse First Boston and
Canadian Imperial Bank of Commerce
4.7C Commitment from Citicorp Venture Capital Ltd.
7.3 Opinion of Counsel for NSC
8.3 Opinion of Counsel for Investor
DISCLOSURE SCHEDULES
A Closing Actions Outline
1 Purchase Price Adjustments
3.3 NSC's Consents
3.4 Litigation
7.5 Required Consents
(iii)
<PAGE>
AGREEMENT AND PLAN OF RECAPITALIZATION
This Agreement and Plan of Recapitalization (the "Agreement") is made this
24th day of January, 1997, between STERLING HOLDING COMPANY, LLC, a Delaware
limited liability company ("Investor"), and NATIONAL SEMICONDUCTOR CORPORATION,
a Delaware corporation ("NSC").
Background
A. NSC is engaged as one of its businesses in the business of
manufacturing and distributing the Business Products (as hereinafter defined)
through its Fairchild Division.
B. The Board of Directors of NSC deems it advisable and in the best
interest of NSC, the Business (as hereinafter defined) and the stockholders of
NSC, to adopt a plan of recapitalization of the Business pursuant to which
(i) NSC will transfer the Purchased Assets and Assumed Liabilities of the
Business to Fairchild Semiconductor Corporation, a Delaware corporation to be
formed by NSC for such purpose ("Fairchild"), and Fairchild will accept the
Purchased Assets and assume the Assumed Liabilities, (ii) NSC will transfer all
of the outstanding common stock of Fairchild to FSC Semiconductor Corporation, a
Delaware corporation to be formed by NSC for such purpose ("Fairchild Parent"),
and (iii) Investor will purchase certain securities of Fairchild Parent, all on
the terms and conditions set forth herein.
C. In connection with the recapitalization of the Business, NSC will
enter into the Operating Agreements (as hereinafter defined) with Fairchild and
NSC and Fairchild will enter into an agreement regarding certain actions
relating to implementation of the transactions contemplated hereby in accordance
with the outline attached as Schedule A.
D. It is intended that the transactions contemplated hereby be recorded
as a recapitalization for financial reporting purposes.
Terms
In consideration of the mutual representations, warranties, covenants and
agreements, and upon the terms and subject to the conditions hereinafter set
forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
"Affiliate" of a Person means any Person controlling, controlled by,
or under common control with, such Person. For purposes of this definition,
"control" means the power
<PAGE>
to direct the management and policies of a Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Agreement" shall have the meaning set forth in the Introduction.
"Asset Agreement" shall have the meaning set forth in Section 2.2(a).
"Assumed Liabilities" shall have the meaning set forth in the Asset
Agreement.
"Best Efforts" is defined to require that the obligated party make a
diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require any significant
expenditure of funds or the incurrence of any significant liability on the part
of the obligated party, nor the incurrence of any expense or liability which is
unreasonable in light of the related objective, nor does it require that the
obligated party act in a manner which would otherwise be contrary to prudent
business judgment or normal commercial practices in order to accomplish the
objective. The fact that the objective is not actually accomplished is no
indication that the obligated party did not in fact utilize its Best Efforts in
attempting to accomplish the objective.
"Business" means NSC's Logic, Memory and Discrete Power and Signal
Technologies Business Units as historically conducted and accounted for
(including Flash Memory, but excluding Public Networks, Programmable Products
and Mil Logic Products).
"Business Day" means a day which is not a Saturday, a Sunday or a
statutory or civic holiday in the State of New York or any other day on which
the principal offices of either Investor or NSC are closed or become closed
prior to 2:00 p.m. local time whether in accordance with established company
policy or as a result of unanticipated events including adverse weather
conditions.
"Business Products" shall have the meaning set forth in the Asset
Agreement.
"Cash Payment" means a cash amount equal to the principal amount of
the Purchase Price Note including interest accrued and unpaid thereon, if any.
"Claim Notice" shall have the meaning set forth in Section 10.3.
"Claim Response" shall have the meaning set forth in Section 10.3.
"Closing" shall have the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.3.
"Commitment Letters" shall have the meaning set forth in Section 4.7.
2
<PAGE>
"Confidentiality Agreement" means the letter from NSC to CVC regarding
confidentiality dated August 23, 1996 and the letter from BA Partners to CVC
regarding confidentiality dated September 4, 1996.
"CVC" means Citicorp Venture Capital Ltd., a New York corporation.
"Damages" means any and all losses, liabilities, damages, penalties,
obligations, awards, fines, deficiencies, interest, claims (including third
party claims, whether or not meritorious), costs and expenses whatsoever
(including reasonable attorneys', accountants' and environmental consultants'
fees and disbursements) resulting from, arising out of or incident to (i) any
matter for which indemnification is provided under this Agreement, or (ii) the
enforcement by an indemnified party of its rights to indemnification under this
Agreement; provided, however, that Damages shall not include consequential or
incidental damages (other than consequential or incidental damages that are
awarded to third parties under matters covered by the foregoing clauses (i) or
(ii)).
"Defense Notice" shall have the meaning set forth in Section 10.3.
"Department" shall have the meaning set forth in Section 9.3.
"Excluded Liabilities" shall have the meaning set forth in the Asset
Agreement.
"Fairchild" shall have the meaning set forth in the Background.
"Fairchild Charter" shall have the meaning set forth in Section
2.1(a).
"Fairchild Companies" shall mean Fairchild and Fairchild Parent.
"Fairchild Common Stock" means the Common Stock, par value $.01 per
share, of Fairchild.
"Fairchild Parent" shall have the meaning set forth in the Background.
"Fairchild Parent Charter" shall have the meaning set forth in Section
2.1(b).
"Financing" means the financing required to effect the transactions
contemplated by this Agreement (including, without limitation, the repayment of
the Purchase Price Note) and to pay related fees and expenses on terms and
conditions reasonably satisfactory to Investor.
"First Boston Commitment Letter" shall have the meaning set forth in
Section 5.6.
"FSC Class A Common Stock" means the Class A Common Stock, par value
$.01 per share, of Fairchild Parent.
3
<PAGE>
"FSC Class B Common Stock" means the Class B Common Stock, par value
$.01 per share, of Fairchild Parent.
"FSC Preferred Stock" means the 12% Series A Cumulative Compounding
Preferred Stock, par value $.01 per share, of Fairchild Parent.
"FSC Securities" means the FSC Class A Common Stock, FSC Class B
Common Stock and FSC Preferred Stock.
"FTC" shall have the meaning set forth in Section 9.3.
"HSR Act" shall have the meaning set forth in Section 5.3.
"Indemnitee" shall have the meaning set forth in Section 10.3.
"Indemnitor" shall have the meaning set forth in Section 10.3.
"Investor" shall have the meaning set forth in the Introduction.
"Management Investors" means the members of management of the Business
designated by Investor pursuant to Section 2.2 to acquire a portion of the FSC
Securities to be acquired by Investor pursuant to this Agreement.
"Market Disruption Event" shall have the meaning set forth in Section
7.8.
"Material Adverse Effect" shall have the meaning set forth in the
Asset Agreement.
"NSC" shall have the meaning set forth in the Introduction.
"NSC Note" means a promissory note in the principal amount of $77
million issued by Fairchild Parent to NSC, the principal terms of which are set
forth on Exhibit 1-A.
"Operating Agreements" means the Technology Licensing and Transfer
Agreement, Transition Services Agreement, Fairchild Foundry Services Agreement,
Revenue Side Letter, Fairchild Assembly Services Agreement, National Foundry
Services Agreement, National Assembly Services Agreement, Mil/Aero Wafer
Services Agreement, Shared Facilities Agreement (for South Portland Site),
Shared Services Agreement (for South Portland Site), and Shared Services and
Occupancy Agreement substantially in the forms of Exhibits 2.2-C-1, 2.2-C-2,
2.2-C-3, 2.2-C-4, 2.2-C-5, 2.2-C-6, 2.2-C-7, 2.2-C-8, 2.2-C-9, 2.2-C-10 and
2.2-C-11 respectively.
"Person" means and includes any individual, corporation, partnership,
firm, association, joint venture, joint stock company, trust or other entity, or
any government or
4
<PAGE>
regulatory administrative or political subdivision or agency, department or
instrumentality thereof.
"Purchase Price Note" means a demand promissory note in the principal
amount of $472.8 million (subject to the adjustments set forth on Schedule 1)
from Fairchild to NSC in the form of Exhibit 1-B.
"Purchased Assets" shall have the meaning set forth in the Asset
Agreement.
"Response Period" shall have the meaning set forth in Section 10.3.
"Shareholders Agreement" shall have the meaning set forth in Section
2.2(d).
"Transaction Agreements" means this Agreement, the Operating
Agreements and the Asset Agreement.
"Voluntary Participation" shall have the meaning set forth in Section
10.3.
ARTICLE II
RECAPITALIZATION
2.1. Formation of Fairchild Companies. Prior to the Closing, NSC shall
have taken the following actions:
(a) caused the certificate of incorporation of Fairchild to be filed
substantially in the form attached hereto as Exhibit 2.1-A (the "Fairchild
Charter") with the Secretary of State of the State of Delaware as required by
the Delaware General Corporation Law under the name "Fairchild Semiconductor
Corporation"; and
(b) caused the certificate of incorporation of Fairchild Parent to be
filed substantially in the form attached hereto as Exhibit 2.1-B (the "Fairchild
Parent Charter") with the Secretary of State of the State of Delaware as
required by the Delaware General Corporation Law under the name "FSC
Semiconductor Corporation".
2.2. Transactions at Closing. The following transactions, which together
shall constitute the recapitalization, shall be consummated at the Closing on
the Closing Date in the following order and each transaction shall be
conditioned upon the occurrence of the other transactions:
(a) NSC and Fairchild shall enter into an Asset Purchase Agreement
substantially in the form attached hereto as Exhibit 2.2-A (the "Asset
Agreement"), and NSC shall transfer the Purchased Assets (other than the
Non-Assignable Assets) and the Assumed
5
<PAGE>
Liabilities to Fairchild, and Fairchild shall accept the Purchased Assets (other
than the Non-Assignable Assets) and assume the Assumed Liabilities, pursuant to
such Asset Purchase Agreement in exchange for the Purchase Price Note and 100
shares of Fairchild Common Stock;
(b) NSC shall transfer all of the outstanding shares of Fairchild
Common Stock and cash in the amount of $12,837,000 to Fairchild Parent for
1,095,000 shares of FSC Class A Common Stock, 1,245,000 shares of FSC Class B
Common Stock and 11,667 shares of FSC Preferred Stock and the NSC Note;
(c) NSC shall enter into the Operating Agreements with Fairchild
substantially in the forms attached hereto as Exhibits 2.2-C-1 through -11,
(d) NSC, Investor, Management Investors and Fairchild Parent shall
enter into a Securities Purchase and Holders Agreement (the "Shareholders
Agreement") in the form attached hereto as Exhibit 2.2-D;
(e) NSC shall cause Fairchild Parent to sell, and Investor shall
purchase, 6,205,000 shares of FSC Class A Common Stock at a purchase price of
$0.50 per share, 7,055,000 shares of FSC Class B Common Stock at a purchase
price of $0.50 per share, and 58,333 shares of FSC Preferred Stock at a purchase
price of $1,000 per share, less the FSC Securities actually purchased by
Management Investors pursuant to Section 2.2(f);
(f) NSC shall cause Fairchild Parent to sell to Management Investors
such of the FSC Securities as would otherwise be purchased by Investor pursuant
to Section 2.2(e) in such amounts and to such Management Investors as shall have
been designated by Investor to Fairchild Parent in writing prior to Closing at
the purchase prices set forth in Section 2.2(e);
(g) Fairchild Parent shall contribute the cash proceeds from the sale
of FSC Securities to the capital of Fairchild;
(h) Fairchild shall obtain the proceeds of the Financing; and
(i) Fairchild shall repay the Purchase Price Note in cash.
The parties acknowledge that it is their intention that the foregoing
transactions all occur at the Closing on the Closing Date.
2.3. The Closing. (a) The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Dechert Price & Rhoads, 30
Rockefeller Plaza, New York, New York commencing at 9:00 a.m., local time, on a
date mutually agreed upon by the parties as soon as reasonably practicable
following satisfaction of the conditions set forth in Articles VII and VIII
hereof, or at such other time and place as the parties may mutually agree (the
"Closing Date"). The effective time of the transactions contemplated hereby
shall be deemed to be the opening of business on the Closing Date.
6
<PAGE>
(b) At the Closing,
(i) Fairchild and NSC shall make the closing deliveries required
by the Asset Agreement;
(ii) Fairchild Parent shall deliver to NSC against payment
therefor certificates representing the FSC Class A Common Stock, FSC Class B
Common Stock, FSC Preferred Stock and NSC Note being purchased by NSC pursuant
to Section 2.2(b), and NSC shall deliver to Fairchild Parent certificates
representing all of the outstanding shares of Fairchild Common Stock accompanied
by duly executed stock transfer powers;
(iii) Fairchild shall deliver to NSC the Cash Payment by wire
transfer of immediately available funds to an account designated by NSC to
Investor in writing at least three business days prior to Closing; and
(iv) Fairchild Parent shall deliver to Investor and the
Management Investors against payment therefor, certificates representing the FSC
Class A Common Stock, FSC Class B Common Stock and FSC Preferred Stock being
purchased by Investor and the Management Investors pursuant to Sections 2.2(e)
and 2.2(f), respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NSC
NSC represents and warrants to Investor as follows:
3.1. Organization. NSC is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, and has all
requisite corporate power and corporate authority to execute, deliver, and
perform the Transaction Agreements and to consummate the transactions
contemplated hereby and thereby.
3.2. Corporate Power and Authority; Effect of Agreement. The execution,
delivery and performance by NSC of the Transaction Agreements and the
consummation by NSC of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of NSC. The
Transaction Agreements have been duly and validly executed and delivered by NSC
and constitute the valid and binding obligations of NSC, enforceable against NSC
in accordance with their respective terms. The execution, delivery, and
performance by NSC of the Transaction Agreements and the consummation by NSC of
the transactions contemplated hereby and thereby will not, with or without the
giving of notice or the lapse of time, or both, (i) violate any provision of
law, rule, or regulation to which NSC is subject, (ii) violate any order,
judgment, or decree applicable to NSC or (iii) violate any provision of the
charter or the by-laws of NSC; except, in the case of (i) or (ii), for
violations that in the aggregate would not (x) materially hinder or impair the
consummation of the transactions contemplated hereby or thereby or
(y) materially interfere with the ability of
7
<PAGE>
Fairchild to conduct the Business after the Closing in substantially the same
manner in which the Business was conducted prior to the Closing.
3.3. Consents. Except as set forth in Schedule 3.3, no consent, approval,
or authorization of, or exemption by, or filing with, any governmental authority
is required to be obtained or made by NSC in connection with the execution,
delivery and performance by NSC of the Transaction Agreements or the taking by
NSC of any other action contemplated hereby or thereby, except for any of the
foregoing that in the aggregate would not (i) materially hinder or impair the
consummation of the transactions contemplated hereby or thereby or
(ii) materially interfere with the ability of Fairchild to conduct the Business
after the Closing in substantially the same manner in which the Business was
conducted prior to the Closing.
3.4. Litigation. Except as set forth on Schedule 3.4, there are no
actions, suits, investigations, or proceedings pending or, to the knowledge of
NSC, threatened (i) against NSC or any of its Affiliates which if adversely
determined would (x) materially hinder or impair the ability of NSC to perform
its obligations under the Transaction Agreements or (y) have a Material Adverse
Effect, or (ii) that seek to enjoin or obtain damages (which damages would
reasonably be expected to have a material adverse change in or effect upon the
business, financial condition or results of operations of the Business taken as
a whole) in respect of the consummation of the transactions contemplated hereby
or thereby. Neither NSC nor any of its Affiliates is subject to any outstanding
orders, rulings, judgments, or decrees that would (i) materially hinder or
impair the ability of NSC to perform its obligations under the Transaction
Agreements or (ii) have a Material Adverse Effect.
3.5. Brokers. NSC has not made any agreement or taken any other action
which might cause anyone to become entitled to a broker's or investment banker's
fee or commission, which is payable by Investor, Fairchild Parent or Fairchild,
or which could create a lien on any of the Purchased Assets, as a result of the
transactions contemplated hereunder.
3.6. Purchase for Investment. NSC is purchasing the FSC Securities and the
NSC Note pursuant to this Agreement for investment and not with a view to any
public resale or other distribution thereof, except in compliance with
applicable securities laws.
3.7. Asset Purchase Agreement Representations. The representations and
warranties set forth in the Asset Agreement (as modified by the schedules
thereto) in the form attached hereto are true and correct as of the date hereof
with the same force and effect as though such representations and warranties
have been made on, as of and with reference to the date hereof, except those
representations and warranties that address matters only as of a particular date
which shall be true and correct as of that date.
8
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to NSC as follows:
4.1. Organization. Investor is a limited liability company duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization, and has all requisite limited liability company power and limited
liability company authority to carry on its business as it is now being
conducted, to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby.
4.2. Power and Authority; Effect of Agreement. The execution, delivery and
performance by Investor of this Agreement and the consummation by Investor of
the transactions contemplated hereby have been duly authorized by all necessary
limited liability company action on the part of Investor. This Agreement has
been duly and validly executed and delivered by Investor and constitutes the
valid and binding obligation of Investor, enforceable against Investor in
accordance with its terms. The execution, delivery, and performance by Investor
of this Agreement and the consummation by Investor of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, (i) violate any provision of law, rule, or regulation to which
Investor or any of its Affiliates is subject, (ii) violate any order, judgment,
or decree applicable to Investor or any of its Affiliates or (iii) violate any
provision of the organization documents of Investor or any of its Affiliates;
except, in the case of (i) and (ii), for violations that in the aggregate would
not (x) materially hinder or impair the consummation of the transactions
contemplated hereby or (y) materially interfere with the ability of Fairchild to
conduct the Business after the Closing in substantially the same manner in which
the Business was conducted prior to the Closing.
4.3. Consents. Except as set forth in Schedule 4.3, no consent, approval,
or authorization of, or exemption by, or filing with, any governmental authority
is required to be obtained or made by Investor in connection with the execution,
delivery and performance by Investor of this Agreement or the taking by Investor
of any other action contemplated hereby, except for any of the foregoing that in
the aggregate would not (i) materially hinder or impair the consummation of the
transactions contemplated hereby or thereby or (ii) materially interfere with
the ability of Fairchild to conduct the Business after the Closing in
substantially the same manner in which the Business was conducted prior to the
Closing. No statute, rule or regulation, or order of any court or
administrative agency prohibits Investor from consummating the transactions
contemplated hereby.
4.4. Litigation. There are no actions, suits, investigations, or
proceedings pending or, to the knowledge of Investor, threatened (i) against
Investor or any of its Affiliates which if adversely determined would (x)
materially hinder or impair the ability of Investor to perform its obligations
under this Agreement or (y) materially decrease the value of the Purchased
Assets as a whole, or (ii) that seek to enjoin or obtain damages (which damages
could reasonably be
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expected to have a material adverse change in or effect upon the business,
financial condition or results of operations of Investor taken as a whole) in
respect of the consummation of the transactions contemplated hereby. Neither
Investor nor any of its Affiliates is subject to any outstanding orders,
rulings, judgments, or decrees that would have a material adverse effect on the
ability of Investor to perform its obligations under this Agreement.
4.5. Brokers. Investor has not made any agreement or taken any other
action which might cause anyone to become entitled to a broker's or investment
banker's fee or commission as a result of the transactions contemplated
hereunder.
4.6. Purchase for Investment. Investor is purchasing the FSC Securities
being purchased by it pursuant to Section 2.2(e) for investment and not with a
view to any public resale or other distribution thereof, except in compliance
with applicable securities laws.
4.7. Financing. Investor or CVC has received and delivered to NSC (a) a
commitment from Credit Suisse First Boston, Bankers Trust New York Corporation
and CIBC Wood Gundy Securities Corp. attached as Exhibit 4.7A, (b) a commitment
from Bankers Trust Company, Credit Suisse First Boston and Canadian Imperial
Bank of Commerce attached as Exhibit 4.7B and (c) a commitment from CVC attached
as Exhibit 4.7C (collectively, the "Commitment Letters"). The Commitment
Letters are sufficient to provide the Financing, have been duly accepted by
Investor and are in full force and effect. All fees required to be paid by
Investor or CVC on or prior to the date hereof in respect of the Commitment
Letters have been paid by Investor or CVC.
4.8. Ownership of Investor. CVC, employees, officers and directors of CVC
and corporations, partnerships and other entities at least a majority of the
equity in which is held in the aggregate by CVC and its employees, officers, and
directors hold in the aggregate no less than a majority of the economic
interests in Investor.
4.9. Inspections. Investor is an informed and sophisticated participant in
the transactions contemplated by this Agreement and has undertaken such
investigation, and has been provided with and has evaluated certain documents
and information in connection with the execution, delivery and performance of
this Agreement. Investor acknowledges that it is engaging in the transactions
contemplated hereby without any representation or warranty, express or implied,
by NSC or any of its Affiliates, except as expressly set forth in the
Transaction Agreements. In furtherance of the foregoing, and not in limitation
thereof, Investor acknowledges that, except as expressly set forth in the
Transaction Agreements, no representation or warranty, express or implied, of
NSC or any of its advisors, including, without limitation, Deutsche Morgan
Grenfell, BA Partners, NSC's lawyers (other than the opinions of such lawyers
delivered in connection with this Agreement), KPMG Peat Marwick (except in
connection with financial statements prepared by such accountants accompanied by
an opinion of such accountants thereon) or any of their respective Affiliates or
representatives, with respect to the Business (including, without limitation,
the Evaluation Materials (as defined in the Asset Agreement), the Confidential
Offering Memoranda (as provided to Investor pursuant to the
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Confidentiality Agreement), any other information provided to Investor pursuant
to the Confidentiality Agreement and any financial projection or forecast
delivered to Investor with respect to the revenues or profitability which may
arise from the Business either before or after the Closing Date) shall form the
basis of any claim against NSC or any of its advisors, or any of their
respective Affiliates or representatives. With respect to any financial
projections or forecasts delivered on behalf of NSC to Investor, Investor
acknowledges that there are uncertainties inherent in attempting to make such
projections and forecasts and that it is familiar with such uncertainties.
4.10. Asset Agreement. Investor acknowledges that Fairchild will have
ongoing obligations under the Asset Agreement and the Operating Agreements.
ARTICLE V
COVENANTS OF NSC
NSC hereby covenants and agrees with Investor as follows:
5.1. Fulfillment of Agreements. NSC shall use its Best Efforts to cause
all of the conditions to the obligations of Investor under Article VII of this
Agreement to be satisfied on or prior to Closing. NSC shall promptly notify
Investor of any event or fact coming to NSC's attention prior to Closing which
causes any of its representations, warranties, covenants or agreements contained
in any Transaction Agreement that are qualified by materiality limitations with
respect to the Business as a whole to be inaccurate and those that are not
qualified by materiality limitations with respect to the business as a whole to
be inaccurate in any material respect with respect to the Business as a whole.
From and after the date hereof and pending the Closing, NSC shall promptly
notify Investor of the occurrence of any condition or development (exclusive of
general economic or industry factors affecting business in general) coming to
NSC's attention of a nature that is materially adverse to the business,
financial condition or results of operations of the Business. NSC shall, and
shall cause Fairchild Parent and Fairchild to, cooperate with Investor (at
Investor's expense and assuming adequate indemnification (including control
person liability on any securities placements)) with respect to the Financing
and take all actions and do all things reasonably necessary, proper or advisable
to assist Investor in securing the Financing.
5.2. Access, Information and Documents. From and after the date hereof and
pending the Closing, upon reasonable notice, NSC will give to Investor and to
Investor's counsel, accountants and other representatives and financing sources
full access during normal business hours to all of the properties, books, tax
returns, contracts, commitments, records, officers, personnel and accountants
relating to the Business and will furnish to Investor all such documents and
copies of documents (certified to be true copies if requested) and all
information with respect to the affairs of the Business as Investor may
reasonably request; provided, that no such access shall unreasonably interfere
with NSC's operation of its business, including, without
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limitation, the Business; and provided further, that all information received by
Investor or any of Investor's counsel, accountants and other representatives and
financing sources from NSC and NSC's counsel, accountants and other
representatives shall be subject to the provisions of the Confidentiality
Agreement.
5.3. Consents. NSC will use its Best Efforts, and will cooperate with
Investor, to secure all consents, approvals, authorizations, exemptions and
waivers from third parties (including any required pursuant to the
Hart-Scott-Rodino Antitrust Improvements act of 1976, as amended (the "HSR
Act")), set forth on Schedule 3.3 or otherwise required in order to enable NSC
to effect the transactions contemplated hereby.
5.4. Conduct of Business. From and after the date hereof and pending
Closing, and unless Investor shall otherwise consent or agree in writing, NSC
covenants and agrees that:
(a) Ordinary Course. The Business will be conducted only in the
ordinary course and consistent with past practice, including billing, shipping
and collection practices, inventory transactions and payment of accounts
payable.
(b) Preservation of Business. NSC will use its Best Efforts to
preserve the business organization of the Business intact in all material
respects, to keep available in all material respects to the Business the
services of the present officers and employees of the Business, and to preserve
in all material respects for the Business the good will of the material
suppliers, material customers and others having material business relations with
the Business.
(c) Material Transactions. NSC will not, and will cause its
Affiliates not to:
(i) enter into any contract or commitment relating to the
Business the performance of which may extend beyond the Closing, except those
made in the ordinary course of business the terms of which are consistent with
past practice or those the obligations of NSC under which do not exceed
$100,000;
(ii) enter into any employment or consulting contract or
arrangement with any Person relating to the Business which is not terminable at
will, without penalty or continuing obligation, subject to the requirements and
restrictions of applicable labor and employment laws and regulations, other than
consulting and employment agreements entered into in the ordinary course of
business consistent with past practice;
(iii) sell, transfer, lease or otherwise dispose of any
assets which would constitute Purchased Assets if the Closing were to occur on
the date of such disposition, other than in the ordinary course of business and
consistent with past practice;
(iv) incur, create, assume or suffer to exist any mortgage,
pledge, lien, restriction, encumbrance, tenancy, encroachment, covenant,
condition, right-of-way, easement, claim, security interest, charge or other
matter affecting title on any Purchased Assets, except
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for (A) the incurrence, creation, assumption or sufferance to exist of any of
the foregoing that does not result in any obligations of NSC or its Affiliates
in excess of $100,000, (B) the incurrence, creation, assumption or sufferance to
exist of any mechanics' liens and purchase money interests that may arise on the
acquisition of supplies, materials or equipment or (C) Assumed Liabilities
(provided that to the extent any Assumed Liability is incurred, created or
assumed after the date hereof, such Assumed Liability was incurred, created or
assumed in the ordinary course of business consistent with past practice);
(v) increase or otherwise change the compensation payable or to
become payable to any officer, employee or agent of the Business, except in the
ordinary course of business consistent with past practice;
(vi) waive any substantial right of the Business, other than for
consideration in the ordinary course of business consistent with past practice;
(vii) take any action or omit to take any action which will
result in a violation of any applicable law or cause a breach of any agreements,
contracts or commitments by the Business, in each case, which, individually or
in the aggregate, is material to the Business as a whole; or
(viii) enter into any agreement to do any of the foregoing.
5.5 Capitalization; Liabilities. Immediately prior to the Closing (except
as set forth in Section 2.2): (i) the authorized capital stock of Fairchild
Parent shall consist solely of (a) 70,000 shares of FSC Preferred Stock, (b)
30,000,000 shares of FSC Class A Stock and (c) 30,000,000 shares, of FSC Class B
Stock; (ii) the FSC Securities issued pursuant to Article II of this Agreement
shall be the only issued and outstanding shares of capital stock of Fairchild
Parent issued or outstanding immediately prior to the Closing; (iii) the
authorized capital stock of Fairchild shall consist solely of 1,000 shares of
Fairchild Common Stock; (iv) all of the issued and outstanding shares of capital
stock of Fairchild shall be held beneficially and of record by Fairchild Parent,
free and clear of any lien, security interest, restriction, encumbrance or
claim; (v) there shall be no outstanding options, warrants, rights, agreements,
calls, commitments or demands of any character relating to the capital stock of
Fairchild Parent or Fairchild or securities convertible into or exchangeable for
any of such capital stock; (vi) Fairchild Parent shall not have any liabilities
or obligations other than pursuant to the NSC Note and Delaware franchise taxes
incident to its organization; and (vii) Fairchild shall not have any liabilities
or obligations other than the Assumed Liabilities, pursuant to the Asset
Agreement and the Operating Agreements and Delaware franchise taxes incident to
its organization.
5.6. Competing Financings. From the date hereof through the Closing Date,
NSC shall not engage in any competing issues of debt securities or commercial
bank facilities as described in and during the period set forth in the Senior
Subordinated Notes/Commitment Letter included in the Commitment Letters (the
"First Boston Commitment Letter").
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ARTICLE VI
COVENANTS OF INVESTOR
6.1. Fulfillment of Agreements. Investor shall use its Best Efforts to
cause all of the conditions to the obligations of NSC under Article VIII of this
Agreement to be satisfied on or prior to the Closing and shall cooperate with
NSC in obtaining the Title Policies (as defined in the Asset Agreement) and
Surveys (as defined in the Asset Agreement). Investor shall promptly notify NSC
in writing of any event or fact which represents or is likely to cause a breach
of any of its representations, warranties, covenants or agreements contained
herein.
6.2. Consents. Investor will use its Best Efforts, and will cooperate with
NSC, to secure all consents, approvals, authorizations, exemptions, and waivers
from third parties (including any required pursuant to the HSR Act) as set forth
on Schedule 3.3 or otherwise required in order to enable Investor to effect the
transactions contemplated hereby.
6.3. Financing. In the event that a condition set forth in Section 7.1
through 7.9 or Article VIII has not been satisfied or waived prior to the date
on which CVC's right to deliver a purchase request under the First Boston
Commitment Letter is terminated and as a result the Fairchild Companies shall
not have obtained the proceeds of the Financing, Investor shall use its
reasonable efforts to obtain the Financing.
ARTICLE VII
CONDITIONS TO INVESTOR'S OBLIGATIONS
The obligation of Investor to consummate the transactions contemplated
hereby at the Closing shall be subject to the satisfaction (or waiver) at or
prior to the Closing of all of the following conditions:
7.1. Bringdown of Representations and Warranties. The representations and
warranties of NSC contained in the Transaction Agreements that are qualified by
materiality limitations with respect to the Business as a whole shall be true
and correct and those that are not qualified by materiality limitations with
respect to the Business as a whole shall be true and correct in all material
respects with respect to the Business as a whole, in each case as of the time of
Closing with the same force and effect as though such representations and
warranties had been made on, as of and with reference to such time, except those
representations and warranties that address matters only as of a particular date
which, if qualified by materiality limitations with respect to the Business as a
whole, shall be true and correct and, if not qualified by materiality
limitations with respect to the Business as a whole, shall be true and correct
in all material respects with respect to the Business as a whole, as of that
date and Investor shall have received a certificate to such effect signed by an
executive officer of NSC.
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7.2. Performance and Compliance. NSC shall have performed in all material
respects all of the covenants and complied in all material respects with all of
the provisions required by the Transaction Agreements to be performed or
complied with by it on or before the Closing and Investor shall have received a
certificate to such effect, signed by an executive officer of NSC.
7.3. Opinion of Counsel. Investor shall have received from Wachtell,
Lipton, Rosen & Katz, counsel for NSC, and John M. Clark, III, General Counsel
of NSC, opinions dated the date of the Closing collectively substantially to the
effect set forth in Exhibit 7.3. In rendering such opinions, such counsel may
rely on matters involving the application of laws other than the laws of the
State of New York, the General Corporation Law of the State of Delaware or laws
of the United States upon the opinion of other counsel of good standing who are
satisfactory to the counsel relying thereon, provided that NSC shall furnish a
copy of any such opinions to Investor and the counsel relying thereon shall
state that such other opinion is satisfactory in scope and form.
7.4. Satisfactory Instruments. All instruments and documents reasonably
required on NSC's part to effectuate and consummate the transactions
contemplated hereby shall be delivered to Investor and shall be in form and
substance reasonably satisfactory to Investor and its counsel in all material
respects.
7.5. Required Consents. All consents and approvals of third parties to the
transactions contemplated hereby (including the consents and approvals which are
(a) set forth on Schedule 7.5, (b) material to the Business or (c) necessary for
Fairchild to conduct the Business after the Closing in substantially the same
manner in which the Business was conducted prior to the Closing) shall have been
obtained (except for such consents and approvals (other than those set forth on
Schedule 7.5) that if not obtained would not in the aggregate have a material
adverse effect on the Business as a whole), and all waiting periods specified by
law the passing of which are necessary for the consummation of such transactions
(including without limitation the waiting period under the HSR Act, if
applicable) shall have passed or been terminated.
7.6. Litigation. No statute, rule or regulation, or order of any court or
administrative agency, shall be in effect which restrains or prohibits the
transactions contemplated hereby or which would limit or adversely affect
Investor's ability to acquire the FSC Securities to be acquired by it pursuant
to this Agreement, Fairchild Parent's ownership or control of Fairchild or
Fairchild's ownership or control of the Purchased Assets (other than the
Non-Assignable Assets) or the Business and there shall not have been threatened
by any Governmental Authority, nor shall there be pending by any Person, any
action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any of the
transactions contemplated by the Transaction Agreements or seeking monetary
relief (which monetary relief would reasonably be expected to have a material
adverse change in or effect upon the business, financial condition or results of
operations of the Business taken as a whole) by reason of the consummation of
such transactions.
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7.7. Ancillary Agreements. The Asset Agreement and the Operating
Agreements shall have been duly authorized, executed and delivered by the
respective parties thereto and shall be in full force and effect. NSC and
Fairchild Parent shall have executed and delivered the Shareholders Agreement.
7.8. Absence of Changes. There shall not have occurred or been threatened
(i) since May 26, 1996, any material adverse change (or series of changes
constituting a material adverse change) in the operations, properties, financial
condition or reasonable prospects of the Business taken as a whole, or
(ii) since the date of this Agreement, any "Market Disruption Event." As used
herein, "Market Disruption Event" shall mean (a) any suspension or limitation of
trading in securities generally on the New York Stock Exchange (not including
any suspension or limitation of trading in any particular security as a result
of computerized trading limits), or any setting of minimum prices for trading on
such exchange; (b) any banking moratorium declared by U.S. Federal or New York
authorities; (c) any outbreak or escalation of major hostilities in which the
Unites States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency; or (d) any other
material adverse change in bank or capital market conditions that has had a
material adverse effect on the syndication of bank credit facilities or the
consummation of high yield offerings.
7.9. Timely Satisfaction of Conditions. This Section 7.9 shall only apply
if a condition set forth in Sections 7.1 through 7.8 or Article VIII has not
been satisfied or waived prior to the date on which CVC's right to deliver a
purchase request under the First Boston Commitment Letter is terminated and as a
result Investor shall not have obtained the proceeds of the Financing. In such
event, the obligation of Investor to consummate the transactions contemplated by
this Agreement shall be subject to the further condition that the Fairchild
Companies shall have obtained the proceeds of the Financing.
ARTICLE VIII
CONDITIONS TO NSC'S OBLIGATIONS
The obligation of NSC to consummate the transactions contemplated hereby at
the Closing shall be subject to the satisfaction (or waiver) at or prior to the
Closing of all of the following conditions:
8.1. Bringdown of Representations and Warranties. The representations and
warranties of Investor contained in this Agreement that are qualified by
materiality limitations shall be true and correct and those that are not
qualified by materiality limitations shall be true and correct in all material
respects, in each case as of the time of Closing with the same force and effect
as though such representations and warranties had been made on, as of and with
reference to such time, except those representations and warranties that address
matters only as of a particular date which, if qualified by materiality
limitations, shall be true and correct and, if not qualified by
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materiality limitations, shall be true and correct in all material respects, as
of that date, and NSC shall have received a certificate to such effect signed by
an executive officer of Investor.
8.2. Performance and Compliance. Investor shall have performed in all
material respects all of the covenants and complied in all material respects
with all of the provisions required by this Agreement to be performed or
complied with by it on or before the Closing and NSC shall have received a
certificate to such effect, signed by an executive officer of Investor.
8.3. Opinion of Counsel. NSC shall have received from Dechert Price &
Rhoads, counsel for Investor, an opinion dated the date of the Closing
substantially to the effect set forth in Exhibit 8.3.
8.4. Satisfactory Instruments. All instruments and documents reasonably
required on Investor's part to effectuate and consummate the transactions
contemplated hereby shall be delivered to NSC and shall be in form and substance
reasonably satisfactory to NSC and its counsel in all material respects.
8.5. Required Consents. All consents and approvals of third parties to the
transactions contemplated hereby (including the consents and approvals which are
(a) set forth on Schedule 7.5, (b) material to the Business or (c) necessary for
Fairchild to conduct the Business after the Closing in substantially the same
manner in which the Business was conducted prior to Closing) shall have been
obtained (except for such consents (other than those set forth on Schedule 7.5)
that if not obtained would not in the aggregate have a material adverse effect
on the Business as a whole), and all waiting periods specified by law the
passing of which are necessary for the consummation of such transactions
(including without limitation the waiting period under the HSR Act, if
applicable) shall have passed or been terminated.
8.6. Litigation. No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and there shall not have been threatened by
any Governmental Authority, nor shall there be pending by any Person, any action
or proceeding by or before any court or governmental agency or other regulatory
or administrative agency or commission, challenging any of the transactions
contemplated by the Transaction Agreements or seeking monetary relief (which
monetary relief would reasonably be expected to have a material adverse change
in or effect upon the business, financial condition or results of operations of
Investor taken as a whole) by reason of the consummation of such transactions.
8.7. Ancillary Agreements. Investor and Management Investors shall have
executed and delivered the Shareholders Agreement.
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ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1. Termination.
(a) When Agreement May Be Terminated. This Agreement may be
terminated at any time prior to Closing:
(i) by mutual consent of Investor and NSC;
(ii) by Investor if there has been a material breach by NSC of
any of its representations, warranties or covenants under the Transaction
Agreements which breach is not curable, or, if curable, is not cured within
thirty days of written notice thereof;
(iii) by NSC if there has been a material breach by Investor
of any of its representations, warranties or covenants under this Agreement
which breach is not curable, or, if curable, is not cured within thirty days of
written notice thereof; or
(iv) by either party if the Closing shall not have occurred prior
to October 31, 1997.
(b) Effect of Termination. In the event of termination of this
Agreement by either Investor or NSC, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either
Investor or NSC or any of their respective officers or directors, except for
liabilities arising from a breach of this Agreement prior to such termination;
provided, however, that under no circumstances shall such liabilities include
any consequential or incidental damages; provided, further, that the obligations
of the parties set forth in Section 9.2 hereof shall survive such termination.
9.2. Costs, Expenses and Taxes. Each party to this Agreement will bear all
the fees, costs and expenses which are incurred by it in connection with the
transactions contemplated hereby; provided, however, that the filing fees for
the HSR Act and any similar foreign clearances or approvals shall be paid
equally by NSC and Investor; and provided, further, that if the Closing occurs,
all fees and expenses of Investor shall be borne by Fairchild.
9.3. Hart-Scott-Rodino Antitrust Improvements Act of 1976. Promptly after
the date hereof, Investor and NSC will file the required notifications, if any,
with the Federal Trade Commission ("FTC") and the Antitrust Division of the
Department of Justice ("Department") pursuant to and in compliance with the HSR
Act and filings required to obtain any necessary foreign approvals. The parties
hereto shall not intentionally or negligently delay submission of information
requested by FTC and Department under the HSR Act and shall use their respective
Best Efforts promptly to supply, or cause to be supplied, such information and
shall use their Best Efforts to obtain early termination of the applicable
waiting period.
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9.4. No Setoff. A purported failure of performance by a party under a
Transaction Agreement, the Shareholders Agreement or the NSC Note shall not
reduce the rights of, or result in a claim of set-off against, such party under
any other Transaction Agreement, the Shareholders Agreement or the NSC Note.
The rights and obligations of the parties to each of the foregoing agreements
shall be deemed to be, and shall be construed as, independent of the rights and
obligations of each such party to each of the other such agreements.
ARTICLE X
INDEMNIFICATION
10.1. Indemnification By NSC. NSC hereby agrees to indemnify and hold
harmless Investor and the Fairchild Companies from and against any Damages
arising out of or resulting from (i) the breach or inaccuracy of any
representation or warranty made by NSC in this Agreement, other than the
representation of NSC in Section 3.7; or (ii) the breach by NSC of any covenant
contained in this Agreement. Notwithstanding anything to the contrary contained
herein, if as of the Closing, Investor has actual knowledge of the breach by
NSC, or the inaccuracy, of any representation or warranty made by NSC in this
Agreement, and NSC does not have such actual knowledge, then (A) Investor shall
not be entitled to indemnification from NSC with respect to such breach or
inaccuracy and (B) the Closing shall be deemed to be a waiver by Investor of any
claim for Damages with respect to such breach or inaccuracy and no other remedy,
set-off or indemnity shall be applicable.
10.2. Indemnification by Investor. Investor hereby agrees to indemnify
and hold harmless NSC from and against any Damages arising out of or resulting
from (i) the breach or inaccuracy of any representation or warranty made by
Investor in this Agreement; or (ii) the breach by Investor of any covenant
contained in this Agreement. Notwithstanding anything to the contrary contained
herein, if as of the Closing, NSC has actual knowledge of the breach by
Investor, or the inaccuracy, of any representation or warranty made by Investor
in this Agreement, and Investor does not have such actual knowledge, then
(A) NSC shall not be entitled to indemnification from Investor with respect to
such breach or inaccuracy and (B) the Closing shall be deemed to be a waiver by
NSC of any claim for Damages with respect to such breach or inaccuracy and no
other remedy, set-off or indemnity shall be applicable.
10.3. General Indemnification Procedures.
(a) In the event that any party incurs or suffers any Damages with
respect to which indemnification may be sought by such party pursuant to this
Article X, the party seeking indemnification (the "Indemnitee") must assert the
claim by giving written notice (a "Claim Notice") to the party from whom
indemnification is sought (the "Indemnitor"). The Claim Notice must state the
nature, basis and amount (if known) of the claim in reasonable detail based on
the information available to the Indemnitee and, if the Claim Notice is being
given with respect to a third party claim, it must be accompanied by a copy of
any written notice of the
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third party claimant. If the Claim Notice is being given by reason of any third
party claim, it shall be given in a timely manner but in no event more than 30
days after the filing or other written assertion of any such claim against the
Indemnitee, but the failure of the Indemnitee to give the Claim Notice within
such time period shall not relieve the Indemnitor of any liability for
indemnification under this Article X, except to the extent that the Indemnitor
is prejudiced thereby. If the amount of the claim is not known at the time the
Claim Notice is given, the Indemnitee shall also give notice of such amount to
the Indemnitor at such time as the amount of the claim is reasonably
ascertainable. Each Indemnitor to whom a Claim Notice is given shall respond to
any Indemnitee that has given a Claim Notice (a "Claim Response") within 30 days
(the "Response Period") after the date that the Claim Notice is received by
Indemnitor. Any Claim Response shall specify whether or not the Indemnitor
given the Claim Response disputes the claim described in the Claim Notice. If
any Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice, in whole or in part. If any Indemnitor elects not to dispute a
claim described in a Claim Notice, whether by failing to give a timely Claim
Response or otherwise, then such claim shall be conclusively deemed to be an
obligation of such Indemnitor. If any Indemnitor shall be obligated to
indemnify an Indemnitee hereunder, such Indemnitor shall pay to such Indemnitee
within 30 days after the last day of the applicable Response Period (or at such
later time as the amount is ascertainable) the amount to which such Indemnitee
shall be entitled. If there shall be a dispute as to the amount or manner of
indemnification under this Agreement, the Indemnitor and the Indemnitee shall
seek to resolve such dispute through negotiations and, if such dispute is not
resolved within 20 days, the Indemnitee may pursue whatever legal remedies may
be available for the recovery of the Damages claimed from any Indemnitor. If
any Indemnitor fails to pay all or any part of any indemnification obligation on
or before the later to occur of (x) 30 days after the last day of the applicable
Response Period, and (y) if the Claim Notice relates to Damages that have not
been liquidated as of the date of the Claim Notice, the date on which all or any
part of such Damages shall have become liquidated and determined, then the
Indemnitor shall also be obligated to pay to the Indemnitee interest on the
unpaid amount for each day during which the obligation remains unpaid at an
annual rate of ten percent.
(b) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Damages that the Indemnitee believes give rise to the claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee that
would have bearing on such claim.
(c) Except as hereinafter provided, in the case of third party claims
for which indemnification is sought, the Indemnitor shall have the option:
(x) to conduct any proceedings or negotiations in connection therewith, (y) to
take all other steps to settle or defend any such claim (provided that the
Indemnitor shall not settle any such claim without the consent of the Indemnitee
(which consent shall not be unreasonably withheld, it being understood that it
shall not be unreasonable for the Indemnitee to withhold its consent from any
settlement which (1) commits the Indemnitee to take, or to forbear to take, any
action, or (2) does not provide for
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a complete release of the Indemnitee by such third party)), and (z) to employ
counsel to contest any such claim or liability in the name of the Indemnitee or
otherwise. In any event, the Indemnitee shall be entitled to participate at its
own expense and by its own counsel (a "Voluntary Participation") in any
proceedings relating to any third party claim. The Indemnitor shall, within
45 days of receipt of the Claim Notice, notify the Indemnitee of its intention
to assume the defense of the claim (a "Defense Notice"). Until the Indemnitee
has received the Defense Notice, the Indemnitee shall take reasonable steps to
defend (but may not settle) the claim. If the Indemnitor declines to assume the
defense of any such claim or fails to give a Defense Notice within 45 days after
receipt of the Claim Notice, the Indemnitee shall defend against the claim but
shall not settle such claim without the consent of the Indemnitor (which consent
shall not be unreasonably withheld). The expenses of all proceedings, contests
or lawsuits (other than those incurred in a Voluntary Participation) with
respect to claims as to which a party is entitled to indemnification under this
Article X shall represent indemnifiable Damages under this Agreement.
Regardless of which party shall assume the defense of the claim, the parties
shall cooperate fully with one another in connection therewith. Notwithstanding
the foregoing, the Indemnitor shall not be entitled (except with the consent of
the Indemnitee) to take any of the actions referred to in clauses (x), (y) or
(z) of the first sentence of this subparagraph unless: (a) the third party
claim involves principally monetary damages; and (b) the Indemnitor shall have
expressly agreed in writing that, as between the Indemnitor and the Indemnitee,
the Indemnitor shall be solely obligated to satisfy and discharge such third
party claim. Damages payable hereunder shall be appropriately adjusted to
reflect the receipt of insurance proceeds, tax benefits and detriments and
proceeds received with respect to condemnation, expropriation or eminent domain
proceedings.
ARTICLE XI
MISCELLANEOUS
11.1. Nature and Survival of Representations. The representations,
warranties, covenants and agreements of NSC and Investor contained in this
Agreement shall survive the Closing; provided, however, that the representation
of NSC contained in Section 3.7 shall not survive the Closing and the covenants
and agreements of NSC contained in Article V of this Agreement, other than those
contained in Section 5.4(c)(iii) and Section 5.5, shall not survive the Closing.
11.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given (i) three Business Days
after mailing if mailed by certified or registered mail, return receipt
requested, (ii) one Business Day after delivery to Federal Express or other
nationally recognized overnight express carrier, if sent for overnight delivery
with fee prepaid, (iii) upon receipt if sent via facsimile with receipt
confirmed, or (iv) upon receipt if delivered personally, addressed as follows or
to such other address or addresses of which the respective party shall have
notified the other:
21
<PAGE>
If to Investor:
c/o Citicorp Venture Capital Ltd.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Richard M. Cashin, Jr.
Fax No.: (212) 888-2940
With a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: G. Daniel O'Donnell
Fax No.: (215) 994-2222
If to NSC, to:
National Semiconductor Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052
Attention: General Counsel
Fax No.: (408) 733-0293
With a required copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer
Fax No.: (212) 403-2000
11.3. Entire Agreement. The agreement of the parties, which is
composed of this Agreement and the Schedules and Exhibits hereto and the
documents referred to herein, sets forth the entire agreement and understanding
between the parties and supersedes any prior agreement or understanding, written
or oral, relating to the subject matter of this Agreement.
11.4. Assignment; Binding Effect; Severability. This Agreement may not
be assigned by any party hereto without the written consent of the other party;
provided that Investor may assign its rights but not its obligations hereunder
to Management Investors designated by Investor as set forth in Section 2.2(f);
provided further that Investor and the Fairchild Companies may assign their
rights hereunder as collateral security to any bona fide financial institution
engaged in financing in the ordinary course providing financing to consummate
the transactions
22
<PAGE>
contemplated hereby or any bona fide financial institution engaged in financing
in the ordinary course through whom such financing is refunded, replaced, or
refinanced and any of the foregoing financial institutions may, in enforcing its
rights in connection with such financing, assign such rights or cause Investor
and the Fairchild Companies to assign their rights in connection with a sale of
FSC, Fairchild or the business in the form then being conducted by Fairchild
substantially as an entirety. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and permitted assigns of
each party hereto. The provisions of this Agreement are severable, and in the
event that any one or more provisions are deemed illegal or unenforceable the
remaining provisions shall remain in full force and effect unless the deletion
of such provision shall cause this Agreement to become materially adverse to any
party, in which event the parties shall use Best Efforts to arrive at an
accommodation which best preserves for the parties the benefits and obligations
of the offending provision.
11.5. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws (as opposed to the conflicts
of laws provisions) of the State of New York.
11.6. Execution in Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if the signatures thereto were
upon one instrument.
11.7. Public Announcement. Prior to Closing, neither Investor nor NSC
shall, without the approval of the other party hereto, make any press release or
other public announcement concerning the terms of the transactions contemplated
by this Agreement, except as and to the extent that any such party shall be so
obligated by law, in which case the party shall use its Best Efforts to advise
the other party thereof and the parties shall use their Best Efforts to cause a
mutually agreeable release or announcement to be issued; provided that the
foregoing shall not preclude communications or disclosures necessary to
(a) implement the provisions of this Agreement (including the Financing) or
(b) comply with accounting, securities laws and Securities and Exchange
Commission disclosure obligations. Investor will provide NSC with a reasonable
opportunity to review and comment on any references to NSC made by Investor (and
shall not include any such references to NSC without the written consent of NSC,
which consent shall not be unreasonably withheld or delayed) in any written
materials that are intended to be filed with the Securities and Exchange
Commission in connection with obtaining the Financing or intended to be
distributed to prospective purchasers pursuant to an offering made under Rule
144A promulgated under the Securities Act of 1933 in connection with obtaining
the Financing.
11.8. No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended to or shall (i) confer on any person other than the
parties hereto and their respective successors or permitted assigns any rights
(including third party beneficiary rights), remedies, obligations or liabilities
under or by reason of this Agreement, other than the rights to indemnification
from NSC to the Fairchild Companies pursuant to Article X, or (ii) constitute
the parties hereto as partners or as participants in a joint venture. This
Agreement shall not provide third parties with any remedy, claim, liability,
reimbursement, cause of action or other
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<PAGE>
right in excess of those existing without reference to the terms of this
Agreement, other than the rights to indemnification from NSC to the Fairchild
Companies pursuant to Article X.
11.9. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
11.10. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby. Each party will provide such certificates from appropriate officers
thereof confirming compliance by such party with the terms of this Agreement as
may reasonably be requested by the other party at Closing.
11.11. Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first above written.
NATIONAL SEMICONDUCTOR CORPORATION
By:_____________________________
Name:
Title:
STERLING HOLDING COMPANY, LLC
By: CITICORP VENTURE CAPITAL LTD.,
a member
By:_____________________________
Name:
Title:
The undersigned hereby represents and warrants that it is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of New York, has all requisite corporate power and corporate authority to
execute, deliver, and perform the following guarantee and the following
guarantee constitutes the valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms. The
undersigned hereby unconditionally and irrevocably guarantees the performance by
Investor of its obligations under this Agreement to be performed by Investor on
or prior to Closing.
CITICORP VENTURE CAPITAL LTD.
By:__________________________
Name:
Title:
25
<PAGE>
ASSET PURCHASE AGREEMENT
between
FAIRCHILD SEMICONDUCTOR CORPORATION
as Buyer
and
NATIONAL SEMICONDUCTOR CORPORATION
as Seller
dated
as of March 11, 1997
<PAGE>
Table of Contents
Page
ARTICLE I DEFINITIONS................................................... 1
1.1. Defined Terms................................................. 1
1.2. Rule of Construction.......................................... 12
ARTICLE II SALE OF ASSETS.................................................. 12
2.1. Purchase and Sale............................................. 12
2.2. Excluded Assets............................................... 15
2.3. Assumed Liabilities; Excluded Liabilities..................... 16
2.4. The Closing................................................... 19
2.5. Purchase Price................................................ 19
2.6. Consent of Third Parties; Further Assurances.................. 21
2.7. Shared Contracts.............................................. 21
2.8. Apportionment at Closing Date; Customer Billing................ 22
2.9. Warranty Claims............................................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...................... 22
3.1. Organization and Authority.................................... 22
3.2. Authorization; Binding Obligation............................. 23
3.3. No Violations................................................. 23
3.4. Financial Statements.......................................... 24
3.5. Absence of Changes............................................ 24
3.6. Assets........................................................ 25
3.7. Personal Property............................................. 25
3.8. Permits, Licenses............................................. 25
3.9. Compliance with Laws and Litigation........................... 26
3.10. Employees..................................................... 27
3.11. Agreements.................................................... 27
3.12. Environmental Matters......................................... 28
3.13. No Undisclosed Liabilities.................................... 29
3.14. Warranty Claims............................................... 29
3.15. Inventory; Purchased Assets................................... 30
3.16. Real Estate................................................... 30
3.17. Ownership of Subsidiaries..................................... 33
3.18. Tax Matters................................................... 33
3.19. Employee Benefit Plans........................................ 34
3.20. No Implied Representation..................................... 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER......................... 37
4.1. Organization and Authority.................................... 37
4.2. Authorization; Binding Obligation............................. 37
4.3. No Violations................................................. 37
4.4. Inspections; Limitation of Seller's Warranties................ 38
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ARTICLE V CERTAIN COVENANTS................................................ 38
5.1. Information................................................... 38
5.2. Tax Reporting and Allocation of Consideration................. 39
5.3. Operating Agreements.......................................... 40
5.4. Tax Matters................................................... 40
5.5. Employee Matters.............................................. 42
5.6. Covenant Not to Compete; Nonsolicitation...................... 46
5.7. Material Consents............................................. 48
5.8. Notice to Customers........................................... 48
5.9. Confidentiality............................................... 48
5.10. Estoppel ertificates.......................................... 49
5.11. Title Policies................................................ 49
5.12. Survey........................................................ 49
5.13. Accounts Receivable and Related Claims........................ 50
ARTICLE VI CLOSING.......................................................... 50
6.1. Seller's Closing Deliveries................................... 50
6.2. Buyer's Closing Deliveries.................................... 51
ARTICLE VII INDEMNIFICATION................................................. 51
7.1. Indemnification By Seller..................................... 51
7.2. Indemnification by Buyer...................................... 51
7.3. General Indemnification Procedures............................ 51
ARTICLE VIII MISCELLANEOUS.................................................. 53
8.1. Nonsurvival of Representations................................ 53
8.2. Notices....................................................... 53
8.3. Expenses...................................................... 54
8.4. Entire Agreement.............................................. 54
8.5. Assignment; Binding Effect; Severability...................... 54
8.6. Governing Law................................................. 55
8.7. Execution in Counterparts..................................... 55
8.8. Public Announcement........................................... 55
8.9. No Third Party Beneficiaries.................................. 55
8.10. Headings...................................................... 56
8.11. Further Assurances............................................ 56
8.12. Amendment and Waiver.......................................... 56
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Schedules
Schedule 1-A Accounts Payable
Schedule 1-B Accrued Expenses
Schedule 1-D Certain Business Products
Schedule 1-E Environmental Liabilities
Schedule 1-F Seller's Knowledge
Schedule 2.1A Principal Premises
Schedule 2.1A-1 Permitted Encumbrances
Schedule 2.1A-2 Remote Locations
Schedule 2.1B Principal Equipment
Schedule 2.1C Motor Vehicles and Other Equipment
Schedule 2.1D Office Equipment
Schedule 2.1E Inventory
Schedule 2.1F Contracts
Schedule 2.1I Governmental Permits
Schedule 2.1O Other Purchased Assets
Schedule 2.2D Excluded Equipment
Schedule 2.2F Excluded Contracts
Schedule 2.2J Work in Process and Die Banks
Schedule 3.3 Violations; Consents
Schedule 3.4 Certain Financial Information
Schedule 3.5 Certain Changes
Schedule 3.6 Title to Assets
Schedule 3.7 Personal Property
Schedule 3.9 Compliance with Laws
Schedule 3.10 Business Employees; Labor Matters
Schedule 3.11 Agreements
Schedule 3.12 Environmental Matters
Schedule 3.13 Disclosed Liabilities
Schedule 3.14 Warranty Claims
Schedule 3.15 Inventory; Purchased Assets
Schedule 3.16 Real Property
Schedule 3.17 Fairchild Subsidiaries
Schedule 3.18 Tax Matters
Schedule 3.19A Benefit Plans
Schedule 3.19I Retiree Benefits
Schedule 3.19J Enhanced Benefits
Schedule 3.19K Foreign Plans
Schedule 3.19K(i) Non-Subsidiary Foreign Plans
Schedule 3.19M Noncompliance
Schedule 5.2 Statement of Allocation
Schedule 5.5A Employee Matters
Schedule 5.5D Buyer's Plans not Established as of Closing Date
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Schedule 5.6 Integrated Circuit Products
Exhibits
Exhibit 2.3A Assumption Agreement
Exhibit 2.5B Purchase Price Note
Exhibit 6.1 Bill of Sale
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of March
11, 1997 between NATIONAL SEMICONDUCTOR CORPORATION, a Delaware corporation
("Seller"), and FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation
("Buyer").
Background
A. Seller is, among other things, engaged through its Fairchild Division
in the manufacture and sale of the Business Products (as hereinafter defined)
and the furnishing of the Business Services.
B. In connection with a plan of recapitalization which the Board of
Directors of Seller deems advisable and in the best interest of Seller, the
Fairchild Division and the stockholders of Seller, Seller will transfer certain
assets and liabilities of the Fairchild Division to Buyer, Buyer will accept
such assets and assume such liabilities, and Seller will enter into certain
operating agreements with Buyer, on the terms and conditions set forth herein.
Seller and Buyer are simultaneously entering into a letter agreement regarding
certain actions relating to implementation of the transactions contemplated
hereby.
C. The transactions contemplated hereby are taken with the consent of
Sterling Holding Company LLC to facilitate the transactions contemplated by the
Recap Agreement (as hereinafter defined).
Terms
In consideration of the mutual representations, warranties, covenants and
agreements, and upon the terms and subject to the conditions, hereinafter set
forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For the purposes of this Agreement, the following
words and phrases shall have the following meanings:
"Accounting Principles" shall have the meaning set forth in Section
2.5(c).
"Accounts Payable" means all liabilities or obligations that would be
included in the net book value of accounts payable related to the Purchased
Assets that would be set forth
<PAGE>
on a balance sheet of the Business as of the Closing Date prepared on a basis
consistent with the Accounting Principles, including those identified on
Schedule 1-A.
"Accounts Receivable" shall have the meaning set forth in Section
2.2(b).
"Accrued Expenses" means all liabilities or obligations in respect of
the Business set forth on Schedule 1-B.
"Affiliate" of a Person means any Person controlling, controlled by,
or under common control with, such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agreement" shall have the meaning set forth in the Introduction.
"Acquired Business" shall have the meaning set forth in Section
5.6(e).
"Asset Acquisition Statement" shall have the meaning set forth in
Section 5.2.
"Assumed Contracts" means the Contracts assumed by Buyer pursuant to
Section 2.3(a).
"Assumed Liabilities" shall have the meaning set forth in Section
2.3(a).
"Assumption Agreement" shall have the meaning set forth in Section
2.3(a).
"Beneficiary" means the person(s) or entity designated by an employee,
by operation of law or otherwise as the party entitled to compensation,
benefits, insurance coverage, payments, indemnification or any other goods or
services as a result of any liability, or claim under any Benefit Plan, Foreign
Plan or under any other employee benefit plan, program or policy.
"Benefit Plan" shall have the meaning set forth in Section 3.19.
"Best Efforts" is defined to require that the obligated party make a
diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require any significant
expenditure of funds or the incurrence of any significant liability on the part
of the obligated party, nor the incurrence of any expenditure or liability which
is unreasonable in light of the related objective, nor does it require that the
obligated party act in a manner which would otherwise be contrary to prudent
business judgment or normal commercial practices in order to accomplish the
objective. The fact that the objective
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is not actually accomplished is no indication that the obligated party did not
in fact utilize its Best Efforts in attempting to accomplish the objective.
"Bill of Sale" shall have the meaning set forth in Section 6.1(b).
"Business" means Seller's Logic, Memory and Discrete Power and Signal
Technologies Business Units as historically conducted and accounted for
(including Flash Memory, but excluding Public Networks, Programmable Products
and Mil Logic Products).
"Business Day" means a day which is not a Saturday, a Sunday or a
statutory or civic holiday in the State of New York or any other day on which
the principal offices of either Seller or Buyer are closed or become closed
prior to 2:00 p.m. local time whether in accordance with established company
policy or as a result of unanticipated events including adverse weather
conditions.
"Business Employees" means all individuals who, as of the Closing
Date, (i) are actively employed by or on Leave of Absence from the employ of,
any Seller Entity and whose duties, as of the Closing Date (in the case of
active employees) or immediately before their leave began (in the case of
employees on Leave of Absence), relate primarily to the Business; (ii) are on
assignment from the Business to Sematech listed on Schedule 3.10; (iii) are
marketing employees who, as of January 24, 1997, have agreed with Buyer to
become employees of Buyer upon Closing (listed on Schedule 3.10) and such
additional marketing employees who subsequently agree with Buyer to become
employees of Buyer upon Closing; or (iv) are on assignment to the Eight Inch
Wafer Fabrication Facility and listed on Schedule 3.10 (the "Fab Employees").
"Business Financial Statements" shall have the meaning set forth in
Section 3.4.
"Business Products" shall have the meaning set forth in the Technology
Licensing and Transfer Agreement between Buyer and Seller dated as of the
Closing Date, and include those set forth in Schedule 1-D.
"Business Records" shall have the meaning set forth in Section 2.1(h).
"Business Services" means the furnishing of services related to the
manufacture or sale of Business Products, including without limitation design
services and process technology services.
"Buyer" shall have the meaning set forth in the Introduction.
"Buyer's Plans" shall have the meaning set forth in Section 5.5(b).
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<PAGE>
"Claim Notice" shall have the meaning set forth in Section 7.3(a).
"Claim Response" shall have the meaning set forth in Section 7.3(a).
"Closing" means the closing of the transactions described in Article
6.
"Closing Inventory Amount" means the net book value of the Inventory
included in the Purchased Assets on the Closing Date.
"Closing Inventory Schedule" shall have the meaning set forth in
Section 2.5(c).
"Closing Date" means the date of the Closing as determined pursuant to
Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Business" shall have the meaning set forth in Section
5.6(b).
"Competitive Portion" shall have the meaning set forth in Section
5.6(e).
"Confidential Offering Memoranda" shall have the meaning set forth in
Section 3.20.
"Contracts" shall have the meaning set forth in Section 2.1(f).
"Damage" means any and all losses, liabilities, damages, penalties,
obligations, awards, fines, deficiencies, interest, claims (including third
party claims, whether or not meritorious), costs and expenses whatsoever
(including reasonable attorneys', accountants' and environmental consultants'
fees and disbursements) resulting from, arising out of or incident to (x) any
matter for which indemnification is provided under this Agreement, or (y) the
enforcement by an indemnified party of its rights to indemnification under this
Agreement; provided, however, that Damages shall not include consequential or
incidental damages (other than consequential or incidental damages that are
awarded to third parties under matters covered by the foregoing clauses (x) or
(y)) except in the case of a material breach by Seller of its obligation to
provide indemnification pursuant to Article VII hereof with respect to
Environmental Liabilities.
"Defense Notice" shall have the meaning set forth in Section 7.3(c).
"Disputed Items" shall have the meaning assigned in Section 2.5(d).
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"Encumbrance" shall mean any encumbrance of any kind whatsoever and
includes any security interest, mortgage, deed of trust, lien, judgment, tax
lien, sewer rent, assessment, mechanics' or materialmen's liens, hypothecation,
pledge, assignment, easement, servitude, right of way, restriction, tenancy,
encroachment or burden or any other right or claim of others affecting the
Purchased Assets and any restrictive covenant or other agreement, restriction or
limitation on the use of the Purchased Assets.
"Environmental Audits" shall have the meaning set forth in Section
3.12(f).
"Environmental Laws" shall have the meaning set forth in Section
3.12(a).
"Environmental Liabilities" means, regardless of whether any of the
following are contained in any disclosure schedule to this Agreement or
otherwise disclosed to Buyer prior to the Closing, any and all losses, claims,
demands, liabilities, obligations, causes of action, damages, costs and
expenses, fines or penalties (including without limitation reasonable attorney
fees and other defense costs), known or unknown, foreseen or unforeseen, whether
contingent or otherwise, fixed or absolute, present or future asserted against
or incurred by Buyer arising out of or related to:
(i) environmental conditions, including without limitation, the
presence, Release, threat of Release or Management of Hazardous Materials,
occurring or existing prior to the Closing Date, at, on, in, under or from the
Principal Premises or any other property now or previously owned, operated or
leased by Seller Entities or any of their Affiliates or in connection with the
operation of the Business; provided however, that any Environmental Liability
for Remediation shall be only for such Remediation required by any Environmental
Law; or
(ii) environmental conditions arising from the pre-Closing
off-site transportation, storage, treatment, recycling or disposal of Hazardous
Materials prior to the Closing Date generated by or on behalf of Seller Entities
or Affiliates or in connection with the operation of the Business; or
(iii) any violation which occurred prior to the Closing of
any then-applicable Environmental Law (including without limitation costs and
expenses for pollution control or monitoring equipment required by Environmental
Laws to bring the Business into compliance with Environmental Laws and fines,
penalties and reasonable defense costs incurred for such reasonable time after
the Closing to come into compliance); or
(iv) the items identified on Schedule 1-E.
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<PAGE>
in each case of clauses (i), (ii) and (iii), except to the extent that such
Environmental Liabilities are exacerbated by Buyer.
"Environmental Permits" shall have the meaning set forth in Section
3.12(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means (i) any corporation included with Seller in a
controlled group of corporations within the meaning of Section 414(b) of the
Code; (ii) any trade or business (whether or not incorporated) which is under
common control with Seller within the meaning of Section 414(c) of the Code;
(iii) any member of an affiliated service group of which Seller is a member
within the meaning of Section 414(m) of the Code; or (iv) any other person or
entity treated as an affiliate of Seller under Section 414(o) of the Code.
"Estoppel Certificates" shall have the meaning set forth in Section
5.10.
"Evaluation Materials" shall have the meaning set forth in Section
3.20.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Contracts" shall have the meaning set forth in Section
2.2(f).
"Excluded Equipment" shall have the meaning set forth in Section
2.2(d).
"Excluded Liabilities" shall have the meaning set forth in Section
2.3(b).
"Fairchild Subsidiaries" means the companies set forth on Schedule
3.17.
"Financing" shall have the meaning set forth in the Recap Agreement.
"Foreign Plan" shall have the meaning set forth in Section 3.19(k).
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means the government of the United States,
Hong Kong, Malaysia, the Philippines or any foreign country or any state,
province, municipality or other political subdivision thereof or therein, or any
court, tribunal, agency, department, board, instrumentality, authority or
commission (including regulatory and administrative bodies) of any of the
foregoing.
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"Governmental Permits" shall have the meaning set forth in Section
2.1(i).
"Hazardous Materials" means any hazardous, toxic or polluting
materials, substances, wastes, pollutants or contaminants (including, without
limitation, petroleum, petroleum products, radioactive materials, asbestos, or
asbestos-containing materials) which are defined by or regulated under any
Environmental Law or any other compound, mixture, element, solution or substance
which poses or may pose a present or potential hazard to human health or the
environment.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"including" or any variation thereof means "including without
limitation" and the term "including" or any variation thereof shall not be
construed to limit any general statement which it follows to the specific or
similar items or matters immediately following it.
"Indemnitee" shall have the meaning set forth in Section 7.3(a).
"Indemnitor" shall have the meaning set forth in Section 7.3(a).
"Independent Accountant" shall have the meaning set forth in Section
2.5(d).
"Interim Financial Statements" shall have the meaning set forth in
Section 3.4.
"Inventory" shall have the meaning set forth in Section 2.1(e).
"IRS" means the U.S. Internal Revenue Service.
"KEIP" shall have the meaning set forth in Section 5.5(f).
"knowledge" when used with respect to Seller, means the actual
knowledge of the individuals whose names are set forth on Schedule 1-F, after
reasonable investigation.
"Leased Real Estate" shall have the meaning set forth in Section
3.16(b)(i).
"Leases" shall have the meaning set forth in Section 3.16(b)(i).
"Leave of Absence" means an approved absence from employment that is
classified as sick time, personal leave, family leave, industrial leave or
Medical Leave.
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"Manage" or "Management", when used with respect to Hazardous
Materials, has the meaning set forth in Section 3.12(c).
"Material Adverse Effect" means any change or effect (or series of
related changes or effects) which has or is reasonably likely to have a material
adverse change in or effect upon the business, financial condition or results of
operations of the Business taken as a whole.
"Material Instruments" shall mean the Contracts described on Schedule
2.1F, the licenses, agreements and other arrangements, if any, transferred to
Buyer pursuant to the Technology Transfer and License Agreement and the
Governmental Permits described on Schedule 2.1I.
"Material Real Estate Impairment" shall mean (1) a material adverse
effect upon the value of any one or more of the individual Principal Premises so
affected or (2) material impairment of the use of, or the conduct of the
Business at, any one or more of the individual Principal Premises so affected.
"Medical Leave" means an absence from employment that is classified
as short-term disability, long-term disability or permanent medical leave.
"Non-Assignable Assets" shall have the meaning set forth in Section
2.6(a).
"Non-Assignable Patent Licenses" means licenses of patents in third
parties to which Seller is the licensee and which are not by their terms
assignable to Buyer.
"Non-Subsidiary Foreign Plan" shall have the meaning set forth in
Section 3.19(k).
"Operating Agreements" means the agreements to be entered into between
Buyer and Seller described in Section 5.3.
"Other Current Liabilities" means liabilities of the character that
would be reflected as "other current liabilities" on a balance sheet prepared on
a basis consistent with the Accounting Principles.
"Overlapping Fiscal Year" shall have the meaning set forth in Section
5.5(f).
"Owned Real Estate" shall have the meaning set forth in Section
3.16(a)(i).
"Pension Plan" shall have the meaning set forth in Section 3.19(e).
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"Permitted Encumbrances" means (i) the Encumbrances and exceptions set
forth in Schedule 2.1A-1; and (ii) imperfections in title not material in extent
or amount and which, individually or in the aggregate, do not materially
interfere with the conduct of the Business or with the use of the Purchased
Assets and do not materially affect the value of the Purchased Assets, taken
collectively.
"Permitted Fee Title Exceptions" shall have the meaning set forth in
Section 3.16(a)(ii).
"Permitted Leasehold Exceptions" shall have the meaning set forth in
Section 3.16(b)(ii).
"Person" means and includes any individual, corporation, partnership,
firm, association, joint venture, joint stock company, trust or other entity, or
any government or regulatory administrative or political subdivision or agency,
department or instrumentality thereof.
"Portland Facility" shall have the meaning set forth in Section
3.8(b).
"Principal Equipment" means all of the machinery and equipment,
fixtures, improvements, tooling, supplies, tools, dies and similar capital items
which are owned or leased by any Seller Entity and are located at the Principal
Premises, Remote Locations or elsewhere and which are primarily used or held for
use in the conduct of the Business, or which are in transit to or temporarily
removed from a location specified above and which would otherwise be included
among the items described above. Principal Equipment shall include, without
limitation, those specified items of machinery and equipment which are
identified on Schedule 2.1B but shall not include the Excluded Equipment.
"Principal Premises" means the Owned Real Estate and all of the
rights, titles, interests and estates of the Seller Entities (and of each of
them) in and to the Leased Real Estate.
"Proprietary Information" means inventions, discoveries, patentable
subject matter, patents, patent applications, industrial models, industrial
designs, trade secrets, trade secret rights, software, works, copyrightable
subject matter, copyright rights and registrations, know-how and show-how,
whether or not protectible by patent, copyright or trade secret, trademarks,
trade names, service marks, emblems, logos, insignia and related marks and
registrations, specifications, technical manuals and data, blueprints,
drawings, proprietary processes, product information and development
work-in-process.
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"Purchase Price" means the payment to be made in consideration for the
Purchased Assets as provided in Section 2.5.
"Purchase Price Note" shall have the meaning set forth in Section
2.5(b).
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"RCRA" shall have the meaning set forth in Section 3.12(c).
"Recap Agreement" means the Agreement and Plan of Recapitalization
dated January 24, 1997 between Seller and Sterling Holding Company LLC.
"Recap Closing" means the closing of the transactions under the Recap
Agreement.
"Recap Closing Date" means the date of the Recap Closing.
"Reference Amount" shall have the meaning set forth in Section 2.5(a).
"Release" shall have the meaning set forth in Section 3.12(e).
"Remediation" means investigation, cleanup, remedial action or other
response action.
"Remote Locations" means the facilities for Inventory stocking and/or
manufacturing support listed on Schedule 2.1A-2.
"Resolution Period" shall have the meaning set forth in Section
2.5(d).
"Response Period" shall have the meaning set forth in Section 7.3(a).
"Returns" means all returns, declarations, reports, statements and
other documents required under a Tax Law to be filed with a Governmental
Authority in respect of Taxes, and includes any Forms W-2, 1099 or similar
documents required under any Tax Law to be provided to a person other than a
Governmental Authority (and "Return" means any one of the foregoing Returns).
"Seller" shall have the meaning set forth in the Introduction.
"Seller Entities" means Seller and all Affiliates of Seller having an
interest in any Purchased Asset, including the Fairchild Subsidiaries.
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"Shared Contract" shall have the meaning set forth in Section 2.7.
"Specified Liabilities" means the sum of Accounts Payable, Accrued
Expenses and Other Current Liabilities.
"Statement of Allocation" shall have the meaning set forth in Section
5.2.
"Straddle Period Taxes" shall have the meaning set forth in Section
5.4(e).
"subsidiary" means as to any Person, a corporation or other entity of
which shares of stock or other equity ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation or other entity are at the time owned, directly or indirectly,
through one or more intermediaries, or both, by such Person.
"Surveyor" shall have the meaning set forth in Section 5.12.
"Surveys" shall have the meaning set forth in Section 5.12.
"Taxes" means all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, add on or alternative minimum tax, occupancy,
withholding, payroll, employment, excise, severance, stamp, value added,
occupation, premium, property (including, without limitation, real property
taxes and any assessments, special or otherwise), windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto (and "Tax" means any one of the foregoing Taxes).
"Tax Law" means a statute, regulation or administrative rule or
judicial opinion enacted, issued or promulgated for the determination,
imposition, assessment or collection of any Tax.
"Title Company" shall have the meaning set forth in Section 5.11.
"Title Policies" shall have the meaning set forth in Section 5.11.
"Transferred Employee" shall have the meaning set forth in Section
5.5(a).
"Transition Services Agreement" means the Transition Services
Agreement of even date herewith between Seller and Buyer.
"Voluntary Participation" shall have the meaning set forth in Section
7.3(c).
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1.2. Rule of Construction. No inaccuracies in a representation or warranty
as a result of any inaccuracy in any Schedule to this Agreement shall be deemed
to constitute a breach of such representation or warranty which makes reference
to such Schedule unless the aggregate effect of all such inaccuracies in all
such Schedules is material to the Business in the context of the transactions
contemplated by the Recap Agreement (including the Financing).
ARTICLE II
SALE OF ASSETS
2.1. Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date Seller shall, and shall cause the other
Seller Entities to, sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase from the Seller Entities, all of the Purchased Assets which
include the Business as a going concern and the goodwill related thereto, as the
same shall exist on the Closing Date; it being understood that such of the
Purchased Assets as shall be held by the Fairchild Subsidiaries shall not be
transferred directly to Buyer but shall be transferred to Buyer through the
transfer of ownership of the Fairchild Subsidiaries to Buyer. For purposes of
this Agreement, "Purchased Assets" shall mean all of the assets, properties and
rights which are primarily used in the conduct of the Business (except in each
case for the Excluded Assets), wherever such assets, properties and rights are
located and whether such assets are real, personal or mixed, tangible or
intangible, matured or unmatured, known or unknown, contingent or fixed, and
whether or not any of such assets have any value for accounting purposes or are
carried or reflected on or specifically referred to in Seller's books or
financial statements including:
(a) the Principal Premises;
(b) all of the Principal Equipment and any rights to the warranties
and licenses received from the manufacturers and distributors of the Principal
Equipment and to any related claims, credits, rights of recovery and set-off
with respect to such items, subject, as applicable, to the rights set forth in
Section 2.1(f);
(c) all of the motor vehicles, whether or not licensed or registered
to operate on public highways, including automobiles, trucks, self-propelled
carts, and other motorized lifting, material handling or transporting equipment
and all spare parts, fuel and other supplies, tools and other items used in the
operation or maintenance thereof which are owned or leased by a Seller Entity
and located at the Principal Premises, Remote Locations or elsewhere and which
are primarily used or held for use in the conduct of the Business, or which are
in transit to or temporarily removed from a location specified above and which
would otherwise be included among the items described above, and any rights to
the warranties received from suppliers or manufacturers of such items described
above, and any related claims, credits, rights
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of recovery and set-off with respect thereto, including without limitation all
such vehicles, spare parts, fuel and other supplies, tools and other items and
other rights set forth on Schedule 2.1C;
(d) all of the furniture and office equipment, including desks,
tables, chairs, file cabinets and other storage devices, communications
equipment, computers and office supplies, including those identified on Schedule
2.1D, which are owned or leased by a Seller Entity and located at the Principal
Premises, Remote Locations or elsewhere and which are primarily used or held for
use in the conduct of the Business, or which are in transit to or temporarily
removed from a location specified above and which would otherwise be included
among the items identified above;
(e) all inventory, wherever located (including inventory in transit),
including, without limitation, all the raw materials, work in process, recycled
materials, finished products, supplies, and spare parts located at the Principal
Premises, the Remote Locations, or elsewhere and primarily used or held for use
in the conduct of the Business, including items of the type and nature of the
materials identified as inventory in the Business Financial Statements, a
summary of which and the principal locations of which are set forth in Schedule
2.1E (the "Inventory") and any rights to the warranties received from suppliers
and any related claims, credits, rights of recovery and set-off with respect to
such Inventory;
(f) subject to Section 2.7 and subject to the terms of the Transition
Services Agreement dated as of the Closing Date between Seller and Buyer, all of
the rights and obligations under the contracts, contractual rights, agreements,
leases, purchase orders, warranty rights, sales orders and instruments which
primarily relate to the Business, including those identified on Schedule 2.1F,
and including those (i) for the lease (from Persons other than Seller or any
Affiliate of Seller) of machinery and equipment, real property, motor vehicles,
or furniture and office equipment or other property primarily used or held for
use in the conduct of the Business, (ii) for the provision (by Persons other
than Seller or any Affiliate of Seller) of goods or services primarily used or
held for use in the conduct of the Business, (iii) for the sale of goods or
performance of services by the Business, (iv) which restrain or restrict any
Person from directly or indirectly competing with the Business or from
disclosing confidential or Proprietary Information relating primarily to the
Business, and (v) any such contracts, agreements, instruments and leases entered
into by Seller or any Affiliate of Seller between the date hereof and the
Closing Date which relate primarily to the Business that are consistent with the
terms of this Agreement (collectively, the "Contracts");
(g) all mailing lists, customer lists, supplier lists, sales and
marketing or packaging materials, equipment maintenance records, warranty
information, records of plant operations and the source and disposition of
materials used and produced therein, manuals of operation, and other similar
proprietary or confidential information of the Seller Entities primarily used or
held for use in the conduct of the Business, and with respect to the Principal
Premises, all building plans, blueprints, renderings or surveys provided, that
the items set forth in this subsection (g) shall not include any information
that does not primarily relate to the Business and Seller shall be entitled to
remove or redact any such information from such items and provided, further,
that Seller shall have the right to retain copies of the items set forth in this
subsection (g);
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(h) all books and records of the Seller Entities relating to the
Business including, without limitation, all discs, tapes and other media storing
data and other information and the software and information management systems
primarily used or held for use in the conduct of the Business, including any
documentation and manuals related thereto (the materials described in
subsections (g) and (h) of this Section 2.1 hereinafter being referred to as
"Business Records"); provided, that Business Records shall not include any
information that does not primarily relate to the Business and Seller shall be
entitled to remove or redact any such information from the Business Records and
provided, further, Seller shall be entitled to retain copies of such Business
Records;
(i) all of the governmental permits, licenses, certificates of
inspection, certificates of occupancy, building permits, variances and other
licenses or permits (including Environmental Permits) relating to the use or
occupancy of the Principal Premises, approvals or other authorizations issued
with respect to the Business and which are used in, or otherwise necessary or
material to, the operation of the Business, the use of the Principal Premises,
or the conduct of the Business at the Principal Premises by Buyer, or which are
otherwise required by law to be transferred to Buyer (the "Governmental
Permits") including those Governmental Permits which are described and
identified in Schedules 2.1I and 3.12 (other than those Governmental Permits for
which transfer is not permitted by law or the issuing authority);
(j) all intellectual property rights granted to Buyer pursuant to the
Technology Licensing and Transfer Agreement dated as of the Closing Date between
Buyer and Seller;
(k) all rights of the Seller Entities to any insurance proceeds
relating to the damage, destruction or impairment of assets or other rights
described in this Section 2.1 which would have been Purchased Assets but for
such damage, destruction or impairment prior to the Closing;
(l) all of the rights, claims or causes of action of the Seller
Entities against third Persons to the extent they relate to the Purchased Assets
or the Assumed Liabilities;
(m) all of the capital stock of the Fairchild Subsidiaries;
(n) all assets (other than Excluded Assets) reflected in the May 26,
1996 balance sheet which is included in the Business Financial Statements,
together with all replacements thereof, all expansions, enhancements and
modifications thereto and all assets (other than Excluded Assets) of like
character that have been or are acquired by the Seller Entities subsequent to
such balance sheet date and on or prior to the Closing Date, primarily for use
in the Business, except to the extent such assets have been disposed of on or
after such date; and
(o) all the items, if any, listed on Schedule 2.1O.
The term "Purchased Assets" when used herein with respect to any date
prior to the Closing Date, shall be deemed to refer to the properties and assets
of the Seller Entities that would constitute the "Purchased Assets" hereunder if
the Closing were to take place on such date.
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2.2. Excluded Assets. It is hereby expressly acknowledged and agreed that
the Purchased Assets shall not include, and the Seller Entities are not selling,
transferring or assigning to Buyer, and Buyer is not purchasing or acquiring
from the Seller Entities, all properties and assets of the Seller Entities that
are not included in the Purchased Assets pursuant to Section 2.1 or that are
excluded by this Section 2.2 (such properties and assets collectively the
"Excluded Assets"), including:
(a) any of the Seller Entities' cash, bank deposits or similar cash
items existing as of the close of business on the Closing Date;
(b) all of the accounts, notes and finance receivables generated by
the Business and existing as of the close of business on the Closing Date,
including, without limitation, all funds, refunds, receivables, credits,
offsets, or reimbursements, claims, debts, obligations and such other rights,
together with all accrued interest thereon, existing as of the close of business
on the Closing Date to the extent and in the amounts that such items would be
reflected as accounts or notes receivable (or as any other asset related
thereto) on a balance sheet of the Business as of the Closing Date prepared in
accordance with the Accounting Principles (the "Accounts Receivable");
(c) any claim, right or interest of the Seller Entities in and to any
refund for Taxes for any periods prior to the Closing Date;
(d) any of the equipment located at the Principal Premises and listed
on Schedule 2.2D (the "Excluded Equipment");
(e) all assets attributable or related to any Benefit Plan except as
provided in Section 5.5;
(f) all of the Contracts set forth on Schedule 2.2F (the "Excluded
Contracts") and all Shared Contracts;
(g) all of the rights, claims or causes of action of the Seller
Entities against third Persons to the extent they do not relate to the Business
or they relate to the Excluded Assets or the Excluded Liabilities;
(h) all intellectual property of Seller except as described in
Section 2.1(j);
(i) the shares of stock of Wafer Scale Integration Inc. owned or held
by Seller;
(j) the work in process (including die banks) at the locations set
forth on Schedule 2.2J to be delivered to Seller under the Operating Agreements;
and
(k) the capital stock of any Seller Entity other than the Fairchild
Subsidiaries.
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2.3. Assumed Liabilities; Excluded Liabilities.
(a) On the Closing Date, Buyer shall execute and deliver to Seller an
assumption agreement in the form set forth in Exhibit 2.3A (the "Assumption
Agreement") pursuant to which Buyer shall assume and agree to pay, perform or
otherwise discharge, in accordance with their respective terms and subject to
the respective conditions thereof and subject to the provisions of Sections
2.3(b), 2.6 and 2.9, all of the Assumed Liabilities. As used herein, "Assumed
Liabilities" means any and all liabilities of the Seller Entities in respect of
the Business of any nature, whether direct or indirect, known or unknown, or
absolute or contingent, to the extent arising out of or relating to the conduct
of the Business or the ownership and operation of the Purchased Assets,
including, without limitation, the obligations and liabilities set forth under
the heading "Assumed by FSC" on Schedule 1-A and 1-B, but excluding the Excluded
Liabilities.
(b) Buyer shall not assume or be obligated to pay, perform or
otherwise discharge any of the following obligations or liabilities of Seller or
any of its Affiliates, whether or not related to the Business and whether direct
or indirect, known or unknown, or absolute or contingent (all of such
obligations and liabilities not so assumed being herein called the "Excluded
Liabilities"):
(i) any obligations or liabilities of any Seller Entity or any
of its Affiliates (including, without limitation, any
Environmental Liability) incurred by any Seller Entity or
any of its Affiliates in connection with the conduct of
their businesses other than the Business, including those
associated with any "shelf" companies acquired by any Seller
Entity in connection with the transactions contemplated
hereby;
(ii) any obligations of any Seller Entity or any of its
Affiliates (other than obligations of Buyer under this
Agreement, the Operating Agreements and the Shareholders
Agreement (as defined in the Recap Agreement)) arising under
this Agreement, the Recap Agreement, the Operating
Agreements or the Shareholders Agreement (as defined in the
Recap Agreement);
(iii) any intercompany payables and liabilities or obligations of
any Seller Entity to any of its Affiliates;
(iv) any liabilities or obligations to the extent related to
Excluded Assets;
(v) any Taxes of a Fairchild Subsidiary with respect to any
taxable period that ends on or prior to the Closing Date
except to the extent such Taxes result from (A) actions
taken by Buyer after Closing unless Buyer is required to
take such actions under an applicable Tax Law or under this
Agreement or (B) Buyer's failure to take actions required to
be taken by Buyer under an applicable
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Tax Law or under this Agreement; any Taxes of a Fairchild
Subsidiary with respect to any period that begins before and
ends after the Closing Date to the extent such Taxes are
allocable to the portion of the period up to the day before
the Closing Date;
(vi) all of the Seller Entities' liabilities for Taxes that have
been or may be incurred as a result of the Seller Entities
operation of the Business or ownership of the Purchased
Assets before the Closing Date;
(vii) any liability allocated to Seller Entities for Taxes incident
to or arising from the consummation of the transactions
contemplated under this Agreement as set forth in Section
8.3;
(viii) any liability for any Taxes of the Seller Entities or of
any consolidated, combined or unitary group of which a
Seller Entity is or was a member with respect to periods
ending on or prior to the Closing Date or beginning prior
to and ending after the Closing Date, including (but not
limited to) any liability pursuant to Treasury Regulation
Section 1.1502-6 or any analogous state, local or foreign
tax provisions except to the extent such Taxes result
from (A) actions taken by Buyer after Closing unless
Buyer is required to take such actions under an
applicable Tax Law or under this Agreement or (B) Buyer's
failure to take actions required to be taken by Buyer
under an applicable Tax Law or under this Agreement;
(ix) any liability for Taxes of another Person (other than a
Fairchild Subsidiary and other than with respect to
withholdings related to payments to another Person after the
Closing) resulting from an agreement entered into by any
Seller Entity or by any Fairchild Subsidiary prior to the
Closing Date, pursuant to which any Seller Entity or any
Fairchild Subsidiary has an obligation in respect of the
Taxes of such other Person;
(x) all of the Specified Liabilities (other than the liabilities
and obligations set forth under the heading "Amts to be
Assumed by FSC" on Schedule 1-B designated on such schedule
to be assumed by Buyer), whether direct or allocated,
existing as of the close of business on the Closing Date;
(xi) all liabilities in respect of customer returns and
allowances, including, without limitation, "ship from stock
and debit" liabilities, in respect of Business Products
shipped prior to Closing to OEM customers;
(xii) any liability allocated to Seller pursuant to Section 5.5;
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(xiii) any liability or obligation of any Seller Entity or any of
its Affiliates for indemnification of, or advancement of
expenses or payment of insurance proceeds to, any present
or former director or officer of (or other person serving
in a fiduciary capacity at the request of) any Seller
Entity or any of its Affiliates based upon an actual or
alleged breach of fiduciary duty of such person prior to
the Closing;
(xiv) any Environmental Liabilities;
(xv) all liabilities and obligations arising out of, resulting
from or relating to claims, whether founded upon negligence,
strict liability in tort or other similar legal theory (but
not breach of warranty), seeking compensation or recovery
for or relating to injury to person or damage to property
arising out of the conduct of the Business before Closing;
(xvi) any liability or obligation arising out of or relating to
any business or product line formerly owned or operated by
any Seller Entity or any predecessor thereof but not
presently so owned or operated;
(xvii) any liability or obligation arising out of, or related to,
any indemnification or other provision under any
contract or other agreement pursuant to which any
sale or disposition was made of any business or
product line formerly owned or operated by any Seller
Entity or any predecessor thereof but not presently
so owned or operated;
(xviii) any liability or obligation of any Seller Entity (other
than the Fairchild Subsidiaries) or any of its Affiliates
(other than the Fairchild Subsidiaries) arising out of
matters occurring, or obligations incurred, after the
Closing;
(xix) any liabilities or obligations of any Seller Entity (other
than the Fairchild Subsidiaries) for any professional,
financial advisory or consulting fees and expenses
incident to or arising out of the negotiation,
preparation, approval or authorization of this Agreement,
the Recap Agreement, the Operating Agreements and the
transactions contemplated hereby or thereby, or any other
proposed transaction for the direct or indirect sale of
the Business or any portion thereof, including without
limitation, the fees, expenses and disbursements of
Seller's counsel and accountants (including accountants
fees, expenses and disbursements in connection with the
preparation of the Business Financial Statements but
excluding those to the extent related to the Financing
(as defined in the Recap Agreement)) and any liability or
obligation to Deutsche Morgan Grenfell or to BA Partners;
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(xx) the liabilities and obligations of Seller pursuant to
Section 2.6(c) and any liability or obligation of any Seller
Entity or any of its Affiliates arising out of any Shared
Contract;
(xxi) any liability or obligation of any Seller Entity or any of
its Affiliates to the extent the amount of such
liability or obligation is covered by a policy of
insurance or other indemnity agreement maintained by or
for the benefit of any Seller Entity or any of its
Affiliates, unless the rights under such policy of
insurance or indemnity agreement have been assigned to
Buyer;
(xxii) any liability or obligation of any Seller Entity or any of
its Affiliates for funded debt and indebtedness for
borrowed money, including obligations evidenced by
notes, bonds, debentures or similar instruments, and
including any guaranties of any of the foregoing
provided, however, that funded debt and indebtedness
for borrowed money shall not include any lease or
deferred payment obligations for property or services;
(xxiii) any liability or obligation to which Buyer, any Purchased
Assets or the Business becomes subject that would not
otherwise constitute an Assumed Liability arising as a
result of failure to comply with bulk sales laws or any
similar law;
(xxiv) any liability or obligation for which Seller has agreed to
indemnify Buyer under the Technology Licensing and Transfer
Agreement of even date herewith between Buyer and Seller;
(xxv) any liability or obligation under the heading "Total Amount
Retained by NSC" on Schedule 1-B; and
(xxvi) any liability or obligation designated as an Excluded
Liability on any Schedule to this Agreement.
2.4. THE CLOSING. The Closing shall take place at the office of Dechert
Price & Rhoads, 30 Rockefeller Plaza, New York, New York on the Recap Closing
Date (such date and time being herein called the "Closing Date"). The effective
time of the transactions contemplated hereby shall be deemed to be the opening
of business on the Closing Date.
2.5. PURCHASE PRICE. (a) The purchase price (the "Purchase Price") for the
Purchased Assets and the other agreements of Seller stated herein shall be
$549.8 million (subject to the adjustments set forth in paragraphs (B), (C) and
(D) on Schedule 1 of the Recap Agreement) payable as provided in Section 2.5(b)
plus Buyer's assumption of the Assumed Liabilities. The Purchase Price shall be
subject to a dollar-for-dollar adjustment to the extent the Closing Inventory
Amount is greater or less than $67,342,000 (the "Reference Amount").
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(b) The Purchase Price shall be paid as follows: At the
Closing Buyer will deliver to Seller Buyer's demand note (and demand notes of
Fairchild Subsidiaries) in the aggregate principal amount of $400,960,000
(the "Purchase Price Note") in the form attached hereto as Exhibit 2.5B
and a certificate representing 100 shares of Buyer's Common Stock, par
value $.01 per share.
(c) Within sixty (60) days after the Closing Date, Seller will
deliver to Buyer a schedule (the "Closing Inventory Schedule") setting forth the
Closing Inventory Amount. The Closing Inventory Schedule shall be prepared in
accordance with GAAP applied on a basis consistent in all respects with the
accounting principles, policies and methodologies reflected in the May 26, 1996
statement of net assets included in the Business Financial Statements (the
"Accounting Principles").
(d) If, within forty-five (45) days after the delivery of the
Closing Inventory Schedule, Buyer determines in good faith that the Closing
Inventory Schedule has not been prepared in accordance with the Accounting
Principles or otherwise disputes any item on the Closing Inventory Schedule,
Buyer shall deliver to Seller within such period written notice specifying in
reasonable detail all disputed items and the basis therefor (collectively, the
"Disputed Items"). The failure by Buyer to provide such notice of Disputed
Items to Seller within such period will constitute Buyer's acceptance of the
Closing Inventory Schedule. Buyer and Seller shall, within ten (10) days
following the delivery of such notice of Disputed Items to Seller (the
"Resolution Period"), negotiate in good faith to resolve such Disputed Items
to their mutual satisfaction. At the conclusion of the Resolution Period,
Seller and Buyer shall refer all unresolved Disputed Items to Coopers &
Lybrand, or any other "big six" independent accounting firm (which has not
previously been engaged by either Seller or Buyer for the preparation of
such party's audited financial statements) as Seller and Buyer shall
mutually agree upon (the "Independent Accountant"). The Independent
Accountant shall make a determination with respect to each Disputed Item
within fifteen (15) days after its engagement by Seller and Buyer to resolve
such Disputed Items, which determination shall be made on the basis of whether
the Closing Inventory Schedule has been prepared in accordance with the
Accounting Principles. All determinations by the Independent Accountant
shall be final, binding and conclusive on the parties hereto. Buyer and
Seller shall each pay one-half of all of the costs incurred in connection
with the engagement of the Independent Accountant.
(e) If the Closing Inventory Amount (as determined by the Closing
Inventory Schedule and adjusted by the resolution of the Disputed Items, if any)
(i) exceeds the Reference Amount, Buyer shall, within ten (10) days after a
final determination of the Closing Inventory Amount, pay to Seller by wire
transfer of immediately available funds an amount equal to such excess, together
with interest on such amount from the Closing Date to the date of such payment
at a rate of ten percent (10%) per annum, or (ii) is less than the Reference
Amount, Seller shall, within ten (10) days after a final determination of the
Closing Inventory Amount, pay to Buyer by wire transfer of immediately available
funds an amount equal to such deficiency, together with interest on such amount
from the Closing Date to the date of such payment at a rate of ten percent (10%)
per annum. Any such adjustment shall be made notwithstanding the fact that the
Purchase Price Note may have been repaid.
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2.6. CONSENT OF THIRD PARTIES; FURTHER ASSURANCES.
(a) From time to time following the Closing, Seller shall execute and
deliver, or cause to be executed and delivered, to Buyer such additional
instruments of conveyance and transfer as Buyer may reasonably request or as may
be otherwise reasonably necessary to more effectively convey or transfer to, and
vest in, Buyer and put Buyer in possession of, any part of the Purchased Assets.
Nothing in this Agreement shall be construed as an attempt or agreement to
assign any asset, contract, lease, permit, license or other right which would
otherwise be included in the Purchased Assets but which is by its terms or by
law nonassignable without the consent of the other party or parties thereto or
any Governmental Authority unless such consent shall have been given, or as to
which all the remedies for the enforcement thereof enjoyed by Seller, any other
Seller Entity or the Business would not, as a matter of law, pass to Buyer as an
incident of the assignments provided for by this Agreement (the "Non-Assignable
Assets"). Seller agrees to use its Best Efforts to obtain such consent
promptly. At such time as any Non-Assignable Assets is properly assigned to
Buyer, such Non-Assignable Asset shall become a Purchased Asset. Following the
Closing and until such time as such Non-Assignable Assets may be properly
assigned to Buyer, such Non-Assignable Assets shall be held by Seller in trust
for Buyer and the covenants and obligations thereunder shall be performed by
Buyer in the name of Seller and all benefits and obligations existing thereunder
shall be for the account of Buyer. During such period, Seller shall take or
cause to be taken such action in its name or otherwise as Buyer may reasonably
request, at Buyer's expense, so as to provide Buyer with the benefits of the
Non-Assignable Assets and to effect collection of money or other consideration
to become due and payable under the Non-Assignable Assets and Seller shall
promptly pay over to Buyer all money or other consideration received by it (or
its Affiliates) in respect of all Non-Assignable Assets. Following the Closing,
Seller authorizes Buyer, to the extent permitted by applicable law and the terms
of the Non-Assignable Assets, at Buyer's expense, to perform all of the
obligations and receive all of the benefits under the Non-Assignable Assets and
appoints Buyer its attorney-in-fact to act in its name on its behalf (and on
behalf of its Affiliates) with respect thereto.
(b) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement by Seller to assign or delegate, or
by Buyer to assume and agree to pay, perform or otherwise discharge, any
Non-Assignable Asset if an attempted assignment, delegation or assumption
thereof without the consent of a third Person (including, without limitation,
any Governmental Authority) thereto would constitute a breach thereof unless and
until such consent is obtained.
(c) Except as set forth in Section 2.6(a), Section 2.7 or as provided
in the Transition Services Agreement, to the extent reasonably practicable, the
Seller Entities shall perform all obligations and be entitled to all the
benefits under the Non-Assignable Assets; provided, however, that Seller shall
be liable for the failure to perform any such obligation.
2.7. SHARED CONTRACTS. Subject to the terms of the Transition Services
Agreement, to the extent any of the Contracts relates both to the Business and
to other businesses of the Seller Entities ("Shared Contracts") such Shared
Contracts shall not be assigned to Buyer. At Buyer's request, with respect to
any Shared Contract, the Seller Entities shall use Best Efforts to obtain the
agreement of the other party or parties to any Shared Contract to enter into a
separate
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agreement with Buyer with respect to the matters covered by such Shared Contract
that relate to the Business. Buyer shall be responsible for fulfilling the
obligations under the Shared Contracts related to or arising from benefits
received by Buyer pursuant to the Shared Contracts as contemplated by the
Transition Services Agreement.
2.8. APPORTIONMENT AT CLOSING DATE; CUSTOMER BILLING.
(a) At the Closing, the parties shall make without duplication
customary closing adjustments with respect to the conveyance of the Principal
Premises as of the Closing Date and the usual adjustments relating to the
Business as of the Closing Date, including prepaid lease payments, security
deposits, rents, real estate taxes, local improvements charges, assessments
(special and ordinary), sewer impost charges, utility charges, water rents,
monthly maintenance charges, rebates and royalties, deposits and prepaid
expenses with any public utility or any municipal, governmental or other public
authority, wages and any other ongoing charges, and all such payments, taxes and
charges shall be apportioned and adjusted as of the Closing Date, and at the
Closing the net amount thereof shall be pro rata paid by Seller to Buyer or paid
by Buyer to Seller, as the case may be. Any such apportionments and adjustments
shall be subject to correction for any errors or omissions that subsequently may
be discovered provided that the party discovering such error or omission
provides written notice of same to the other party. Such other party shall,
within 15 days after receipt of such notice, reimburse the party delivering such
notice for the full amount of such error or omission.
(b) In the event that Seller or any of its Affiliates receives
payment after the Closing Date on invoices issued by Buyer relating to product
sold or services rendered on or after the Closing Date, Seller will promptly
notify Buyer of such receipt and will promptly remit, or will cause such
Affiliate to promptly remit, such payment to Buyer. In the event that Buyer or
any Affiliate of Buyer receives payment after the Closing Date on invoices
issued by Seller relating to product sold or services rendered prior to the
Closing Date that have given rise to accounts receivable that are included in
the Excluded Assets, Buyer will promptly notify Seller of such receipt and will
promptly remit, or will cause such Affiliate to promptly remit, such payment to
Seller.
2.9. WARRANTY CLAIMS. Except as provided in Section 2.3 and this Section
2.9, all of the obligations and liabilities of the Seller Entities with respect
to any Business Products transferred to Buyer as part of the Purchased Assets
which are shipped or provided by Buyer on or after the Closing shall be for the
account of, and exclusively the obligation of Buyer. Buyer shall assume the
obligation to satisfy all warranty claims or liabilities with respect to any
products or services shipped or provided by Seller prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1. ORGANIZATION AND AUTHORITY. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate
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power and corporate authority to execute and deliver this Agreement and the
Operating Agreements and effect the transactions contemplated hereby and thereby
and has duly authorized the execution, delivery and performance of this
Agreement and the Operating Agreements by all necessary corporate action.
Seller has all corporate power and corporate authority necessary to carry on the
Business as now conducted and to own or lease and operate its properties as and
in the places where such Business is now conducted and such properties are now
owned, leased or operated.
3.2. AUTHORIZATION; BINDING OBLIGATION. This Agreement and the Operating
Agreements have been duly executed and delivered by Seller, and this Agreement
and the Operating Agreements are the valid and legally binding obligations of
Seller, enforceable against it in accordance with their terms.
3.3. NO VIOLATIONS. Except as disclosed on Schedule 3.3:
(a) The execution, delivery and performance of this Agreement and the
Operating Agreements by the Seller Entities and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) result in a
breach or violation of any provision of Seller's charter or by-laws, (ii) result
in a violation of any statute, rule, regulation or ordinance applicable to the
Seller Entities, or any one or more of the Principal Premises, which violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or a Material Real Estate Impairment, (iii) subject to
the receipt of any consents of third Persons described in clauses (i)-(iii) of
Section 3.3(b), violate or result in a breach of or constitute an event of
default (or an event which might, upon the passage of time or the giving of
notice, or both, constitute an event of default) under any provision of, result
in acceleration or cancellation of any obligation under, or give rise to a right
by any party to terminate or amend its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, indenture, lien, Material
Instrument, material lease, agreement, instrument, order, judgment or decree or
other material arrangement or commitment (x) (1) to which any Seller Entity is a
party or (2) which primarily relates to the Business or the Purchased Assets and
(y) which violation, breach or default could be reasonably expected to have a
Material Adverse Effect or a material adverse effect on Seller, taken as a
whole, or with respect to Principal Premises, could be reasonably expected to
have a Material Real Estate Impairment (iv) violate any order, judgment, decree,
rule or regulation of any court or any governmental agency or body (x) having
jurisdiction over any Seller Entity or any of its assets or properties, and
which violation could be reasonably expected to have a Material Adverse Effect
or a material adverse effect on Seller, taken as a whole, or on the performance
by Seller of its obligations under this Agreement, or which could be reasonably
expected to have a Material Real Estate Impairment and (y) having jurisdiction
over the Business or the Purchased Assets.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Person is required by any Seller Entity in
connection with the execution and delivery of this Agreement, the Operating
Agreements or the consummation of the transactions contemplated hereby or
thereby, except for (i) any filings required to be made under the HSR Act; (ii)
consents of third Persons which are required to transfer or assign to Buyer any
Purchased Assets or assign the benefits of or delegate performance with regard
thereto, which consents are disclosed on Schedule 3.3; and (iii) such consents,
approvals, orders or
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authorizations, registrations, declarations or filings where failure of
compliance would not, individually or in the aggregate, have a Material Adverse
Effect or a Material Real Estate Impairment.
3.4. FINANCIAL STATEMENTS. Attached hereto as Schedule 3.4 are the
Combined Financial Statements of the Business for the three years ended May 26,
1996 (such financial statements of the Business being referred to collectively
herein as the "Business Financial Statements") and the Combined Financial
Statements of the Business for the six months ended November 24, 1996 and
November 26, 1995 (such financial statements of the Business being referred to
collectively herein as the "Interim Financial Statements"). The Business
Financial Statements and the Interim Financial Statements have been compiled
from and are in all material respects in accordance with Seller's books and
records for the Business and (i) fairly present the financial condition, assets
and liabilities of the Business as of their respective dates and the results of
operations of the Business for the periods then ended; (ii) have been prepared
in accordance with GAAP consistently applied; (iii) in the case of the Business
Financial Statements, are accompanied by the unqualified opinion of KPMG Peat
Marwick; and (iv) conform to the requirements of Regulation S-X of the
Securities and Exchange Commission. The Business Financial Statements reflect
allocations of expense for certain common support functions performed
predominately outside of the Principal Premises, such as general and
administrative support and marketing and sales support, which allocations are
disclosed on Schedule 3.4 hereto. Since January 1, 1994 the methodology of
making such allocations has not changed in any material respect. If the Closing
had occurred on September 29, 1996, the Closing Inventory Amount as of such date
would not have been less than the mean Closing Inventory Amount for such fiscal
year. During the five fiscal years ended May 26, 1996, there has not been any
material change in the method of accounting or keeping of books of account or
accounting practices with respect to the Business, except as described in
Seller's annual reports on Form 10-K for the five fiscal years ended May 26,
1996 as filed with the Securities and Exchange Commission.
3.5. ABSENCE OF CHANGES. Except as disclosed on Schedule 3.5, since May
26, 1996:
(a) Seller has (i) conducted the Business only in the usual and
ordinary course and (ii) operated the Business in accordance with past
practices;
(b) there has not been any change (or series of changes) in the
business, financial condition or results of operations of the Business, other
than changes arising in the ordinary course of business, none of which changes,
individually or in the aggregate, has had or reasonably would be expected to
have a Material Adverse Effect;
(c) no Seller Entity has made or promised to make any increase in any
salaries, rates of pay or other compensation or benefits of any Business
Employees, except for customary increases and progressions for employees which
increases and progressions were made in the ordinary course of business or
changes in benefits generally provided to Seller's occupational and/or
management employees;
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(d) the Business has not suffered any damage, destruction or loss of
any tangible assets or properties which would have been included as Purchased
Assets but for such damage, destruction or loss (whether or not covered by
insurance) in excess of $500,000;
(e) the Business has not suffered any strike or other labor trouble
that has had or would reasonably be expected to have a Material Adverse Effect
on the relationship between any Seller Entity and the Business Employees, and
has not entered into any material agreement or material negotiation with any
labor union or other collective bargaining representative of any Business
Employees;
(f) there has not been any change or, to the knowledge of Seller, any
threat of any change in any of its relations with, or any loss or, to the
knowledge of Seller, threat of loss of, any of the suppliers, distributors or
customers of the Business which, individually or in the aggregate, has had or
reasonably could be expected to have a Material Adverse Effect;
(g) other than in the ordinary course, there has not been any
cancellation, expiration, non-renewal or waiver of any right under any contract,
lease, agreement, license or permit which cancellation, expiration, non-renewal
or waiver, has had or could reasonably be expected to have a Material Adverse
Effect; and
(h) there has not been any sale, transfer or other disposition of, or
subjection to any Encumbrance of, any assets, properties or rights of the
Business, except for Permitted Encumbrances, Permitted Fee Title Exceptions,
Permitted Leasehold Exceptions, sales of inventory or obsolete or damaged
equipment or retirement of equipment, in each case in the ordinary course of
business, and sales of equipment to third Persons other than in the ordinary
course of business in an aggregate amount less than $500,000.
3.6. ASSETS. Except as disclosed on Schedule 3.6, the Seller Entities have
and upon consummation of the transactions contemplated by this Agreement, Buyer
(or the Fairchild Subsidiaries, as the case may be) will have good and
marketable title to, or leasehold interest in, all of the Purchased Assets
(other than the Non-Assignable Assets) free and clear of any Encumbrance except
for (i) Permitted Encumbrances, Permitted Fee Title Exceptions and Permitted
Leasehold Exceptions; (ii) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlords' or other like liens securing obligations
that are not delinquent; and (iii) liens for taxes and other governmental
charges which are not due and payable or which may be paid without penalty.
3.7. PERSONAL PROPERTY. Except as set forth on Schedule 3.7, to Seller's
knowledge, the items of personal property included in the Purchased Assets and
presently and actively used in the operation of the Business are in good
operating condition, free of any defects (except those resulting from normal
wear and operation) which individually or in the aggregate, reasonably could be
expected to have a Material Adverse Effect.
3.8. PERMITS, LICENSES. (a) Except as set forth on Schedule 2.1I, Schedule
3.8 or Schedule 3.12, there are no material Governmental Permits, licenses,
certificates of inspection or other authorizations, necessary for or used to
carry on the Business as now being conducted or to use and occupy any one or
more of the Principal Premises as now being used, which are
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required by currently effective laws, rules or regulations, other than, in each
case, those Governmental Permits, licenses, certificates of inspection or other
authorizations the absence of which, individually or in the aggregate, could not
reasonably be expected to have a (i) Material Adverse Effect on the Business as
now being conducted, or (ii) Material Real Estate Impairment with respect to the
use and occupancy of any one or more of the Principal Premises as now being
used.
(b) Except as set forth on Schedule 2.1I or Schedule 3.12, there are
no material Governmental Permits, licenses, certificates of inspection or other
authorizations, necessary for the division of the existing facility owned by
Seller Entities in South Portland, Maine into two parcels of real estate, one of
which shall be owned by Buyer and constitute Owned Real Estate as listed on
Schedule 2.1A (the "Portland Facility") or the conduct of the Business, as
contemplated subsequent to the Closing, or the use and occupancy of the Portland
Facility as contemplated subsequent to the Closing, which are required by
currently effective laws, rules or regulations other than, in each case, those
Governmental Permits, licenses, certificates of inspection or other
authorizations, the absence of which, individually or in the aggregate, could
not reasonably be expected to have a (i) Material Adverse Effect on the Business
at the Portland Facility as contemplated subsequent to the Closing, or (ii)
Material Real Estate Impairment with respect to the use and occupancy of the
Portland Facility as contemplated subsequent to the Closing.
3.9. COMPLIANCE WITH LAWS AND LITIGATION. (a) Except as set forth on
Schedule 3.9, with respect to the Business and the Principal Premises, the
Seller Entities are in compliance with all applicable laws, rules, regulations,
ordinances, decrees, orders, judgments, permits and licenses of or from
governmental authorities, including, without limitation, those relating to the
use and operation of any one or more of the Principal Premises, except for such
failures or non-compliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or a Material Real
Estate Impairment. Except as set forth on Schedule 3.9, there are no actions,
suits, proceedings or governmental investigations pending or, to the knowledge
of Seller, threatened against it with respect to the Business or the Purchased
Assets which individually or in the aggregate, could be reasonably expected to
have a Material Adverse Effect or a Material Real Estate Impairment.
(b) Except as set forth on Schedule 3.9, with respect to the Business
contemplated to be conducted at the Portland Facility subsequent to the Closing,
the Seller Entities will be in compliance with all applicable laws, rules,
regulations, ordinances, decrees, orders, judgments, permits and licenses of or
from governmental authorities, including, without limitation, those relating to
the use and operation of the Portland Facility contemplated subsequent to the
Closing, except for such failures or non-compliance which, individually or in
the aggregate, could not reasonably be expected to have a (i) Material Adverse
Effect on the Business at the Portland Facility as contemplated subsequent to
the Closing, or (ii) Material Real Estate Impairment with respect to the use and
occupancy of the Portland Facility as contemplated subsequent to the Closing.
Except as set forth on Schedule 3.9, there are no actions, suits, proceedings or
governmental investigations pending or, to the knowledge of Seller, threatened
against it with respect to the contemplated division of the Portland Facility or
with respect to the Business contemplated to be conducted at the Portland
Facility subsequent to the Closing, which
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individually or in the aggregate, could be reasonably expected to have a
Material Adverse Effect or a Material Real Estate Impairment.
3.10. EMPLOYEES. (a) Schedule 3.10 lists the names, job title, date of
hire or seniority date, and assigned location of all Business Employees
(designated as union-represented or not) as of its date, which date is not
earlier than the last day of the fiscal period ending not more than six weeks
prior to the date hereof. Except as set forth on Schedule 3.10, all individuals
whose primary responsibility relates to, and who are employed in the conduct of,
the Business are employed by the Seller Entities and there are no other such
individuals (including "leased employees" as defined in Section 414(n) of the
Code) whose continued services are material to the Business as a whole. None of
the Business Employees is covered by any union, collective bargaining or similar
agreements. Seller has provided Buyer with a true and correct copy of the
current collective bargaining agreements affecting the Business Employees.
Except as set forth on Schedule 2.1F, there are no written employment or
consulting agreements that constitute an Assumed Contract.
(b) Except as disclosed in Schedule 3.10 and except for any of the
following that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect: (i) there is no unfair labor practice charge
pending or, to the knowledge of Seller, threatened against any Seller Entity
relating to any of the Business Employees; (ii) there is no labor strike or
stoppage relating to any of the Business Employees actually pending or, to the
knowledge of Seller, threatened against or involving any Seller Entity; (iii) no
material labor grievance relating to any of the Business Employees is pending
or, to the knowledge of Seller, threatened; (iv) the Seller Entities have not in
the past three years experienced any work stoppage relating to any of the
Business Employees; (v) to the knowledge of Seller, within the past two years,
the Seller Entities have not been the subject of any union organizational
campaign with respect to any of the Business Employees; (vi) no Seller Entity
has any material labor negotiations in process with any labor union or other
labor organization relating specifically to the Business Employees; and (vii) to
the knowledge of Seller, there are no efforts in process by unions to organize
any Business Employees who are not now represented by recognized collective
bargaining agents.
3.11. AGREEMENTS. Schedule 2.1F contains a complete and correct list
of all outstanding Contracts (other than the Excluded Contracts) (a) which have
unexpired terms of more than one (1) year and cannot be terminated by the Seller
Entity which is a party thereto without penalty or payment on thirty (30) days
notice or less; (b) which would require over the full term thereof payments by
or to any Seller Entity or the Business of more than $250,000; or (c) pursuant
to which there were payments by or to any Seller Entity or the Business of more
than $250,000 for the calendar year ended December 31, 1995. True and correct
copies of the Contracts (other than the Excluded Contracts) listed on Schedule
2.1F have been delivered or made available to Buyer. Each of such Contracts is
valid, binding and enforceable against the Seller Entity which is a party
thereto, and to the knowledge of Seller, the other parties thereto, in
accordance with its terms and is in full force and effect, except those the
absence of which could not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 2.1F or Schedule 3.11, the Seller
Entities, and to the knowledge of Seller, each of the other parties thereto,
have performed in all material respects all obligations required to be performed
by them under, and are not in default in any material respect under, any of such
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Contracts and no event has occurred which, with notice or lapse of time, or
both, would constitute such a default, except for any such defaults which could
not reasonably be expected to have a Material Adverse Effect. Except as
disclosed on Schedule 2.1F or Schedule 3.11, no Seller Entity has received any
written claim from any other party to any such Contract that any Seller Entity
has breached any obligations to be performed by it thereunder, or is otherwise
in default or delinquent in performance thereunder, except any of the foregoing
which could not reasonably be expected to have a Material Adverse Effect. There
are no agreements not to compete binding upon any Seller Entity which affect or
restrict the conduct of the Business as currently conducted by the Seller
Entities or could reasonably be expected to affect or restrict the conduct of
the Business as currently conducted by the Seller Entities by Buyer (or any
Fairchild Subsidiary) after the Closing.
3.12. ENVIRONMENTAL MATTERS. Seller represents and warrants that in
relation to the Business and except as disclosed on Schedule 3.12 and except as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Business as a whole:
(a) The Seller Entities and their Affiliates have conducted and are
now conducting the Business in compliance with all applicable foreign, federal,
state and local environmental and employee protection laws, rules, regulations,
the common law, judgments orders, consent agreements, work practices and
standards in existence on the Closing Date ("Environmental Laws") and, to
Seller's knowledge, have conducted the Business in compliance with environmental
laws that existed prior to the Closing Date.
(b) The Seller Entities hold and are and have been in compliance with
all permits, certificates, licenses, approvals, registrations and authorizations
required under Environmental Laws ("Environmental Permits"), and all such
Environmental Permits are in full force and effect and are transferable or
assignable to Buyer. The Seller Entities have made or will make before the
Closing timely application or notification for the renewal of all Environmental
Permits for which Environmental Laws require that applications or notices must
be filed on or before the Closing to maintain the Environmental Permits in full
force and effect up to and through the Closing. Seller and Buyer will use their
respective Best Efforts to obtain any and all material consents, approvals,
authorizations, transfers, assignments or issuances of such Environmental
Permits to the Buyer before the Closing. Schedule 3.12 lists all such material
Environmental Permits and identifies whether such permits are transferrable or
assignable.
(c) No Seller Entity nor any of its subsidiaries or affiliates uses,
possesses, generates, treats, manufactures, processes, handles, stores,
recycles, transports or disposes of ("Manage" or "Management") Hazardous
Materials in connection with the operations of the Business in quantities or in
a manner which requires a treatment, storage or disposal permit or which imposes
generator requirements under the Resource Conservation and Recovery Act, as
amended ("RCRA") or any similar Environmental Laws.
(d) No Seller Entity nor any of its Affiliates has received any
written notice, citation, summons, order or complaint, no penalty has been
assessed or is pending or, to the knowledge of Seller or any of its Affiliates,
threatened by any third party including any
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Governmental Authority or other entity with respect to the Management or Release
of Hazardous Materials by or on behalf of any Seller Entity, its Affiliates in
relation to the Business or exposure to such Hazardous Materials. No Seller
Entity nor any of its Affiliates has received any written and, to the best of
their knowledge after due inquiry, no one else has received any requests for
information, notices of claim, demands or other notifications that it or they
are or may be potentially responsible with respect to any investigation or
cleanup of Hazardous Materials Released or Managed at the Principal Premises or
at any other property owned, operated or leased by any Seller Entity or any of
its Affiliates in connection with the Business or at any other property,
facility or off-site location to which the Hazardous Materials Released or
Managed by any Seller Entity or any of its Affiliates in connection with the
Business have been transported or disposed of or have come to be located.
(e) To Seller's knowledge, no Hazardous Materials have been released,
spilled, leaked, discharged, disposed of, pumped, poured, emitted, emptied,
injected, leached, dumped or allowed to escape ("Released") at, on, about, under
or from the Principal Premises or any property now or formerly owned, operated
or leased by any Seller Entity or any of its Affiliates in connection with the
operation of the Business.
(f) All environmental audits or reports conducted in relation to the
Principal Premises or in connection with the operation of the Business thereat
(collectively, "Environmental Audits") which are in the possession or control of
Seller have been provided or made available to Buyer.
(g) To the knowledge of Seller, no Seller Entity nor any of its
subsidiaries or affiliates has retained or assumed, by contract, law or
otherwise, any liability or responsibility for any environmental claims or
conditions with respect to the Business or the Purchased Assets.
(h) For purposes of this Section 3.12, "Principal Premises" shall be
deemed to include the Principal Premises and any Purchased Assets located
thereat and includes all environmental media on which or in which the Principal
Premises are located.
3.13. NO UNDISCLOSED LIABILITIES. None of the Seller Entities (with
respect to the Businesses) has any liability or obligation of any nature,
whether due or to become due, absolute, contingent or otherwise, including
liabilities for or in respect of federal, state and local taxes and any interest
or penalties relating thereto, which has had or would reasonably be expected to
have a Material Adverse Effect, except (a) to the extent reflected as a
liability on the Combined Financial Statement as of May 26, 1996 included in the
Financial Statements, (b) liabilities incurred in the ordinary course of
business since May 26, 1996 and fully reflected as liabilities on the Business'
books of account, none of which, individually or in the aggregate, has been
materially adverse to the Business taken as a whole and (c) liabilities
disclosed on Schedule 3.13.
3.14. WARRANTY CLAIMS. The Seller Entities have paid (whether in
money, property or services) claims relating to breaches of express or implied
warranties (excluding claims founded upon negligence, strict liability in tort
or other similar legal theory) made with respect to Business Products for the
years ended May 26, 1996, May 28, 1995 and May 29, 1994 in amounts not in excess
of 2% of sales of the Business for such years, respectively. Except as
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set forth on Schedule 3.14, there are no pending or, to the knowledge of Seller,
threatened claims for the breach of any express or implied warranty made with
respect to Business Products, except for individual claims which involve claims
for money, property or services of less than $50,000.
3.15. INVENTORY; PURCHASED ASSETS. Except as set forth on Schedule
3.15:
(a) All Inventory is located at the locations specified on Schedule
2.1E and all such Inventory that is not located on the Principal Premises is
identified as belonging to the Business.
(b) The Purchased Assets, taken together with the Non-Assignable
Assets (the extent to which Buyer will receive the benefits thereof under
Section 2.6) and Buyer's rights under the Operating Agreements, constitute
substantially all of the assets, properties, agreements, licenses (other than
the Non-Assignable Patent Licenses), intellectual property and other rights
which are necessary to enable Buyer after the Closing to manufacture the
Business Products in a manner consistent with the Seller Entities' past
practice, furnish Business Services or otherwise operate the Business after the
Closing.
(c) No Seller Entity nor any of its subsidiaries has received any
written notice of any infringement or violation of, or conflict with, any
intellectual property rights of any third Person by the Seller Entities or any
of their subsidiaries in connection with the conduct of the Business which could
reasonably be expected to have a Material Adverse Effect.
3.16. REAL ESTATE.
(a) OWNED PROPERTY. (i) Schedule 2.1A sets forth a list of all of
the real estate owned by any one or more of the Seller Entities and primarily
used in the Business (such real estate, together with all beneficial,
appurtenant easements and other appurtenances thereto and with all fixtures
attached thereto or forming a part thereof, is collectively referred to herein
as the "Owned Real Estate"), and includes the street address and legal
description of each parcel of the Owned Real Estate. Seller has good, valid,
marketable and indefeasible fee simple title to the Owned Real Estate, including
the buildings, structures, fixtures and improvements situated thereon or forming
a part thereof and the appurtenances thereto, subject to the Permitted Fee Title
Exceptions. Seller has made available to Buyer copies of all (i) title reports,
title insurance policies and commitments therefore, (ii) surveys, (iii)
documents and instruments creating or governing appurtenances, and (iv)
licenses, certificates of occupancy, plans, specifications and permits,
pertaining to the Owned Real Estate that are in the possession or control of any
of the Seller Entities.
(ii) The Owned Real Estate is free and clear of all Encumbrances,
including, without limitation, security interests, any conditional sale or other
title or interest retention agreements or arrangements, options to purchase,
rights of first refusal, liens, encumbrances, mortgages, pledges, assessments,
easements, covenants, restrictions, reservations, defects in title,
encroachments and other burdens, leases, subleases, rights of occupancy, deed
restrictions, chattel mortgages and collateral security arrangements, rights of
way, building use restrictions, exceptions, variances or reservations of any
nature whatsoever, except for the
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following (collectively, "Permitted Fee Title Exceptions"): (a) any Encumbrances
or title defects, conditions, easements, covenants or restrictions, if any, none
of which, individually or in the aggregate, would reasonably be expected to have
a Material Real Estate Impairment or which would cause such Owned Real Estate to
be unmarketable or uninsurable at customary title insurance rates, (b) zoning or
land use ordinances (subject to the compliance obligations under Section 3.8 and
3.9), (c) liens for ad valorem real property taxes and assessments not yet due
and payable, (d) with respect to the Portland Facility only, the Shared
Facilities Agreement relating to such shared facility, and (e) with respect to
the Seller's facility in Santa Clara, California only, the Shared Services and
Occupancy Agreement relating to such shared facility. The Owned Real Estate is
also subject to those matters set forth on Schedule 2.1-A, but unless such
matters otherwise qualify under clauses (a) through (c) above, such matters
shall not be deemed to be Permitted Fee Title Exceptions.
(iii) No Seller Entity has received written notice from any
governmental authority, insurance company which has issued a policy with respect
to any of the Owned Real Estate or any board of fire underwriters or other body
performing similar functions or any other Person which (a) relates to or alleges
a violation of or nonconformity with any zoning, building, safety, subdivision,
wetlands or other similar law, code, rule, regulation, ordinance, permit,
license, certificate, covenant, restriction or condition with respect to any of
the Owned Real Estate or the use thereof which nonconformity could, either
individually or in the aggregate, reasonably be expected to have a Material Real
Estate Impairment, or (b) requests the performance of any repairs, alterations
or other work to or in any of the Owned Real Estate, which violations, repairs,
alterations or other work have not yet been cured or performed, as applicable;
which failure to perform such work, either individually or in the aggregate,
would reasonably be expected to have a Material Real Estate Impairment. There
is no pending condemnation, expropriation, eminent domain, or similar proceeding
affecting any of the Owned Real Estate and, to the knowledge of Seller, no such
action, proceeding or litigation is threatened which proceeding or litigation,
if concluded adversely to Seller Entities, would reasonably be expected to have
a Material Real Estate Impairment. The sale of the Owned Real Estate to Buyer
does not and will not violate or conflict with the requirements of any
subdivision plan currently applicable to the Owned Real Estate.
(b) REAL ESTATE LEASES. (i) Schedule 3.16 sets forth a list of all
of the leases or rights of occupancy pursuant to which the Seller Entities (or
any of them) lease or sublease any real property or interest therein related to
or used in the Business (collectively, as heretofore modified, amended or
extended, the "Leases"), including the identification of each of the lessors
thereof and the street addresses of all of the real estate demised under any of
the Leases (collectively, the "Leased Real Estate"). Except as set forth on
Schedule 3.16, one or more of the Seller Entities is the lessee under all
Leases, and no party other than one or more of the Seller Entities has any right
to possession, occupancy or use of any of the Leased Real Estate. Copies of (a)
leasehold title insurance policies and commitments therefor, title reports,
surveys, licenses, certificates of occupancy, plans, specifications, permits and
other documents, pertaining to the Leased Real Estate, if any, that are in the
possession or control of any of the Seller Entities, and (b) each of the Leases,
including all amendments, modifications and extensions, and together with all
subordination, non-disturbance and/or attornment agreements or any brokerage
commission agreements related thereto, and (c) any other material agreements
relating to the Leases have been made available by Seller to Buyer. Each of the
Leases is valid and in
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full force and effect and is binding and enforceable in accordance with its
terms. Except as set forth on Schedule 3.16-1, none of the Seller Entities has
received any written notice of any material default under any provision of any
of the Leases which default remains uncured. There is no material default by
any Seller Entity in the payment of rent under any Lease beyond any applicable
notice and cure period. None of the Seller Entities has given notice to any
other party to any of the Leases that such party is in default under any of the
provisions thereof which default remains uncured.
(ii) Except as set forth in Schedule 3.16, the Seller Entities
are in actual possession of the Leased Real Estate. The Seller Entities have
good and valid title to all the leasehold estates conveyed under the Leases free
and clear of all Encumbrances, including, without limitation, security
interests, any conditional sale or other title or interest retention agreements
or arrangements, options to purchase, rights of first refusal, liens,
encumbrances, mortgages, pledges, assessments, easements, covenants,
restrictions, reservations, defects in title, encroachments and other burdens,
leases, subleases, rights of occupancy, deed restrictions, chattel mortgages and
collateral security arrangements, rights of way, building use restrictions,
exceptions, variances or reservations of any nature whatsoever, except for the
following (collectively, "Permitted Leasehold Exceptions"): (a) zoning or land
use ordinances (subject to the compliance obligations under Sections 3.8 and
3.9), (b) liens for ad valorem real property taxes and assessments not yet due
and payable, (c) with respect to the Portland Facility only, the Shared
Facilities Agreement relating to such shared facility, (d) with respect to
Seller's Santa Clara, California facility only, the Shared Services and
Occupancy Agreement relating to such shared facility, and (e) any Encumbrances
or title defects, conditions, easements, covenants or restrictions effecting or
encumbering the fee interest of the Leased Real Estate, none of which, either
individually, or in the aggregate, would reasonably be expected to have a
Material Real Estate Impairment. The Leased Real Estate is also subject to
those matters set forth on Schedule 3.16, but unless such matters otherwise
qualify under clause (a), (b), and (e) above, such matters will not be deemed to
be Permitted Leasehold Exceptions.
(iii) No Seller Entity has received written notice from any
governmental authority, insurance company which has issued a policy with respect
to any of the Leased Real Estate or any board of fire underwriters or other body
performing similar functions or any other Person which (a) relates to or alleges
a violation of or nonconformity with any zoning, building, safety, subdivision,
wetlands or other similar law, code, rule, regulation, ordinance, permit,
license, certificate, covenant, restriction or condition with respect to any of
the Leased Real Estate or the use thereof which nonconformity could, either
individually or in the aggregate, reasonably be expected to have a Material Real
Estate Impairment, or (b) requests the performance of any material repairs,
alterations or other work to or in any of the Leased Real Estate, which
violations repairs, alterations or other work have not yet been cured or
performed, as applicable; which failure to perform such work, either
individually or in the aggregate, would reasonably be expected to have a
Material Real Estate Impairment. There is no pending condemnation,
expropriation, eminent domain, or similar proceeding affecting any of the Leased
Real Estate and, to the knowledge of Seller, no such action, proceeding or
litigation is threatened, which proceeding or litigation if concluded adversely
to the Seller Entities would reasonably be expected to have a Material Real
Estate Impairment.
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(iv) Except as set forth on Schedule 3.16, there are no brokerage
commissions or finder's fees due from any of the Seller Entities which are
currently due and unpaid with regard to any of the Leases or the Leased Real
Estate, or which will become due at any time in the future with regard to the
Leases or the Leased Real Estate.
(v) Except as set forth on Schedule 3.16, there have been no
casualties which could result in the termination by any landlord pursuant to the
terms of such lease, or pursuant to the written agreement of the landlord and
tenant.
3.17. OWNERSHIP OF SUBSIDIARIES. Except for the Fairchild
Subsidiaries, the Purchased Assets do not include the stock of, or any other
equity or debt interest in, any other corporation or business entity. Each
Fairchild Subsidiary is (or will be prior to Closing) a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, which jurisdiction is set forth opposite its name
on Schedule 3.17. Each Fairchild Subsidiary has (or will have prior to Closing)
all requisite power and authority to own or lease its properties and assets as
now owned or leased and to carry on its business as and where now being
conducted, except for any failure to have such power and authority which could
not reasonably be expected to have a Material Adverse Effect. The copies of the
articles of incorporation and bylaws, as amended to date, of each Fairchild
Subsidiary in existence as of the date hereof and which have been delivered to
Buyer, are correct and complete and are in full force and effect. The currently
authorized, issued and outstanding shares of capital stock of each Fairchild
Subsidiary in existence on the date hereof and the record holders as of the date
hereof of such shares are set forth on Schedule 3.17. All of such outstanding
shares have been (or will be prior to Closing) duly authorized, validly issued
and are fully paid and nonassessable, are directly or indirectly owned by Seller
free and clear of all liens, claims, security interests, pledges, charges,
equities, options, restrictions and encumbrances of whatsoever nature, were not
issued in violation of the terms of any agreement or other understanding binding
upon any Fairchild Subsidiary or Seller, and were issued in compliance with all
applicable federal and state securities or "blue sky" laws and regulations.
There are no outstanding options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the capital stock of any
Fairchild Subsidiary and no securities convertible into or exchangeable for any
of such capital stock.
3.18. TAX MATTERS. Except as set forth on Schedule 3.18 and except as
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect:
(a) The Seller Entities have (A) filed or provided all Returns
required to be filed or provided with respect or relating to, in connection with
or arising out of the Business and each Return is true, complete and accurate,
(B) timely paid all Taxes shown thereon as due and owing with respect or
relating to, in connection with or arising out of the Business, and (C) in
accordance with GAAP has provided for, on its books of account and related
records, liability for all other current Taxes not yet paid with respect to, or
in connection with or arising out of the Business. To Seller's knowledge, no
Seller Entity has received from any Governmental Authority any written notice of
proposed adjustment, deficiency or underpayment of Taxes with respect to, or in
connection with or arising out of the Business, which notice has not been
satisfied by payment or been withdrawn, and there are no claims that have been
asserted or threatened in writing relating to such Taxes against any Seller
Entity.
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(b) There are no liens with respect to Taxes upon the Purchased
Assets other than customary liens for current Taxes not yet due and payable.
(c) Each Fairchild Subsidiary has (A) duly filed or provided, or has
had filed or provided on its behalf, all Returns required to be filed by it, and
each such Return is true, complete and accurate; (B) paid, or has had paid on
its behalf, all Taxes shown to have become due pursuant to such Returns; and (C)
in accordance with GAAP has provided for, on its books of account and related
records, liability for all other current Taxes not yet paid.
(d) To the knowledge of Seller, there is no action, suit, proceeding
or claim currently pending regarding Taxes with respect to any Fairchild
Subsidiary. No Return of any Fairchild Subsidiary is being examined by, and no
written notification of intention to examine has been received from, any
Governmental Authority. No issue raised by any Governmental Authority in
connection with any Return with respect to Taxes of any Fairchild Subsidiary is
currently pending. No presently effective waiver or extension of any statute of
limitation with respect to Taxes has been given by or requested from any
Fairchild Subsidiary.
(e) There is no ruling issued to any Fairchild Subsidiary (or closing
agreement to which any Fairchild Subsidiary is a party) concerning Taxes from
(or with) any Governmental Authority which would have continuing material effect
on any Fairchild Subsidiary after the Closing Date.
(f) No Fairchild Subsidiary is a party to any tax sharing or similar
agreement in respect of Taxes of a Person other than a Fairchild Subsidiary.
(g) None of the Fairchild Subsidiaries has reported or expects to
report income, loss, deduction or credit in its capacity as a partner in another
entity for federal income tax purposes.
(h) Each Seller Entity is a United States person within the meaning
of Section 7701(a)(30) of the Code.
(i) There is no lien or security interest in favor of any
Governmental Authority on any of the assets of any Fairchild Subsidiary that
arose in connection with the failure (or alleged failure) to pay any Tax except
for customary liens for current Taxes not yet due and payable.
The representations and warranties set forth in this Section 3.18 are not
applicable to the extent that such Taxes do not constitute an encumbrance
against the Purchased Assets or will not become a liability of FSC Semiconductor
Corporation, Buyer or any of the Fairchild Subsidiaries.
3.19. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.19(a) lists all "employee
benefit plans," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA) and all other
material pension, profit sharing, retirement, supplemental retirement, stock,
stock option, basic and supplemental accidental death and dismemberment, basic
and supplemental life and health insurance, post-retirement medical or life,
welfare, dental,
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vision, savings, bonus, deferred compensation, incentive compensation, business
travel and accident, holiday, vacation, severance pay, salary continuation, sick
pay, sick leave, short and long term disability, tuition refund, service award,
company car, scholarship, relocation, patent award, fringe benefit and other
employee benefit plans, arrangements, contracts, or policies, qualified or
unqualified, funded or unfunded, (i) maintained, contributed to, or required to
be contributed to by Seller or any ERISA Affiliate with respect to any Business
Employees, or (ii) pursuant to which Seller or any ERISA Affiliate may have any
liability with respect to any Business Employees, within the United States (the
"Benefit Plans").
(b) As applicable, with respect to each of the Benefit Plans, true
and complete copies of (i) all plan documents (including all amendments and
modifications thereof) and all related trust agreements and insurance contracts;
(ii) the last three filed Form 5500 series and all Schedules thereto, as
applicable; (iii) the current summary plan descriptions and all summary material
modifications thereto; and (iv) the most recent determination letter issued
with respect to each Benefit Plan has been delivered or made available to Buyer.
(c) Each Benefit Plan has been maintained, operated and administered
in compliance in all material respects with its terms and the applicable
provisions of ERISA and the Code.
(d) No Benefit Plan is subject to Title IV of ERISA.
(e) Seller's Retirement and Savings Program is the only Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA and which is intended to meet the qualification requirements of Section
401(a) of the Code (the "Pension Plan"). The Pension Plan meets the
qualification requirements of Section 401(a) of the Code and each related trust
is exempt from taxation under Section 501(a) of the Code.
(f) The Pension Plan has received a determination letter from the IRS
to the effect that such Pension Plan is qualified and all related trusts are
exempt from federal income taxes and no determination letter with respect to the
Pension Plan has been revoked nor has the Pension Plan been amended since the
date of its most recent determination letter in any respect which would
adversely affect its qualification.
(g) There are no pending audits or investigations by any governmental
agency involving the Benefit Plans, and no threatened or pending claims (except
for individual claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings involving any Benefit Plan.
(h) With respect to each Benefit Plan that is a "group health plan"
within the meaning of Section 607 of ERISA and that is subject to Section 4980B
of the Code, Seller and each ERISA Affiliate comply in all material respects
with the continuation coverage requirements of the Code and ERISA with respect
to Business Employees and their eligible beneficiaries and dependents.
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(i) Except as set forth in Schedule 3.19(i), no Benefit Plan provides
medical or life insurance benefits, beyond termination of service or retirement
other than coverage mandated by law.
(j) Except as set forth on Schedule 3.19(j), the execution of, and
performance of the transactions contemplated by this Agreement will not
constitute an event under any Benefit Plan that will result in any payment
(whether as severance pay or otherwise), acceleration, vesting or increase in
benefits with respect to any employee. No Benefit Plan provides for "parachute
payments" within the meaning of Section 280G of the Code.
(k) Schedule 3.19(k) lists all material pension, profit sharing,
retirement, supplemental retirement, stock, stock option, basic and supplemental
accidental death and dismemberment, basic and supplemental life and health
insurance, post-retirement medical or life, welfare, dental, vision, savings,
bonus, deferred compensation, incentive compensation, business travel and
accident, holiday, vacation, severance pay, salary continuation, sick pay, sick
leave, short and long term disability, tuition refund, service award, company
car, scholarship, relocation, patent award, fringe benefit and other employee
benefit plans, arrangements, contracts or policies, whether funded or unfunded
(i) maintained, contributed to, or required to be contributed to by Seller or
any Affiliate with respect to any Business Employees, or (ii) pursuant to which
Seller or any Affiliate may have any liability with respect to any Business
Employees, outside the United States (the "Foreign Plans"). Schedule 3.19(k)(i)
lists all the Foreign Plans that are not sponsored by a Fairchild Subsidiary (a
"Non-Subsidiary Foreign Plan").
(l) A true and complete copy of each Foreign Plan including all
amendments and modifications thereof together with all related trust agreements
and insurance contracts have been delivered or made available to Buyer.
(m) Except as set forth on Schedule 3.19(m), each Foreign Plan has
been maintained, operated and administered in compliance in all material
respects with its terms and with all applicable laws.
(n) All contributions and other payments required to be made by
Seller or any Affiliate to any Foreign Plan with respect to any period up to and
including the Closing Date shall have been made or accrued and booked on or
before the Closing Date.
(o) There are no pending audits or investigations by any governmental
or quasi-governmental agency involving the Foreign Plans and no threatened or
pending claims (except for individual claims for benefits payable in the normal
operation of the Foreign Plan), suits or proceedings involving any Foreign Plan.
3.20. No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT BUYER AND SELLER
ACKNOWLEDGE AND AGREE THAT NONE OF SELLER OR ANY OF ITS AFFILIATES, AGENTS,
EMPLOYEES OR REPRESENTATIVES IS MAKING, WHETHER CONTAINED IN OR REFERRED TO IN
THE EVALUATION MATERIALS THAT HAVE BEEN OR SHALL HEREAFTER BE PROVIDED TO BUYER
OR ANY OF ITS
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AFFILIATES, AGENTS OR REPRESENTATIVES (INCLUDING WITHOUT LIMITATION THE
CONFIDENTIAL OFFERING MEMORANDA RELATING TO THE BUSINESS (THE "CONFIDENTIAL
OFFERING MEMORANDA") (SUCH MATERIALS COLLECTIVELY, THE "EVALUATION MATERIALS")),
ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE
EXPRESSLY GIVEN BY SELLER IN THIS AGREEMENT, THE RECAP AGREEMENT AND THE
OPERATING AGREEMENTS, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR
REPRESENTATION AS TO THE VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY AS TO
ANY OF THE PROPERTIES OR ASSETS OF THE BUSINESS CARRIED OUT BY SELLER.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1. Organization and Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power and corporate authority to execute and deliver this
Agreement, the Purchase Price Note and the Operating Agreements and to effect
the transactions contemplated hereby and thereby and has duly authorized the
execution, delivery and performance of this Agreement, the Purchase Price Note
and the Operating Agreements by all necessary corporate action. Buyer has all
corporate power and corporate authority necessary to carry on its business as
now being conducted and to own or lease and operate its properties as and in the
places where such business is now conducted and such properties are now owned,
leased or operated.
4.2. Authorization; Binding Obligation. This Agreement, the Purchase Price
Note and the Operating Agreements have been duly executed and delivered by Buyer
and this Agreement, the Purchase Price Note and the Operating Agreements are the
valid and legally binding obligations of Buyer, enforceable against it in
accordance with their terms.
4.3. No Violations. (a) The execution, delivery and performance of this
Agreement, the Purchase Price Note and the Operating Agreements by Buyer and the
consummation of the transactions contemplated hereby and thereby do not and will
not (i) result in a breach or violation of any provision of Buyer's charter or
by-laws or in a material violation of any statute, rule, regulation or ordinance
applicable to Buyer or (ii) violate or result in a breach of or constitute an
event of default (or an event which might, upon the passage of time or the
giving of notice, or both, constitute an event of default) under any provision
of, result in acceleration or cancellation of any obligation under, or give rise
to a right by any party to terminate or amend its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien,
material lease, agreement, instrument, order, judgment, decree or other material
arrangement or commitment to which Buyer is a party or by which its assets or
properties are bound, or violate any order, judgment, decree, rule or regulation
of any court or any governmental agency or body having jurisdiction over Buyer
or any of its assets or properties.
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(b) No consent, approval, order or authorization of or registration,
declaration or filing with, any Person is required by Buyer in connection with
the execution and delivery of this Agreement, the Purchase Price Note, the
Operating Agreements or the consummation of the transactions contemplated hereby
or thereby, except for (i) any filings required to be made under the HSR Act,
and (ii) such consents, approvals, orders or authorizations, registrations,
declarations or filings where failure of compliance would not, individually or
in the aggregate, have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
4.4. Inspections; Limitation of Seller's Warranties. Buyer is an informed
and sophisticated participant in the transactions contemplated by this Agreement
and has undertaken such investigation, and has been provided with and has
evaluated certain documents and information in connection with the execution,
delivery and performance of this Agreement. Buyer acknowledges that it is
acquiring the Business without any representation or warranty, express or
implied, by Seller or any of its Affiliates except as expressly set forth
herein, in the Recap Agreement and in the Operating Agreements. In furtherance
of the foregoing, and not in limitation thereof, Buyer acknowledges that, except
as expressly set forth herein, in the Recap Agreement and in the Operating
Agreements, no representation or warranty, express or implied, of Seller or any
of its advisors, including, without limitation, Deutsche Morgan Grenfell, BA
Partners, Seller's lawyers (other than the opinions of such lawyers delivered in
connection with this Agreement), KPMG Peat Marwick (except in connection with
financial statements prepared by such accountants accompanied by an opinion of
such accountants thereon) or any of their respective Affiliates or
representatives, with respect to the Business (including, without limitation,
the Evaluation Materials, the Confidential Offering Memorandum, any other
information provided to Buyer pursuant to the Confidentiality Agreement and any
financial projection or forecast delivered to Buyer with respect to the revenues
or profitability which may arise from the Business either before or after the
Closing Date) shall form the basis of any claim against Seller or any of its
advisors, or any of their respective Affiliates or representatives, except as
otherwise provided in Section 3.20. With respect to any financial projection or
forecast delivered on behalf of Seller to Buyer, Buyer acknowledges that there
are uncertainties inherent in attempting to make such projections and forecasts
and that it is familiar with such uncertainties.
ARTICLE V
CERTAIN COVENANTS
5.1. Information. (a) Seller and Buyer will provide to each other and to
their respective officers, employees, counsel and other representatives, upon
request (subject to any limitations that are reasonably required to preserve any
applicable attorney-client privilege) reasonable access to their respective
officers and employees and reasonable access for inspection and copying of all
Business Records, Governmental Permits, Contracts and any other information
existing at the Closing Date and relating to the conduct of the Business, and
will make their respective officers and employees available, to the extent such
availability does not unreasonably interfere with the conduct of the Business by
Buyer, or the conduct of its business by Seller, as the case may be, as is
reasonably necessary to enable the party requesting such information to: (i)
comply with reporting, filing or other requirements related to the conduct of
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the Business and imposed on such party by any local, state or federal court,
agency or regulatory body or taxing authority; (ii) assert or defend any claims
or allegations in any arbitration or in any administrative or legal proceeding
related to the conduct of the Business other than claims or allegations which
one party to this Agreement has asserted against the other; or (iii) subject to
clause (ii) above, perform its obligations under this Agreement. Seller and
Buyer shall each maintain all of the foregoing information in accordance with
their normal document retention policies and if either party desires to destroy
or dispose of any of the foregoing which are material to the other party at any
time prior to the tenth anniversary of the Closing, such party will offer first
in writing at least 60 days prior to such destruction or disposition to
surrender them to the other party.
(b) Subject to applicable law, Seller agrees to make available to
Buyer, for inspection and copying by Buyer, all employment and personnel records
(including medical records) and information relating to any Business Employee
hired by Buyer.
(c) The party requesting the information and assistance provided in
clauses (a) and (b) of this Section 5.1 shall reimburse the other party for all
out-of-pocket costs and expenses incurred by such party in providing such
information and in rendering such assistance. The access to files, books and
records contemplated by this Section 5.1 shall be during normal business hours
and upon not less than two Business Days prior written request and shall be
subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein. Buyer agrees to preserve all Business Records and Governmental Permits
delivered to it by Seller for at least three (3) years after the Closing Date.
5.2. Tax Reporting and Allocation of Consideration. Buyer and Seller agree
that the sale of the Purchased Assets hereunder is a fully taxable sale for
income tax purposes. Seller further agrees that neither Buyer nor FSC
Semiconductor Corporation will be treated on Seller's federal income tax returns
(or amended federal income tax returns) as a member of any consolidated group of
which Seller is or was a member with respect to periods ending on or prior to
the Closing Date or beginning prior to and ending after the Closing Date. Buyer
and Seller recognize their mutual obligations pursuant to Section 1060 of the
Code to timely file IRS Form 8594 (the "Asset Acquisition Statement") with each
of their respective federal income tax returns. Accordingly, Buyer and Seller
agree to cooperate in the preparation of the Asset Acquisition Statement for
timely filing in each of their respective federal income tax returns in
accordance with a written statement (the "Statement of Allocation") prepared in
accordance with Schedule 5.2 (to be attached at Closing), setting forth an
allocation of the Purchase Price among such Purchased Assets and the covenants
not to compete and not to solicit contained in Section 5.6 in accordance with
the provisions of Section 1060 of the Code and the Treasury Regulations
thereunder. The Statement of Allocation shall be prepared by Seller. Seller
shall deliver, subject to Buyer's prior review and written approval the
Statement of Allocation to Buyer at the Closing. If Buyer approves the
Statement of Allocation, then, unless otherwise prohibited by law, all federal,
state and local income tax returns of Buyer and Seller shall be filed
consistently with the allocations made pursuant to the Statement of Allocation.
If Buyer does not approve the Statement of Allocation and if Buyer and Seller,
after good faith negotiations, cannot agree on the allocation of the
consideration among the Purchased Assets and covenants, then no Statement of
Allocation shall be prepared, and each party shall prepare and file its tax
returns
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in accordance with its own allocations. Seller and Buyer acknowledge and agree
that (x) Seller will be responsible for and perform all tax withholding, payment
and reporting duties with respect to any wages and other compensation paid by
Seller to any Business Employee in connection with the operation of the Business
prior to the Closing; and (y) Buyer will be responsible for and perform all tax
withholding, payment and reporting duties with respect to any wages and other
compensation paid by Buyer to any employee in connection with the operation of
the Business after the Closing. Seller and Buyer agree to follow the Standard
Procedure specified in Rev. Proc. 96-60, whereby, among other things, each will
be responsible for the reporting duties with respect to its own wages and
compensation to employees in connection with the operation of the Business.
5.3. Operating Agreements. On or prior to the Closing Date, Buyer shall
execute and deliver to Seller and Seller shall execute and deliver to Buyer the
following agreements (the "Operating Agreements"): Technology Licensing and
Transfer Agreement, Transition Services Agreement, Fairchild Foundry Services
Agreement, Revenue Side Letter, Fairchild Assembly Services Agreement, National
Foundry Services Agreement, National Assembly Services Agreement, Mil/Aero Wafer
and Services Agreement, Shared Facilities Agreement (for South Portland Site),
Shared Services Agreement (for South Portland Site) and Shared Services and
Occupancy Agreement and the agreements contemplated by the foregoing agreements.
5.4. Tax Matters.(a) Seller will be responsible for the preparation and
filing of (i) all Returns of any Fairchild Subsidiary that are due (giving
effect to valid extensions) on or before the Closing Date or are due after the
Closing Date for a taxable period that ends on or before the Closing Date and
(ii) all Returns for the Business that are due (giving effect to valid
extensions) after the Closing Date for all taxable periods ending on or before
the Closing Date. Seller shall make all payments required with respect to any
such Return as shown or required to be shown thereon; provided, however, Seller
and Buyer will reimburse each other for all Taxes prorated in accordance with
Section 5.4 (c).
(b) Buyer will be responsible for the preparation and filing of all
other Returns of any Fairchild Subsidiary or relating to the Business. Buyer
will make all payments required with respect to any such Return; provided,
however, Seller and Buyer will reimburse each other for all Taxes prorated in
accordance with Section 5.4 (c).
(c) Taxes imposed on a Fairchild Subsidiary for any taxable period
that begins before and ends after the Closing Date shall be allocated to and
paid or caused to be paid by (i) Seller for the period up to and including the
day before the Closing Date, and (ii) Buyer for the period beginning on the
Closing Date. For purposes of this Agreement, Taxes of any Fairchild Subsidiary
for the period up to and including the day before the Closing Date and for the
period beginning on the Closing Date shall be apportioned on a per diem basis in
the case of any such Taxes not measured or measurable in whole or in part with
reference to net or gross income, sales or receipts, capital expenses or
compensation expenses, and all other such Taxes shall be determined on the basis
of an interim closing of the books of the Fairchild Subsidiary as of the end of
the day before the Closing Date.
(d) Seller and Buyer shall provide reasonable cooperation and
information to each other in connection with (i) the preparation or filing of
any Return, amended Return, Tax
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election, Tax consent or certification, or any claim for a Tax refund, (ii) any
determination of liability for Taxes, and (iii) any audit, examination or other
proceeding in respect of Taxes related to any Fairchild Subsidiary or the
Business. Such cooperation shall include providing copies of all relevant
Returns, together with accompanying schedules and related work papers, documents
relating to determinations by any Governmental Authority and records containing
the ownership and tax basis of property, which either party may possess. Seller
and Buyer shall make available on a reasonable basis, employees of the Seller,
Buyer, or any Fairchild Subsidiary as the case may be, whose reasonable
out-of-pocket costs, if any, such as travel and lodging, shall be reimbursed by
the party to which such employees are made available. Seller and Buyer shall at
their own cost and expense preserve all Returns, schedules, workpapers and all
material records or other documents relating thereto until the expiration of any
applicable statute of limitations, including extensions thereof, provided that
notice of such extension is given to the party which did not grant the
extension. Seller and Buyer shall not destroy or otherwise dispose of any
Returns, schedules, workpapers, information, records and documents without first
providing the other party a reasonable opportunity to review and copy the same.
The party requesting such information, records and documents shall bear the
reasonable out-of-pocket costs and expenses incurred in connection with
providing the same. For the Seller's fiscal year ending May 25, 1997, Buyer
shall at its own cost and expense complete and submit any Tax data packages
required by Seller consistent with past practices of Seller's Tax Department.
Any information obtained under this Section 5.4 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Returns,
claims for a Tax refund or in conducting any audit, examination or other
proceeding in respect of Taxes.
(e) Seller shall have the right, at its own expense, to control any
audit or examination by any Governmental Authority, to initiate any claim for
refund, to amend any Return, or to contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any Taxes for any taxable period ending on or before the Closing
Date, except that Seller shall consult with Buyer and obtain Buyer's consent
(which consent shall not be unreasonably withheld) as to any of the foregoing if
Buyer, any of its Subsidiaries or any Fairchild Subsidiary may be adversely
affected by such action. Buyer shall promptly notify Seller of the receipt of
all notices, audits, examinations or other proceedings, information or document
requests, requests for conferences, meetings, interviews or testimony of
employees of Buyer or any Fairchild Subsidiary and other correspondence in
respect of Taxes related to any Fairchild Subsidiary or the Business for any
taxable period ending on or before the Closing Date. Seller shall have the
right, at its own expense to participate in all conferences, meetings,
interviews or testimony of employees of Buyer or any Fairchild Subsidiary and
other correspondence in respect of Taxes related to any Fairchild Subsidiary or
the Business for any taxable period ending on or before the Closing Date. With
respect to any audit or other proceeding relating to Taxes for taxable periods
that begin before and end after the Closing Date ("Straddle Period Taxes"),
Seller shall have the right, at its own expense, to participate (i) in all
conferences, meetings or proceedings with any Governmental Authority, the
subject matter of which is or includes Straddle Period Taxes and (ii) in all
appearances before any court, the subject matter of which is or includes
Straddle Period Taxes. Buyer agrees not to settle or compromise any issue
relating to Straddle Period Taxes without Seller's consent (which consent shall
not be unreasonably withheld) unless Buyer first waives, in writing, any rights
to indemnification it may have under this Agreement relating to such Straddle
Period Taxes.
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(f) Effective as of the Closing Date, Seller shall cause any tax
sharing agreements to which any Fairchild Subsidiary is a party to be terminated
as to such Fairchild Subsidiary and such Fairchild Subsidiary shall have no
current or continuing obligations under any such agreement after the Closing
Date.
5.5. Employee Matters. (a) Effective as of the Closing Date, except for
the Fab Employees, Buyer shall offer to employ all of the Business Employees who
are not otherwise employed by a Fairchild Subsidiary on substantially the same
terms and conditions (other than the Benefit Plans set forth on item (c) of
Schedule 3.5) as they were employed immediately before the Closing Date;
provided, that such offer of employment with respect to any Business Employee
who is on Medical Leave as of the Closing Date shall only be effective if and
when such Business Employee is ready, willing and able to return to active duty
and provided further, that notwithstanding Buyer's offer of employment,
responsibility for the workers' compensation benefits of any Business Employee
shall be governed by Section 5.5(j). In addition, Buyer shall offer to employ
the Fab Employees in accordance with the terms and conditions set forth on
Schedule 5.5A. All of the Business Employees who accept such offers of
employment are hereinafter referred to as "Transferred Employees" and shall be
considered to become "Transferred Employees" as of the Closing Date, except for
such Business Employees who are on Medical Leave or classified as a Fab Employee
as of the Closing Date, each of whom shall be considered to become a
"Transferred Employee" as of the date he or she returns to active duty with the
Buyer after the Closing Date. Nothing in this Section 5.5 shall limit Buyer's
authority to terminate the employment of any Business Employee at any time after
he or she becomes a Transferred Employee for any reason.
(b) Effective as of the Closing Date, Buyer shall take, or cause to
be taken, all action necessary and appropriate to establish employee benefit
plans for the benefit of Transferred Employees and their eligible beneficiaries
and dependents that correspond to, and that are substantially similar in the
aggregate (excluding equity based features and the Benefit Plans set forth on
item (c) of Schedule 3.5) to Seller's Benefit Plans and Non-Subsidiary Foreign
Plans set forth on Schedule 3.19(a) and Schedule 3.19(k)(i) (such plans
established by Buyer are hereinafter referred to as "Buyer's Plans"). Except as
specifically provided otherwise in this Section 5.5 or as required by law, each
Transferred Employee and his or her eligible beneficiaries and dependents shall
cease to participate in and accrue benefits under Seller's Benefit Plans and
Non-Subsidiary Foreign Plans, and shall become eligible to participate in and
accrue benefits under Buyer's Plans, as of the date such Transferred Employee
becomes a Transferred Employee. Except as specifically provided otherwise in
this Section 5.5, Seller shall remain responsible for all liabilities or
obligations of any Seller Entity or Affiliate to the Business Employees or any
of their other present or former employees (or the Beneficiary of any such
individual) arising out of their employment relationship with any Seller Entity
or any Affiliate, including without limitation, claims asserted under any
Benefit Plan, Non-Subsidiary Foreign Plan or collective bargaining agreement or
claims for severance, bonuses or any other benefits that must be paid as a
result of the transactions contemplated by this Agreement (whether or not such
individual becomes a Transferred Employee) or as a result of the termination of
such employees by any Seller Entity, including severance, bonuses or any other
benefits arising under the agreements with directors, officers and employees set
forth on Schedule 3.5 other than claims resulting from or arising out of a
failure of Buyer to comply with its obligations under this Section 3.5 other
than claims resulting from or arising out of a failure
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of Buyer to comply with its obligations under this Section 5.5. Buyer shall be
responsible for all liabilities relating to or arising out of Buyer's Plans.
Nothing in this Section 5.5 shall prevent Buyer from amending, modifying or
terminating any of Buyer's Plans at any time after the Closing Date or prevent
Seller from amending, modifying or terminating any of Seller's Benefit Plans and
Non-Subsidiary Foreign Plans at any time after the date hereof; provided, if
Seller makes any amendment or modification to a Seller's Benefit Plan or
Non-Subsidiary Foreign Plan after the date hereof that increases materially the
costs of providing benefits thereunder to any Business Employee, the
corresponding Buyer's Plan need not incorporate such amendment or modification.
Notwithstanding the foregoing sentence, Buyer's Plans shall at all times after
the Closing Date treat pre-Closing service by Transferred Employees with Seller
and its affiliates in the same manner as service with Buyer for all purposes
under Buyer's Plans other than accrual of benefits.
(c) Seller's Benefit Plans and Non-Subsidiary Foreign Plans that are
identified on Schedule 3.19(a) or Schedule 3.19(k)(i) as Medical Plans, Dental
Plans and other Welfare Benefit Plans shall be responsible for all claims
incurred by any Transferred Employee and any eligible beneficiary or dependent
thereof before the date such Transferred Employee becomes a Transferred Employee
(regardless of when submitted), and the corresponding Buyer's Plans shall be
responsible for all claims incurred by any Transferred Employee and any eligible
beneficiary or dependent thereof on or after the date such Transferred Employee
becomes a Transferred Employee. Such Buyer's Plans shall provide coverage to
Transferred Employees and their eligible beneficiaries and dependents without
regard to any pre-existing conditions except to the extent such pre-existing
conditions were subject to coverage limitations under the corresponding Seller's
Benefit Plans or Non-Subsidiary Foreign Plans, and shall give credit for all
deductibles, copayments and other out-of-pocket expenses incurred by Transferred
Employees under Seller's Benefit Plans and Non-Subsidiary Foreign Plans during
the portion of the applicable plan year that precedes the date such Transferred
Employees begin to be covered by the corresponding Buyer's Plans. An individual
receiving benefits under Seller's Benefit Plans pursuant to the continuation
coverage requirements of Section 601 et seq. of ERISA and section 4980B of the
Code as a result of ceasing to be an eligible beneficiary or dependent of a
Transferred Employee shall be considered for all purposes of this Section 5.5 to
be an eligible beneficiary or dependent, as applicable, of such Transferred
Employee during the period such continuation coverage is required to be
provided. It is understood that a claim for a benefit under any such plan shall
be deemed to be incurred (i) in the case of a claim for life insurance or other
death benefits, on the date of death, (ii) in the case of a claim for disability
benefits, on the date the later of the date the relevant disability status is
deemed to begin and the date any applicable waiting period is satisfied, (iii)
in the case of a claim for medical, dental, vision care, employee assistance,
family care and other benefits involving the rendering of services or the
reimbursement of the cost of services, on the date the relevant service is
rendered, and (iv) in the case of a claim for prescription drug benefits, on the
date the relevant prescription is filled.
(d) Notwithstanding the provisions of Sections 5.5(b) and (c), if
Buyer determines that it is not practicable for it to establish any of the
Buyer's Plans corresponding to the Seller's Benefit Plans set forth on Schedule
5.5D as of the Closing Date, Seller shall amend such corresponding Seller's
Benefit Plan so as to permit the continued participation of Transferred
Employees therein until Buyer is able to establish such Buyer's Plan (and Buyer
shall do so as soon as reasonably practicable after the Closing Date).
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(e) (i) Effective as of the Closing Date, Buyer shall establish a
defined contribution retirement plan qualified under section 401(a) of the Code
for the benefit of Transferred Employees located in the United States ("Buyer's
Savings Plan"). Seller shall take all actions necessary or appropriate so that,
effective as of the date any participant in Seller's Retirement and Savings
Program (the "RASP") becomes a Transferred Employee, such participant shall be
fully vested in his or her accrued benefit under the RASP. Seller agrees, as
soon as practicable following the Closing Date, to direct the trustee of the
trust funding the RASP to transfer to the trustee of the trust funding the
Buyer's Savings Plan in one or more separate transfers, the account balances as
of the date of transfer attributable to the participants in the RASP who are
Transferred Employees, plus the portion of any unallocated contributions and
trust earnings attributable to such participants who are Transferred Employees.
Unless otherwise agreed to by Buyer and Seller, such account balances shall be
transferred in cash (except to the extent such account balances are invested in
participant notes which shall be transferred in kind); provided, that with
respect to any portion of such accounts invested in Insurance Policy #61896
issued by Confederation Life Insurance Company, Seller shall transfer such
amounts in kind or in cash, as and when reasonably practicable and prudent.
Following the transfer to Buyer's Savings Plan of the account balances as
provided herein, Buyer's Savings Plan shall be solely liable, to the extent of
the account balances transferred and any benefits accruing thereafter, for the
payment of benefits to the Transferred Employees whose accounts were so
transferred.
(ii) Seller and Buyer shall, in connection with the transfers
required by this Section 5.5(e), cooperate in making any and all appropriate
filings required under the Code or ERISA, and the regulations thereunder, and
any applicable securities laws, and shall take all such action as may be
necessary and appropriate to cause such transfers to take place as soon as
practicable after the Closing Date; provided, however, that no such transfer
shall take place until after the later of (i) the expiration of a 30-day period
following the date of filing of any required Form 5310 (or any successor form
thereto) with the IRS and (ii) the earlier of (a) the receipt of a favorable IRS
determination letter with respect to the qualification of the Buyer's Savings
Plan under Section 401(a) of the Code or (b) the receipt by Seller of an opinion
of Buyer's counsel to the effect that Buyer's Savings Plan is intended in good
faith to be qualified under Section 401(a) of the Code and that an application
for an IRS determination letter to that effect has been filed within the
remedial amendment period.
(iii) Seller shall be responsible for making all matching
contributions applicable to all employee contributions made to the RASP by
Transferred Employees prior to Closing. Such contribution shall be made prior
to the time of the asset transfers required by Section 5.5(e)(i). Seller will
be responsible for making a "Pro Rata Profit Sharing Contribution" (as described
below) to the RASP on behalf of the Transferred Employees prior to the time of
the asset transfers required by Section 5.5(e)(i). The Pro Rata Profit Sharing
Contribution shall mean a good faith estimate of the amount to be contributed
under the profit-sharing contribution formula utilized under the RASP for the
plan year that begins before and ends after the Closing Date but applied only to
the compensation earned by the Transferred Employees from the Seller during such
plan year.
(f) Except as otherwise expressly set forth in this subsection (f),
Buyer shall be responsible for paying awards to Transferred Employee under the
Seller's Key Employee
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Incentive Plan ("KEIP") for the fiscal year of Seller that begins before and
ends after the Closing Date (the "Overlapping Fiscal Year"), including, without
limitation, those liabilities set forth on Schedule 1-A/1-B under the heading
"Assumed by FSC." Buyer shall pay such amounts in accordance with the terms of
the KEIP, except that (i) employment with Buyer shall be treated as employment
with Seller for purposes of determining eligibility to receive an award under
the KEIP, and (ii) the amount of each such award shall be determined by (A)
multiplying the Performance Factor (as defined below) times the applicable
Transferred Employee's Annual Compensation (as defined below) times the
applicable Transferred Employee's Participation Percentage (as defined in the
KEIP), and then (B) multiplying the result of (A) by a fraction, the numerator
of which is the number of days during the Overlapping Fiscal Year that precede
the Closing Date, and the denominator of which is the total number of days
during the Overlapping Fiscal Year. For purposes of this Section 5.5(f):
"Performance Factor" means the actual performance with respect to the
performance goals under the KEIP for the Overlapping Fiscal Year, measured by
reference solely to performance during the portion of the Overlapping Fiscal
Year that precedes the Closing Date, as reasonably determined by Buyer; and a
Transferred Employee's "Annual Compensation" means such Transferred Employee's
Compensation (as defined in the KEIP) treating compensation from Buyer after the
Closing Date as if it were compensation from Seller. The KEIP awards payable
pursuant to this Section 5.5(f) shall be paid following the end of the
Overlapping Fiscal Year in accordance with past practice (but in no event more
than 45 days after the end of the Overlapping Fiscal Year). Seller shall be
responsible for paying all awards to Transferred Employees under Seller's KEIP
to the extent such awards were awarded with respect to a fiscal year prior to
the Overlapping Fiscal Year and have been deferred by the applicable recipient,
including, without limitation, those liabilities set forth on Schedule 1-A/1-B
under the heading "Stay with NSC."
(g) Seller shall remain responsible for providing scholarship
benefits to any child of a Transferred Employee who is receiving such benefits
as of the date such individual becomes a Transferred Employee.
(h) Buyer shall permit Transferred Employees to use after the Closing
Date all vacation that is accrued but unused as of the Closing Date under
Seller's vacation pay policies and practices. As soon as practicable following
the Closing, Seller shall provide Buyer with a list of the amount of each
Transferred Employee's accrued vacation as of the Closing Date.
(i) Buyer shall be responsible for paying awards for Seller's third
and fourth fiscal quarters for the fiscal year ending May 25, 1997 under
Seller's Success Sharing Plan to all eligible Transferred Employees in
accordance with the terms of such Plan. Seller shall be responsible for paying
awards under Seller's Success Sharing Plan to all eligible employees, other than
Transferred Employees, including, without limitation, those awards set forth on
Schedule 1-A/1-B under the heading "Stay with NSC." Seller shall pay all sales
incentive compensation earned by any Transferred Employee before he or she
becomes a Transferred Employee, as determined in accordance with the terms of
the applicable sales incentive plan of Seller. Stock options granted under
Seller's Stock Option Plan ("Seller's Stock Plan") to any Transferred Employee
at least six months before, and that remain outstanding and unexercised as of,
the date he or she becomes a Transferred Employee shall be fully vested and
exercisable as of such date and shall remain exercisable until, and shall
terminate upon, the close of business on the ninetieth day following such date,
all in accordance with the terms of Seller's Stock Plan.
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(j) Buyer shall be responsible for any workers' compensation claims
incurred by any Transferred Employee whether incurred prior to, upon or after
Closing. A workers' compensation claim shall be considered "incurred" on the
first date that there is objective evidence of the event or condition that is
the basis of such claim.
(k) Seller and Buyer will take all action necessary to facilitate the
treatment as deferred compensation for income tax purposes of all KEIP payments
previously deferred that otherwise would have become payable prior to the
Seller's 1997 fiscal year, KEIP awards otherwise payable for the Overlapping
Fiscal Year, certain stay-on bonuses, sales bonuses, participation in sales
price pools, management incentive bonuses, retention bonus plan payments, and
enhanced benefits under performance incentive plans which come due to be paid or
delivered by any Seller Entity to certain Transferred Employees previously
identified to National Semiconductor, with each such Transferred Employee to be
entitled to designate the amount of such payments to which he or she is entitled
to be so treated and to designate the manner in which such payments shall be
made in order to achieve such treatment. As of the Closing Date, Buyer shall
assume all liabilities of Seller with respect to such designated payments, and
Buyer and Seller shall use their best efforts to cause such Transferred
Employees to consent to such assumption and release Seller from such
liabilities. Buyer shall establish one or more "rabbi" trusts to provide for
payment of such liabilities and each such trust shall allow the investment of
its assets in stock of Buyer or any of its Affiliates or designees. As promptly
as practicable on or after Closing, Seller shall contribute to such trust or
trusts a cash amount equal to the amount of such assumed liabilities as of the
Closing Date. In the event that Seller shall pay any awards to Transferred
Employees under Seller's KEIP with respect to the Overlapping Fiscal Year, Buyer
shall reimburse Seller for such payments. Seller and Buyer agree that Seller
shall be entitled to any and all tax deductions attributable to satisfaction of
such assumed liabilities, Buyer shall be entitled to any and all tax deductions
attributable to satisfaction by Buyer of any other liabilities relating to such
deferred compensation, that they will cooperate with one another in sharing any
information needed to assure the foregoing, and that neither of them shall take
any position on any tax return or take any other action inconsistent with the
foregoing.
(l) Notwithstanding the foregoing, to the extent required by
applicable law, effective as of the Closing Date, Buyer shall assume all
liabilities arising under German pension plan identified on Schedule 3.19(K)
with respect to Transferred Employees.
(m) Effective as of the Closing Date, all Transferred Employees shall
cease to participate in the National Stock Purchase Plan and Seller shall cause
all employee contributions not utilized to purchase National stock prior to the
Closing Date to be refunded to Transferred Employees within 30 days.
5.6. Covenant Not to Compete; Nonsolicitation. (a) From and after the
Closing Date, Seller will not and will cause its Affiliates not to, for its own
account or for the account of others, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of any business conducting business under the name "Fairchild," or any
variant thereof, other than Fairchild Parent and its Affiliates. For a period
of five years from and after the Closing Date, Seller will not and will cause
its Affiliates (other than natural persons) not to, other than in the
performance of Seller's obligations under the Operating Agreements, for its own
account or for the account of others, directly or indirectly
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(i) engage in any Competing Business, or (ii) own, manage, operate, join,
control or participate in the ownership, management, operation or control of any
person or entity who or which at any relevant time during such period is engaged
in any Competing Business. Ownership of not more than 5% of the outstanding
capital stock of any company registered under Section 12 of the Securities
Exchange Act of 1934 shall not be a violation of this Section 5.6(a).
Notwithstanding the foregoing, in the event that Buyer breaches any of the
Fairchild Foundry Services Agreement, Fairchild Assembly Services Agreement, or
Mil/Aero Wafer Services Agreement included in the Operating Agreements, which
breach gives rise to a right of termination of such agreement, Seller may
manufacture or assemble the products or perform the services which Buyer is not
providing under such agreement as a result of such breach, solely to satisfy its
own needs for such products or services and not for the purpose of providing
such products or services to others.
(b) As used herein, "Competing Business" shall mean the design,
production, manufacture, assembly, testing, distribution, marketing or sale for
Seller's own account or for the account of others of any product that has
substantially the same specifications as any Business Product or the purchase
for resale or repackaging of any Business Product except pursuant to the
Mil/Aero Wafer Services Agreement of even date herewith between Buyer and
Seller.
(c) For a period of one year from and after the Closing Date, Seller
will not and will cause its Affiliates not to, directly or indirectly, solicit
or attempt to solicit any person or entity who is or has been a customer,
supplier, licensor, licensee or business relation of the Business prior to or
during such period to cease its particular business relationship with the
Business.
(d) Except as specifically contemplated in Section 5.5, for a period
of two years from the Closing Date with respect to any director, officer,
employee or agent located in Maine and for a period of one year from and after
the Closing Date with respect to any of the foregoing located outside of Maine,
neither party hereto will, and the parties hereto will cause their respective
Affiliates not to, directly or indirectly, solicit or induce any person or
entity who is a director, officer, employee or agent of the other party or any
of its Affiliates to terminate his, her or its relationship with, or employment
by, such entity.
(e) Notwithstanding the foregoing, Seller may acquire any business or
entity that engages in a Competing Business (an "Acquired Business") provided
that (i) not more than fifteen percent (15%) of the revenues of the Acquired
Business during the twelve calendar months immediately preceding such
acquisition are derived from any Competing Business and (ii) Seller uses its
diligent good faith efforts to dispose of the portion of the Acquired Business
which engages in a Competing Business (the "Competitive Portion") as soon as
commercially practicable.
(f) For a period of thirty-nine (39) months following Closing, Buyer
will not develop, manufacture (except for Seller under the Fairchild Foundry
Services Agreement or Fairchild Assembly Services Agreement each of even date
herewith between Buyer and Seller), market or sell any integrated circuit that
has substantially the same specifications as any of Seller's integrated circuit
products identified in Schedule 5.6 hereto; provided, however, that this
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provision shall not prohibit Buyer from acquiring and operating any Person that
at the time of acquisition develops, manufactures, markets or sells any product
that has substantially the same specifications as any of Seller's products
identified on Schedule 5.6.
(g) The restrictive covenants contained in this Section are covenants
independent of any other provision of this Agreement and the existence of any
claim which any party to this Agreement may allege against any other party to
this Agreement, whether based on this Agreement or otherwise, shall not prevent
the enforcement of these covenants. Each of Seller and Buyer agrees that the
other's remedies at law for any breach or threat of breach of the provisions of
this Section will be inadequate, and that each party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
and to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which such party may be entitled at law or equity. In the event
of litigation regarding the covenant not to compete, the prevailing party in
such litigation shall, in addition to any other remedies the prevailing party
may obtain in such litigation, be entitled to recover from the other party its
reasonable legal fees and out of pocket costs incurred by such party in
enforcing or defending its rights hereunder. The length of time for which this
covenant not to compete shall be in force shall not include any period of
violation or any other period required for litigation during which the party
seeking to enforce this covenant seeks to enforce this covenant. Should any
provisions of this Section be adjudged to any extent invalid by any competent
tribunal, such provision will be deemed modified to the extent necessary to make
it enforceable.
5.7. Material Consents. Seller and Buyer agree to use their respective
Best Efforts to obtain prior to the Closing all of the consents of third Persons
which have been disclosed, or are required to be disclosed, on Schedule 3.3,
which consents shall be in a form reasonably satisfactory to Seller and Buyer.
5.8. Notice to Customers. Seller agrees, in consultation with Buyer, to
promptly notify customers of the Business of the consummation of the
transactions contemplated by this Agreement and to reasonably assist Buyer, at
Buyer's expense, in making arrangements with such customers for the payment of
Buyer's accounts receivable (other than the Accounts Receivable) in a manner
satisfactory to Buyer.
5.9. Confidentiality. For a period of five years after the Closing Date,
Seller agrees that it will keep confidential all of Buyer's Proprietary
Information and Buyer agrees that it will keep confidential all of Seller's
Proprietary Information except that Buyer shall not be required to keep
confidential Proprietary Information relating to the Business and conveyed to
Buyer as part of the Purchased Assets; such Proprietary Information shall
include any Proprietary Information obtained in connection with the Operating
Agreements. The obligation of each party to keep such Proprietary Information
confidential shall not apply to any information which (i) is or becomes
available to such party from a source other than the other party (or any Person
who is bound by a confidentiality agreement with such other party with respect
to such information), (ii) is or becomes available to the public other than as a
result of disclosure by such party or its agents, or (iii) is required to be
disclosed under applicable law or judicial process; provided, however, that if a
party is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demand or similar process) to disclose any of such information, to
the extent permitted by law,
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such party will provide the other party with prompt written notice to, and will
cooperate with, such other party so that such other party may seek a protective
order or other appropriate remedy; provided, further, that in the event such
other party waives compliance with the provisions of this Section 5.9, such
party shall disclose only that portion of the confidential information which is
legally required and will exercise its Best Efforts to seek confidential
treatment for such information. Notwithstanding anything in this Section 5.9 to
the contrary, in the event that any such information is also subject to a
limitation on disclosure or use contained in another written agreement between
Buyer and Seller which is more restrictive than the limitation contained in this
Section 5.9, then the limitation in such agreement shall supersede this Section
5.9.
5.10. Estoppel Certificates. The parties shall each use, and Seller
shall cause the Seller Entities to use, their respective Best Efforts to obtain
on or prior to the Closing estoppel certificates and lessor lien waivers (such
estoppel certificates and waivers not to be conditioned on any increased rental,
other payment, reduced term, or other change of lease terms), if applicable, in
a form and substance reasonably acceptable to Buyer and its lenders and dated a
date occurring not more than twenty (20) days prior to the Closing Date (the
"Estoppel Certificates"), from each real property lessor listed on Schedule
3.16.
5.11. Title Policies. The parties shall each use, and Seller shall
cause the Seller Entities to use, their respective Best Efforts to obtain on or
prior to the Closing, at standard rates, good and valid, irrevocable ALTA
extended form title insurance policies (or signed pro forma policies)
(collectively, the "Title Policies" issued by a nationally recognized title
company or companies reasonably acceptable to Buyer (collectively, the "Title
Company"), insuring (or committing the Title Company to insuring) the Buyer's
fee title to each parcel of the Owned Real Estate in such amounts which are
equal to the current fair market values of each of such parcels, subject to no
Encumbrances or exceptions to title other than the than the Permitted Fee Title
Exceptions, together with such endorsements as are customary for commercial
transactions of this type including without limitation a comprehensive
endorsement with respect to easements and restrictions of record. Each of the
Title Policies shall be effective as of the date and time of the recording of
the deed to the parcel or parcels of the Owned Real Estate to which it relates.
The cost of obtaining such Title Policies shall be paid one-half by Seller and
one-half by Buyer.
5.12. Survey. The parties shall each use, and Seller shall cause the
Seller Entities to use, their respective Best Efforts to obtain no later than
fifteen days prior to Closing, as-built surveys of each parcel of the Owned Real
Estate (the "Surveys") prepared by surveyors registered in the jurisdiction in
which the surveyed property is located and otherwise satisfactory to Buyer (the
"Surveyor") in accordance with the 1992 minimum standard detail requirements for
ALTA/ACSM surveys, Class A or B or Urban, dated as of a date after January 20,
1997 showing, with respect to each parcel of the Owned Real Estate and the
appurtenances to such parcel, access to and from a dedicated and accepted public
right-of-way, the correct location and dimensions of all improvements (including
fences and driveways), all easements, rights-of-way and setback lines, the
correct location and dimensions of all alleys and streets, all other matters of
record or visible on the ground affecting such parcel of the Owned Real Estate,
and such other information as may be requested by Buyer. The Surveys shall: (i)
show that other than Permitted Fee Title Encumbrances, all structures and other
improvements on the Principal
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Premises are (I) within the lot lines and do not encroach upon the properties of
any other Person, and (II) in compliance with applicable zoning laws relating to
setback and height restrictions, (ii) show no Encumbrances other than Permitted
Fee Title Encumbrances, (iii) be certified to the Buyer and its assigns, the
Investor and any mortgage lender to the same, and the Title Company, and (iv)
comply with any requirements imposed by the Title Company as a condition to the
removal of any survey exception from the general exceptions to the Title Policy
covering such of the Owned Real Estate as is shown on the property surveyed.
The cost of obtaining such Surveys shall be paid one-half by Seller and one-half
by Buyer.
5.13. Accounts Receivable and Related Claims. From and after the
Closing, Buyer (i) shall use its Best Efforts to assist Seller, upon Seller's
reasonable request, in collecting the Accounts Receivable and (ii) shall not
(A) without the prior written consent of Seller, waive or settle any claims or
rights which constitute Excluded Assets, including, without limitation, claims
with respect to Accounts Receivable or (B) take any action to interfere with or
impair the collection by Seller of any claims or rights which constitute
Excluded Assets, including, without limitation, claims with respect to Accounts
Receivable.
ARTICLE VI
CLOSING
6.1. Seller's Closing Deliveries. On the Closing Date, Seller shall
deliver, or execute and deliver, to Buyer:
(a) the Operating Agreements;
(b) an Assumption Agreement and Bill of Sale substantially in the
form set forth in Exhibit 6.1 (the "Bill of Sale") with respect to the Purchased
Assets (other than the Non-Assignable Assets);
(c) special warranty deeds in the customary and proper form for
recording duly executed and acknowledged so as to convey to Buyer good and
marketable title to the Principal Premises free and clear of all Encumbrances
other than Permitted Fee Title Exceptions;
(d) all of the consents of third Persons described on Schedule 7.5 of
the Recap Agreement; and
(e) any documents or instruments as Buyer may reasonably request or
as may be otherwise necessary or desirable to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets (other
than the Non-Assignable Assets) to Buyer and to put Buyer in actual possession
or control of the Purchased Assets (other than the Non-Assignable Assets).
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6.2. Buyer's Closing Deliveries. On the Closing Date, Buyer shall deliver,
or execute and deliver, to Seller:
(a) the Operating Agreements;
(b) the Assumption Agreement;
(c) the Bill of Sale;
(d) the Purchase Price Note;
(e) a certificate for 100 shares of Buyer's Common Stock; and
(f) any documents or instruments as Seller may reasonably request or
as may be otherwise necessary or desirable to evidence and effect the assumption
by Buyer of the Assumed Liabilities.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification By Seller. Seller hereby agrees to indemnify and hold
harmless Buyer from and against any Damages arising out of or resulting from (i)
the Excluded Liabilities or (ii) the breach by Seller of any covenant contained
in this Agreement or in any Operating Agreement.
7.2. Indemnification by Buyer. Buyer hereby agrees to indemnify and hold
harmless Seller from and against any Damages arising out of or resulting from
(i) the Assumed Liabilities or (ii) the breach by Buyer of any covenant
contained in this Agreement or in any Operating Agreement.
7.3. General Indemnification Procedures.
(a) In the event that any party incurs or suffers any Damages with
respect to which indemnification may be sought by such party pursuant to this
Article VII, the party seeking indemnification (the "Indemnitee") must assert
the claim by giving written notice (a "Claim Notice") to the party from whom
indemnification is sought (the "Indemnitor"). The Claim Notice must state the
nature, basis and amount (if known) of the claim in reasonable detail based on
the information available to the Indemnitee and, if the Claim Notice is being
given with respect to a third party claim, it must be accompanied by a copy of
any written notice of the third party claimant. If the Claim Notice is being
given by reason of any third party claim, it shall be given in a timely manner
but in no event more than 30 days after the filing or other written assertion of
any such claim against the Indemnitee, but the failure of the Indemnitee to give
the Claim Notice within such time period shall not relieve the Indemnitor of any
liability for indemnification under this Article VII, except to the extent that
the Indemnitor is prejudiced thereby. If the amount of the claim is not known
at the time the Claim Notice is given, the
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Indemnitee shall also give notice of such amount to the Indemnitor at such time
as the amount of the claim is reasonably ascertainable. Each Indemnitor to whom
a Claim Notice is given shall respond to any Indemnitee that has given a Claim
Notice (a "Claim Response") within 30 days (the "Response Period") after the
date that the Claim Notice is received by Indemnitor. Any Claim Response shall
specify whether or not the Indemnitor given the Claim Response disputes the
claim described in the Claim Notice in whole or in part. If any Indemnitor
fails to give a Claim Response within the Response Period, such Indemnitor shall
be deemed not to dispute the claim described in the related Claim Notice. If
any Indemnitor elects not to dispute a claim described in a Claim Notice,
whether by failing to give a timely Claim Response or otherwise, then such claim
shall be conclusively deemed to be an obligation of such Indemnitor. If any
Indemnitor shall be obligated to indemnify an Indemnitee hereunder, such
Indemnitor shall pay to such Indemnitee within 30 days after the last day of the
applicable Response Period (or at such later time as the amount is
ascertainable) the amount to which such Indemnitee shall be entitled. If there
shall be a dispute as to the amount or manner of indemnification under this
Agreement, the Indemnitor and the Indemnitee shall seek to resolve such dispute
through negotiations and, if such dispute is not resolved within 20 days, the
Indemnitee may pursue whatever legal remedies may be available for the recovery
of the Damages claimed from any Indemnitor. If any Indemnitor fails to pay all
or any part of any indemnification obligation on or before the later to occur of
(x) 30 days after the last day of the applicable Response Period, and (y) if the
Claim Notice relates to Damages that have not been liquidated as of the date of
the Claim Notice, the date on which all or any part of such Damages shall have
become liquidated and determined, then the Indemnitor shall also be obligated to
pay to the Indemnitee interest on the unpaid amount for each day during which
the obligation remains unpaid at an annual rate of ten percent.
(b) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Damages that the Indemnitee believes give rise to the claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee that
would have bearing on such claim.
(c) Except as hereinafter provided, in the case of third party claims
for which indemnification is sought, the Indemnitor shall have the option:
(x) to conduct any proceedings or negotiations in connection therewith, (y) to
take all other steps to settle or defend any such claim (provided that the
Indemnitor shall not settle any such claim without the consent of the Indemnitee
(which consent shall not be unreasonably withheld, it being understood that it
shall not be unreasonable for the Indemnitee to withhold its consent from any
settlement which (1) commits the Indemnitee to take, or to forbear to take, any
action, or (2) does not provide for a complete release of the Indemnitee by such
third party)), and (z) to employ counsel to contest any such claim or liability
in the name of the Indemnitee or otherwise. In any event, the Indemnitee shall
be entitled to participate at its own expense and by its own counsel (a
"Voluntary Participation") in any proceedings relating to any third party claim.
The Indemnitor shall, within 45 days of receipt of the Claim Notice, notify the
Indemnitee of its intention to assume the defense of the claim (a "Defense
Notice"). Until the Indemnitee has received the Defense Notice, the Indemnitee
shall take reasonable steps to defend (but may not settle) the claim. If the
Indemnitor declines to assume the defense of any such claim or fails to give a
Defense Notice within 45 days after receipt of the Claim Notice, the Indemnitee
shall defend
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against the claim but shall not settle such claim without the consent of the
Indemnitor (which consent shall not be unreasonably withheld). The expenses of
all proceedings, contests or lawsuits (other than those incurred in a Voluntary
Participation) with respect to claims as to which a party is entitled to
indemnification under this Article VII shall represent indemnifiable Damages
under this Agreement. Regardless of which party shall assume the defense of the
claim, the parties shall cooperate fully with one another in connection
therewith. Notwithstanding the foregoing, the Indemnitor shall not be entitled
(except with the consent of the Indemnitee) to take any of the actions referred
to in clauses (x), (y) or (z) of the first sentence of this subparagraph
unless: (a) the third party claim involves principally monetary damages; and
(b) the Indemnitor shall have expressly agreed in writing that, as between the
Indemnitor and the Indemnitee, the Indemnitor shall be solely obligated to
satisfy and discharge such third party claim. Damages payable hereunder shall
be appropriately adjusted to reflect the receipt of insurance proceeds, tax
benefits and detriments and proceeds received with respect to condemnation,
expropriation or eminent domain proceedings.
ARTICLE VIII
MISCELLANEOUS
8.1. Nonsurvival of Representations. The representations and warranties
of Buyer and Seller contained in this Agreement shall terminate upon the
Closing. The covenants and agreements of Buyer and Seller contained in this
Agreement shall survive the Closing.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) three Business Days
after mailing if mailed by certified or registered mail, return receipt
requested, (ii) one Business Day after delivery to Federal Express or other
nationally recognized overnight express carrier, if sent for overnight delivery
with fee prepaid, (iii) upon receipt if sent via facsimile with receipt
confirmed, or (iv) upon receipt if delivered personally, addressed as follows or
to such other address or addresses of which the respective party shall have
notified the other:
If to Seller, to:
National Semiconductor Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052
Attention: General Counsel
Fax No.: (408) 733-0293
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With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer
Fax No.: (212) 403-2000
If to Buyer, to:
Fairchild Semiconductor Corporation
333 Western Avenue
Portland, ME 04106
Attention: General Counsel, mail stop 01-00
Fax No.: (207) 761-6020
With copies to:
Citicorp Venture Capital Ltd.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Richard M. Cashin, Jr.
Fax No.: 212-888-2940
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attn: G. Daniel O'Donnell
Fax No.: 215-994-2222
8.3. Expenses. Except as otherwise provided in this Agreement and in the
Recap Agreement, each party to this Agreement will bear all the fees, costs and
expenses which are incurred by it in connection with the transactions
contemplated hereby, whether or not such transactions are consummated, provided
that Seller and Buyer shall bear equally all Taxes (other than income Taxes) and
related charges, all fees for any necessary consents or approvals of any
Governmental Authority, and all recording and filing fees, in each case that may
be imposed by reason of the sale, transfer, assignment or delivery of the
Purchased Assets.
8.4. Entire Agreement. The agreement of the parties, which is comprised of
this Agreement and the Schedules hereto and the documents referred to herein,
sets forth the entire agreement and understanding between the parties and
supersedes any prior agreement or understanding, written or oral, relating to
the subject matter of this Agreement.
8.5. Assignment; Binding Effect; Severability. This Agreement may not be
assigned by any party hereto without the written consent of the other party,
provided, however that Buyer may assign its rights hereunder as collateral
security to any bona fide financial institution which
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is engaged in financing in the ordinary course providing financing to consummate
the transactions contemplated hereby or any financial institution which is
engaged in financing in the ordinary course through whom such financing is
refunded, replaced, or refinanced and any of the foregoing financial
institutions may, in enforcing its rights in connection with such financing,
assign Buyer's rights or cause Buyer to assign its rights hereunder in
connection with a sale of Buyer or its parent or the business in the form then
being conducted by Buyer substantially as an entirety; and provided, further,
Buyer may assign its rights hereunder, in whole or in part, but subject to all
limitations contained herein, to one or more subsidiaries of Buyer, provided
that, in any such case, Buyer gives Seller prior written notice of such
assignment. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors, legal representatives and permitted
assigns of each party hereto. The provisions of this Agreement are severable,
and in the event that any one or more provisions are deemed illegal or
unenforceable the remaining provisions shall remain in full force and effect
unless the deletion of such provision shall cause this Agreement to become
materially adverse to any party, in which event the parties shall use Best
Efforts to arrive at an accommodation which best preserves for the parties the
benefits and obligations of the offending provision.
8.6. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws (as opposed to the conflicts of
laws provisions) of the State of New York.
8.7. Execution in Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if the signatures thereto were
upon one instrument.
8.8. Public Announcement. Neither Seller nor Buyer shall, without the
approval of the other party hereto, make any press release or other public
announcement concerning the terms of the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be so obligated
by law, in which case such party shall use its Best Efforts to advise the other
party thereof and the parties shall use their Best Efforts to cause a mutually
agreeable release or announcement to be issued; provided that the foregoing
shall not preclude communications or disclosures necessary to (a) implement the
provisions of this Agreement (including the Financing) or (b) comply with
accounting, securities laws and Securities and Exchange Commission disclosure
obligations.
8.9. No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall (i) confer on any Person other than the parties
hereto and their respective successors or permitted assigns any rights
(including third party beneficiary rights), remedies, obligations or liabilities
under or by reason of this Agreement, or (ii) constitute the parties hereto as
partners or as participants in a joint venture. This Agreement shall not
provide third parties with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to the terms
of this Agreement.
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8.10. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
8.11. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
8.12. Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be duly executed on its behalf by its duly authorized officer as of the day
and year first written above.
NATIONAL SEMICONDUCTOR CORPORATION
By:___________________________________________
Donald Macleod
Executive Vice President and
Chief Financial Officer
FAIRCHILD SEMICONDUCTOR CORPORATION
By:___________________________________________
Joseph R. Martin
Executive Vice President and
Chief Financial Officer
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Exhibit 3.01
CERTIFICATE OF INCORPORATION
OF
FAIRCHILD SEMICONDUCTOR CORPORATION
1. Name. The name of the Corporation is
Fairchild Semiconductor Corporation.
2. Registered Office and Agent. The address of
the Corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent
at such address is Corporation Service Company.
3. Purpose. The purposes for which the
Corporation is formed are to engage in any lawful act or
activity, including, without limitation, forming and/or
acquiring foreign subsidiaries, for which corporations may
be organized under the General Corporation Law of the State
of Delaware ("DGCL") and to possess and exercise all of the
powers and privileges granted by such law and any other law
of Delaware.
4. Authorized Capital. The aggregate number of
shares of stock which the Corporation shall have authority
to issue is One Thousand (1000) shares, all of which are of
one class and are designated as Common Stock, par value $.01
per share.
5. Incorporator. The name and mailing address
of the incorporator are Nikki Gold, 4000 Bell Atlantic
Tower, 1717 Arch Street, Philadelphia, Pennsylvania
19103-2793.
6. Bylaws. In furtherance and not in limitation
of the powers conferred by law, the board of directors of
the Corporation is authorized to adopt, amend or repeal the
bylaws of the Corporation, except as otherwise specifically
provided therein, subject to the powers of the stockholders
of the Corporation to amend or repeal any bylaws adopted by
the board of directors.
7. Elections of Directors. Elections of
directors need not be by written ballot unless and except to
the extent the bylaws of the Corporation shall so provide.
8. Right to Amend. The Corporation reserves the
right to amend or repeal any provision contained in this
Certificate as the same may from time to time be in effect
in the manner now or hereafter prescribed by law, and all
rights,
<PAGE>
preferences and privileges conferred on stockholders,
directors or others hereunder are subject to such
reservation.
9. Limitation on Liability. The directors of
the Corporation shall be entitled to the benefits of all
limitations on the liability of directors generally that are
now or hereafter become available under the DGCL. Without
limiting the generality of the foregoing, to the fullest
extent permitted by the DGCL, as it exists on the date
hereof or as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the
DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. Any repeal or
modification of this Section 9 or any adoption of any
provision of this Certificate of Incorporation inconsistent
with this Section 9 shall be prospective only, and shall not
affect, to the detriment of any director, any limitation on
the personal liability of a director of the Corporation
existing at the time of such repeal, modification or
adoption.
Dated: ______________
_________________________________
Nikki Gold, Incorporator
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Exhibit 3.02
BYLAWS
OF
FAIRCHILD SEMICONDUCTOR CORPORATION
ARTICLE I
STOCKHOLDERS
1.1 Meetings.
1.1.1 Place. Meetings of the stockholders shall be held at such place
as may be designated by the board of directors.
1.1.2 Annual Meeting. An annual meeting of the stockholders for the
election of directors and for other business shall be held on such date and
at such time as may be fixed by the board of directors.
1.1.3 Special Meetings. Special meetings of the stockholders may be
called at any time by the president, or the board of directors, or the
holders of a majority of the outstanding shares of stock of the Company
entitled to vote at the meeting.
1.1.4 Quorum. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote
on a particular matter shall constitute a quorum for the purpose of
considering such matter.
1.1.5 Voting Rights. Except as otherwise provided herein, in the
certificate of incorporation or by law, every stockholder shall have the
right at every meeting of stockholders to one vote for every share standing
in the name of such stockholder on the books of the Company which is entitled
to vote at such meeting. Every stockholder may vote either in person or by
proxy.
ARTICLE II
DIRECTORS
2.1 Number and Term. The board of directors shall have authority to (i)
determine the number of directors to constitute the board and (ii) fix the
terms of office of the directors.
<PAGE>
2.2 Meetings.
2.2.1 Place. Meetings of the board of directors shall be held at such
place as may be designated by the board or in the notice of the meeting.
2.2.2 Regular Meetings. Regular meetings of the board of directors
shall be held at such times as the board may designate. Notice of regular
meetings need not be given.
2.2.3 Special Meetings. Special meetings of the board may be called by
direction of the president or any two members of the board on three days'
notice to each director, either personally or by mail, telegram or facsimile
transmission.
2.2.4 Quorum. A majority of all the directors in office shall
constitute a quorum for the transaction of business at any meeting.
2.2.5 Voting. Except as otherwise provided herein, in the certificate
of incorporation or by law, the vote of a majority of the directors present
at any meeting at which a quorum is present shall constitute the act of the
board of directors.
2.2.6 Committees. The board of directors may, by resolution adopted by
a majority of the whole board, designate one or more committees, each
committee to consist of one or more directors and such alternate members
(also directors) as may be designated by the board. Unless otherwise
provided herein, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member. Except as otherwise
provided herein, in the certificate of incorporation or by law, any such
committee shall have and may exercise the powers of the full board of
directors to the extent provided in the resolution of the board directing the
committee.
ARTICLE III
OFFICERS
3.1 Election. At its first meeting after each annual meeting of the
stockholders, the board of directors shall elect a president, treasurer,
secretary and such other officers as it deems advisable.
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3.2 Authority, Duties and Compensation. The officers shall have such
authority, perform such duties and serve for such compensation as may be
determined by resolution of the board of directors. Except as otherwise
provided by board resolution, (i) the president shall be the chief executive
officer of the Company, shall have general supervision over the business and
operations of the Company, may perform any act and execute any instrument for
the conduct of such business and operations and shall preside at all meetings
of the board and stockholders, (ii) the other officers shall have the duties
customarily related to their respective offices, and (iii) any vice
president, or vice presidents in the order determined by the board, shall in
the absence of the president have the authority and perform the duties of the
president.
ARTICLE IV
INDEMNIFICATION
4.1 Right to Indemnification. The Company shall indemnify any person who
was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that
such person is or was a director or officer of the Company or a constituent
corporation absorbed in a consolidation or merger, or is or was serving at
the request of the Company or a constituent corporation absorbed in a
consolidation or merger, as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or is or was a
director or officer of the Company serving at its request as an
administrator, trustee or other fiduciary of one or more of the employee
benefit plans of the Company or other enterprise, against expenses (including
attorneys' fees), liability and loss actually and reasonably incurred or
suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law.
4.2 Advance of Expenses. Expenses incurred by a director or officer of the
Company in defending a proceeding shall be paid by the Company in advance of
the final disposition of such proceeding subject to the provisions of any
applicable statute.
4.3 Procedure for Determining Permissibility. To determine whether any
indemnification or advance of expenses under this Article IV is permissible,
the board of directors by a majority
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vote of a quorum consisting of directors not parties to such proceeding may,
and on request of any person seeking indemnification or advance of expenses
shall be required to, determine in each case whether the applicable standards
in any applicable statute have been met, or such determination shall be made
by independent legal counsel if such quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested directors so
directs, provided that, if there has been a change in control of the Company
between the time of the action or failure to act giving rise to the claim for
indemnification or advance of expenses and the time such claim is made, at
the option of the person seeking indemnification or advance of expenses, the
permissibility of indemnification or advance of expenses shall be determined
by independent legal counsel. The reasonable expenses of any director or
officer in prosecuting a successful claim for indemnification, and the fees
and expenses of any special legal counsel engaged to determine permissibility
of indemnification or advance of expenses, shall be borne by the Company.
4.4 Contractual Obligation. The obligations of the Company to indemnify a
director or officer under this Article IV, including the duty to advance
expenses, shall be considered a contract between the Company and such
director or officer, and no modification or repeal of any provision of this
Article IV shall affect, to the detriment of the director or officer, such
obligations of the Company in connection with a claim based on any act or
failure to act occurring before such modification or repeal.
4.5 Indemnification Not Exclusive; Inuring of Benefit. The indemnification
and advance of expenses provided by this Article IV shall not be deemed
exclusive of any other right to which one indemnified may be entitled under
any statute, provision of the Certificate of Incorporation, these bylaws,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall inure to the benefit of the
heirs, executors and administrators of any such person.
4.6 Insurance and Other Indemnification. The board of directors shall have
the power to (i) authorize the Company to purchase and maintain, at the
Company's expense, insurance on behalf of the Company and on behalf of others
to the extent that power to do so has not been prohibited by statute, (ii)
create any fund of any nature, whether or not under the control of a trustee,
or otherwise secure any of its indemnification obligations, and
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(iii) give other indemnification to the extent permitted by statute.
ARTICLE V
TRANSFER OF SHARE CERTIFICATES
Transfers of share certificates and the shares represented thereby shall
be made on the books of the Company only by the registered holder or by duly
authorized attorney. Transfers shall be made only on surrender of the share
certificate or certificates.
ARTICLE VI
AMENDMENTS
These bylaws may be amended or repealed at any regular or special
meeting of the board of directors by vote of a majority of all directors in
office or at any annual or special meeting of stockholders by vote of holders
of a majority of the outstanding stock entitled to vote. Notice of any such
annual or special meeting of stockholders shall set forth the proposed change
or a summary thereof.
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CERTIFICATE OF INCORPORATION
OF
FSC SEMICONDUCTOR CORPORATION
1. Name. The name of the Corporation is FSC
Semiconductor Corporation.
2. Registered Office and Agent. The address of
the Corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent
at such address is Corporation Service Company.
3. Purpose. The purposes for which the
Corporation is formed are to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware ("DGCL")
and to possess and exercise all of the powers and privileges
granted by such law and any other law of Delaware.
4. Authorized Capital. The aggregate number of
shares of stock which the Corporation shall have authority
to issue is 60,070,000 shares, divided into three (3)
classes consisting of 70,000 shares of 12% Series A
Cumulative Compounding Preferred Stock, par value $.01 per
share ("Series A Preferred Stock"); 30,000,000 shares of
Class A Common Stock, par value $.01 per share ("Class A
Common Stock"); and 30,000,000 shares of Class B Common
Stock, par value $.01 per share ("Class B Common Stock").
Class A Common Stock and Class B Common Stock are
hereinafter sometimes collectively referred to as "Common
Stock".
The following is a statement of the designations,
preferences, qualifications, limitations, restrictions and
the special or relative rights granted to or imposed upon
the shares of each such class.
A. SERIES A PREFERRED STOCK
(a) Accrual and Payment of Dividends
i. The holders of Series A Preferred
Stock shall be entitled to receive,
when, as and if declared by the Board of
Directors out of funds of the
Corporation legally available therefor,
cumulative cash dividends at the rate of
$120 per share per annum.
ii. Such dividends shall be payable in
annual installments in arrears
commencing September 15, 1997 and
thereafter on the
<PAGE>
fifteenth day of March
and September (unless such day is not a
business day in which event on the last
preceding business day) in each such
year (hereinafter referred to as a
"Dividend Accrual Date"), except that
the dividend payment payable on
September 15, 1997 shall be calculated
at the annual rate of $120 per share
from the date of original issuance
through September 15, 1997. Each such
dividend on Series A Preferred Stock
when paid shall be payable to holders of
record as they appear on the stock books
of the Corporation on the date
established by the Board of Directors of
the Corporation as the record date for
the payment of such dividend (which
record date shall not precede the date
upon which the resolution fixing such
record date is adopted and which record
date shall be not more than sixty days
prior to such action). If no record
date is fixed, the record date for
determining holders for such purpose
shall be at the close of business on the
date on which the Board of Directors
adopts the resolution relating to such
dividend payment. Dividends with
respect to any shares of Series A
Preferred Stock shall accrue (whether or
not earned or declared) from the date of
issue of such shares.
iii. Such dividends on the Series A
Preferred Stock shall be cumulative,
whether or not earned or declared, so
that if at any time full cumulative
dividends at the rate aforesaid on all
shares of Series A Preferred Stock then
outstanding to the end of the annual
dividend period next preceding such time
shall not have been paid, the amount of
the deficiency shall be paid before any
sum shall be set aside for or applied by
the Corporation to the purchase,
redemption or other acquisition for
value of any shares of Junior Stock
(either pursuant to any applicable
sinking fund requirement or otherwise)
or any dividend or other distribution
shall be paid or declared and set apart
for payment on any Junior Stock (other
than a dividend payable in Junior Stock)
provided, however, that the foregoing
shall not prohibit the Corporation from
repurchasing shares of Junior Stock from a
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former employee of the Corporation (or
a subsidiary of the Corporation) where
such repurchase arises from the
Corporation's option to repurchase such
shares upon termination of such
employee's employment with the
Corporation (or a subsidiary) pursuant
to a written agreement between the
Corporation and such employee. Accrued
dividends on the Series A Preferred
Stock if not paid on the first or any
subsequent Dividend Accrual Date
following accrual shall thereafter
accrue additional dividends in respect
thereof (the "Additional Dividends"),
compounded annually, at the rate of 12%
per annum.
iv. When dividends are not paid in full
upon the Series A Preferred Stock, all
dividends paid upon shares of Series A
Preferred Stock shall be paid pro rata
so that in all cases the amount of
dividends paid per share on the Series A
Preferred Stock shall bear the same
ratio that accrued dividends per share
on the shares of Series A Preferred
Stock bear to each other.
v. An annual dividend period shall
commence on the day following a Dividend
Accrual Date and shall end on the next
succeeding Dividend Accrual Date.
(b) Preference on Liquidation
i. In the event that the Corporation
shall be liquidated, dissolved or wound
up, whether voluntarily or
involuntarily, after all creditors of
the Corporation shall have been paid in
full, the holders of the Series A
Preferred Stock shall be entitled to
receive, out of the assets of the
Corporation legally available for
distribution to its stockholders,
whether from capital, surplus or
earnings, before any amount shall be
paid to the holders of any shares of
Junior Stock, an amount equal to $1000
in cash per share plus an amount equal
to full cumulative dividends (whether or
not earned or declared) accrued and
unpaid thereon (including Additional
Dividends) to the date of final
distribution, and no more. If upon any
voluntary or involuntary liquidation,
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dissolution or winding up of the
Corporation, the net assets of the
Corporation shall be insufficient to pay
the holders of all outstanding shares of
Series A Preferred Stock the full
amounts to which they respectively shall
be entitled, such assets, or the
proceeds thereof, shall be distributed
ratably among the holders of the Series
A Preferred Stock in accordance with the
amounts which would be payable on such
distribution if the amount to which the
holders of the Series A Preferred Stock
are entitled were paid in full. Holders
of Series A Preferred Stock shall not be
entitled, upon the voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation, to
receive any amounts with respect to such
stock other than the amounts referred to
in this paragraph (b)(i).
ii. Neither the purchase nor redemption
by the Corporation of shares of any
class of stock in any manner permitted
by the Certificate of Incorporation or
any amendment thereof, nor the merger or
consolidation of the Corporation with or
into any other corporation or
corporations, nor a sale, exchange,
conveyance, transfer or lease of all or
substantially all of the Corporation's
assets shall be deemed to be a
liquidation, dissolution or winding up
of the Corporation for the purposes of
this paragraph (b); provided, however,
that any consolidation or merger of the
Corporation in which the Corporation is
not the surviving entity shall be deemed
to be a liquidation, dissolution or
winding up of the affairs of the
Corporation within the meaning of this
paragraph (b) if, (A) in connection
therewith, the holders of Common Stock
of the Corporation receive as
consideration, whether in whole or in
part, for such Common Stock (1) cash,
(2) notes, debentures or other evidences
of indebtedness or obligations to pay
cash or (3) preferred stock of the
surviving entity which ranks on a parity
with or senior to the preferred stock
received by holders of the Series A
Preferred Stock with respect to
liquidation or dividends or (B) the
holders of the Series A Preferred Stock
do not receive preferred stock of the
surviving entity with rights,
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powers and preferences equal to (or more
favorable to the holders than) the rights,
powers and preferences of the Series A
Preferred Stock.
(c) Redemption
i. Mandatory Redemption. All
outstanding shares of the Series A
Preferred Stock shall be redeemed from
funds legally available therefor on
March 16, 2009 (the "Mandatory
Redemption Date"), in the manner
provided in Section 4(A)(d) hereof, at a
price per share equal to $1,000 plus an
amount per share equal to full
cumulative dividends (whether or not
earned or declared) accrued and unpaid
thereon (including Additional Dividends)
to the Mandatory Redemption Date.
ii. Optional Redemption. The Series A
Preferred Stock may be redeemed from
funds legally available therefor, in
whole or in part, at the election of the
Corporation, expressed by resolution of
the Board of Directors, at any time at a
price per share equal to $1,000 plus an
amount per share equal to full
cumulative dividends (whether or not
earned or declared) accrued and unpaid
thereon (including Additional Dividends
and all dividends which have accrued
since the most recent Dividend Accrual
Date) to the date of redemption.
iii. The aggregate amount of any
redemption pursuant to paragraph (i) or
(ii) is hereinafter referred to as the
"Redemption Price" with respect to such
redemption. The Mandatory Redemption
Date and the date of any redemption
pursuant to paragraph (ii) are each
hereinafter referred to individually as
a "Redemption Date."
(d) Redemption Procedure
i. Any redemption pursuant to this
paragraph (d) shall be accomplished in
the manner and with the effect as set
forth in this paragraph.
ii. Notice of every redemption of
Series A Preferred Stock pursuant to
paragraph (c)
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<PAGE>
shall be given by first
class mail to each holder of record on
the record date for such redemption at
such holder's address as the same
appears on the stock register of the
Corporation not less than ten (10) days
and not more than sixty (60) days prior
to the Redemption Date. Each such
notice shall state (A) the Redemption
Date, (B) whether the redemption is a
mandatory or optional redemption under
Section 4(A)(c)(i) or 4(A)(c)(ii)
hereof, as the case may be, (C) the
place or places where such shares are to
be surrendered, (D) that the holder is
to surrender the shares at the place of
redemption and (E) that dividends on the
Series A Preferred Stock shall cease to
accrue on the Redemption Date. If less
than all the outstanding Series A
Preferred Stock is to be redeemed, the
selection of shares for redemption shall
be made pro rata and the notice of
redemption to a holder shall state the
number of shares of Series A Preferred
Stock of such holder to be redeemed.
The amount of the applicable Redemption
Price shall be deposited on or before
the applicable Redemption Date in trust
for the account of the holders of Series
A Preferred Stock entitled thereto with
a bank or trust company in good standing
doing business in the State of New York
and having capital and surplus of at
least $100,000,000 (the date of such
deposit being hereinafter in this
paragraph (d) referred to as the "date
of deposit").
iii. Notice of the date on which, and
the name and address of the bank or
trust company with which, the deposit
has been or will be made shall be
included in the notice of redemption.
On and after the applicable Redemption
Date (unless default shall be made by
the Corporation in providing money for
the payment of the Redemption Price
pursuant to the notice of redemption),
or if the Corporation shall make such
deposit on or before the date specified
therefor in the notice of redemption,
then on and after the date of deposit
(provided notice of redemption has been
duly given), all dividends on the Series
A Preferred Stock so called for
redemption shall cease to accrue,
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<PAGE>
and the notice of redemption shall so
state, and, notwithstanding that any
certificate for shares of Series A
Preferred Stock is not surrendered for
cancellation, the shares represented
thereby shall no longer be deemed
outstanding and all rights of the
holders thereof as stockholders of the
Corporation shall cease and terminate,
except the right to receive the
Redemption Price (without interest) as
hereinafter provided.
iv. At any time on or after the
applicable Redemption Date, or if the
Corporation shall deposit the money for
such redemption prior to the Redemption
Date, then at any time on or after the
date of deposit, which time shall be
specified by the Corporation in the
notice of redemption and which shall not
be later than the applicable Redemption
Date, the holders of record of the
Series A Preferred Stock to be redeemed
shall be entitled to receive the
Redemption Price upon actual delivery to
the bank or trust company with which
such deposit shall be made of
certificates for the shares to be
redeemed, such certificates, if
required, to be duly endorsed in blank
or accompanied by proper instruments of
assignment and transfer duly endorsed in
blank. The making of such deposit with
any such bank or trust company shall not
relieve the Corporation of liability for
payment of the Redemption Price.
v. Any money so deposited which shall
remain unclaimed by the holders of such
Series A Preferred Stock at the end of
two (2) years after the Redemption Date
shall be paid by such bank or trust
company to the Corporation, which shall
thereafter, to the extent of the money
so repaid, be liable for the payment of
the Redemption Price. Any interest
accrued on money so deposited shall be
paid to the Corporation from time to
time.
(e) Optional Exchange
i. The Series A Preferred Stock may be
exchanged, at the Corporation's option
at any time and from time to time, in
whole or in part, for junior
subordinated debentures to
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<PAGE> be issued by the Corporation in
substantially the form attached as
Annex A hereto ("Exchange Debentures")
at the rate of $1000 per share plus an
amount per share equal to full
cumulative dividends (whether or not
earned or declared) accrued and unpaid
thereon (including all dividends which
have accrued since the most recent
Dividend Accrual Date) to the date
established by the Board of Directors
for such exchange (the Exchange Date")
(the aggregate of such amounts is
hereinafter referred to as the "Exchange
Amount"). The Exchange Debentures shall
bear interest at a rate equal to the
lesser of 12% and the maximum interest
rate permitted to be deducted as accrued
under the relevant provisions of the
Internal Revenue Code of 1986 and the
rules and regulations promulgated
thereunder in effect on the Exchange
Date. If less than all the shares of
Series A Preferred Stock is to be
exchanged, the selection of shares to
be exchanged shall be pro rata. The
election of the Corporation to exchange
the shares of Series A Preferred Stock
for Exchange Debentures pursuant to this
paragraph (e) must be made by the
affirmative vote of at least eighty
percent (80%) of all the directors of
the Corporation then in office.
(f) Exchange Procedure
i. Any exchange pursuant to paragraph
(e) shall be accomplished in the manner
and with the effect as set forth in this
paragraph (f).
ii. Notice of the exchange of Series A
Preferred Stock pursuant to paragraph
(e) shall be given by first class mail
to each holder of record on the record
date for such exchange at such holder's
address as the same appears on the stock
register of the Corporation not less
than ten (10) days and not more than
sixty (60) days prior to the Exchange
Date. Each such notice shall state:
(A) the Exchange Date, (B) the place or
places where certificates for such
shares of Series A Preferred Stock are
to be surrendered for exchange into the
Exchange Debentures, (C) that dividends
on the Series
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<PAGE>
A Preferred Stock to be exchanged will
cease to accrue on such Exchange Date
and (D) if less than all the shares of
Series A Preferred Stock is to be
exchanged the number of shares of the
holder to be exchanged. The form
of the Exchange Debentures may not be
amended or supplemented before the
Exchange Date without the affirmative
vote or consent of the holders of a
majority of the outstanding shares of
Series A Preferred Stock, except for
those changes which would not adversely
affect the legal rights of the holders.
iii. On and after the Exchange Date, all
dividends on the Series A Preferred
Stock so called for exchange shall cease
to accrue and, notwithstanding that any
certificate for shares of Series A
Preferred Stock is not surrendered for
cancellation, the shares represented
thereby shall no longer be deemed
outstanding and all rights of the
holders thereof as stockholders of the
Corporation shall cease and terminate,
except the right to receive the Exchange
Debentures as herein provided.
iv. At any time on or after the
Exchange Date, the holders of record of
the Series A Preferred Stock to be
exchanged shall be entitled to receive
the amount of Exchange Debentures set
forth herein upon actual delivery to the
Corporation of certificates for the
shares to be exchanged, such
certificates, if required, to be duly
endorsed in blank or accompanied by
proper instruments of assignment and
transfer duly endorsed in blank. The
person or persons entitled to receive
the Exchange Debentures issuable upon
exchange shall be treated for all
purposes as the registered holder or
holders of such Exchange Debentures.
v. The Corporation shall not be
required to honor any request to
register a transfer or exchange of the
Series A Preferred Stock for the
fifteen (15) days prior to the Exchange
Date. The Corporation will cause the
Exchange Debentures to be authenticated
on the Exchange Date.
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<PAGE>
(g) Voting. Except as required by law and
except for any voting by the holders of the
Series A Preferred Stock as part of a
separate class or series pursuant to
paragraph (h) hereunder or any other
provision of the Corporation's Certificate of
Incorporation, no holder of Series A
Preferred Stock, as such holder, shall be
entitled to vote on any matter submitted to a
vote of stockholders. On any matters on
which the holders of the Series A Preferred
Stock shall be entitled to vote, they shall
be entitled to one vote for each share held.
(h) Other Rights. Without the written
consent of the holders of a majority of the
outstanding shares of Series A Preferred
Stock or the vote of the holders of a
majority of the outstanding shares of Series
A Preferred Stock at a meeting of the holders
of Series A Preferred Stock called for such
purpose, the Corporation shall not (i)
exchange the shares of Series A Preferred
Stock for Exchange Debentures pursuant to
paragraph (e), (ii) create, authorize or
issue any other class or series of stock
entitled to a preference prior to Series A
Preferred Stock upon any dividend or
distribution or any liquidation, distribution
of assets, dissolution or winding up of the
Corporation, or increase the authorized
amount of any such other class or series, or
(iii) amend, alter or repeal any provision of
the Corporation's Certificate of
Incorporation so as to adversely affect the
relative rights and preferences of the Series
A Preferred Stock; provided, however, that
any such amendment that changes the dividend
payable on the Series A Preferred Stock shall
require the affirmative vote of the holder of
each share of Series A Preferred Stock at a
meeting of such holders called for such
purpose or the written consent of the holder
of each share of Series A Preferred Stock.
(i) Acknowledgement. Each holder of Series
A Preferred Stock, by acceptance thereof,
acknowledges and agrees that payments of
dividends, interest, premium and principal
on, and redemption and repurchase of, such
securities by the Corporation are subject to
restrictions contained in certain credit and
financing agreements of the Corporation.
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<PAGE>
(j) Definitions.
The following terms, when used herein,
shall have the meanings set forth below:
i. As used herein, the amount of
dividends "accrued" on any share of
Series A Preferred Stock as at any date
shall be calculated as the amount of any
unpaid dividends accumulated thereon to
and including the last preceding
Dividend Accrual Date with respect to
which dividends have not been paid,
whether or not earned or declared
(including the amount of any dividends
accumulated on any share of Series A
Preferred Stock from the preceding
Dividend Accrual Date in the event of an
optional redemption pursuant to
paragraph (d)(ii) or in the event of an
exchange pursuant to paragraph (e)).
ii. "corporation" shall mean a
corporation, partnership, business
trust, unincorporated organization,
association or joint stock company.
iii. "Junior Stock" shall mean any
series or class of the capital stock of
the Corporation now or hereafter
authorized or issued by the Corporation
ranking junior to the Series A Preferred
Stock with respect to dividends or
distributions or upon the liquidation,
distribution of assets, dissolution or
winding-up of the Corporation, including
without limitation the Class A Common
Stock and the Class B Common Stock.
iv. "person" shall mean an individual,
a corporation, partnership, trust,
organization, association, government or
any department or agency thereof, or any
other individual or entity.
B. CLASS A AND CLASS B COMMON STOCK
Except as otherwise provided herein, all
shares of Class A Common Stock and Class B
Common Stock shall be identical and shall
entitle the holders thereof to the same
rights and privileges.
(a) Dividends. Holders of Common Stock
shall be entitled to receive ratably on a per
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<PAGE>
share basis such dividends as may be declared
by the Board of Directors, provided that if
dividends are declared which are payable in
shares of Class A Common Stock or Class B
Common Stock, dividends shall be declared
which are payable at the same rate on each
class of Common Stock and the dividends
payable in shares of Class A Common Stock
shall be payable to holders of Class A Common
Stock and the dividends payable in shares of
Class B Common Stock shall be payable to
holders of Class B Common Stock.
(b) Conversion. Each record holder of
Class A Common Stock shall be entitled to
convert any or all of such holder's Class A
Common Stock into the same number of shares
of Class B Common Stock and each record
holder of Class B Common Stock shall be
entitled to convert any or all of the shares
of such holder's Class B Common Stock into
the same number of shares of Class A Common
Stock; provided, however, that at the time of
conversion of shares of Class B Common Stock
into shares of Class A Common Stock such
holder would be permitted, pursuant to
applicable law, to hold the total number of
shares of Class A Common Stock which he would
hold after giving effect to such conversion.
Each conversion of shares of one class
of Common Stock into shares of another class
of Common Stock shall be effected by the
surrender of the certificate or certificates
representing the shares to be converted at
the principal office of the Corporation at
any time during normal business hours,
together with a written notice by the holder
of such shares stating the number of shares
that any such holder desires to convert into
the other class of Common Stock. Such
conversion shall be deemed to have been
effected as of the close of business on the
date on which such certificate or
certificates have been surrendered and such
notice has been received by the Corporation,
and at such time the rights of any such
holder with respect to the converted class of
Common Stock shall cease and the person or
persons in whose name or names the
certificate or certificates for shares of the
other class of Common Stock are to be issued
upon such conversion shall be deemed to have
become the holder or holders of record of the
shares of such other class of Common Stock
represented thereby.
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Promptly after such surrender and the
receipt by the Corporation of the written
notice from the holder hereinbefore referred
to, the Corporation shall issue and deliver
in accordance with the surrendering holder's
instructions the certificate or certificates
for the other class of Common Stock issuable
upon such conversion and a certificate
representing any shares of Common Stock which
were represented by the certificate or
certificates delivered to the Corporation in
connection with such conversion but which
were not converted. The issuance of
certificates for the other class of Common
Stock upon conversion shall be made without
charge to the holder or holders of such
shares for any issuance tax (except stock
transfer taxes) in respect thereof or other
cost incurred by the Corporation in
connection with such conversion.
(c) Transfers. The Corporation shall
not close its books against the transfer of
any share of Common Stock, or of any share of
Common Stock issued or issuable upon
conversion of shares of the other class of
Common Stock, in any manner that would
interfere with the timely conversion of such
shares of Common Stock.
(d) Subdivision and Combinations of
Shares. If the Corporation in any manner
subdivides or combines the outstanding shares
of any class of Common Stock, the outstanding
shares of the other class of Common Stock
shall be proportionately subdivided or
combined.
(e) Reservation of Shares for
Conversion. So long as any shares of any
class of Common Stock are outstanding, the
Corporation shall at all times reserve and
keep available out of its authorized but
unissued shares of Class A Common Stock and
Class B Common Stock (or any shares of Class
A Common Stock or Class B Common Stock which
are held as treasury shares), the number of
shares sufficient for issuance upon
conversion of the outstanding shares of
common stock.
(f) Distribution of Assets. In the
event of the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation, holders of Common Stock shall be
entitled to receive all of the remaining
assets of the Corporation available for
distribution to its
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stockholders after all amounts to which
the holders of Series A Preferred Stock
are entitled have been paid or set aside
in cash for payment.
(g) Voting Rights. The holders of
Class A Common Stock shall have the general
right to vote for all purposes, including the
election of directors, as provided by law.
Each holder of Class A Common Stock shall be
entitled to one vote for each share thereof
held. There shall be no cumulative voting.
Except as otherwise required by law, the
holders of Class B Common Stock shall have no
voting rights.
(h) Merger, etc. In connection with
any merger, consolidation, or
recapitalization in which holders of Class A
Common Stock generally receive, or are given
the opportunity to receive, consideration for
their shares, all holders of Class B Common
Stock shall receive or be given the
opportunity to receive, as the case may be,
the same form of consideration for their
shares in the same amount per share as is
received by holders of Class A Common Stock.
5. Incorporator. The name and mailing address
of the incorporator are Nikki Gold, 4000 Bell Atlantic
Tower, 1717 Arch Street, Philadelphia, Pennsylvania
19103-2793.
6. Bylaws. In furtherance and not in limitation
of the powers conferred by law, the board of directors of
the Corporation is authorized to adopt, amend or repeal the
bylaws of the Corporation, except as otherwise specifically
provided therein, subject to the powers of the stockholders
of the Corporation to amend or repeal any bylaws adopted by
the board of directors.
7. Elections of Directors. Elections of
directors need not be by written ballot unless and except to
the extent the bylaws of the Corporation shall so provide.
8. Right to Amend. The Corporation reserves the
right to amend or repeal any provision contained in this
Certificate as the same may from time to time be in effect
in the manner now or hereafter prescribed by law, and all
rights, preferences and privileges conferred on
stockholders, directors or others hereunder are subject to
such reservation.
9. Limitation on Liability. The directors of
the Corporation shall be entitled to the benefits of all
limitations on the liability of directors generally that are
now or hereafter
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become available under the DGCL. Without
limiting the generality of the foregoing, to the fullest
extent permitted by the DGCL, as it exists on the date
hereof or as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the
DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. Any repeal or
modification of this Section 9 or any adoption of any
provision of this Certificate of Incorporation inconsistent
with this Section 9 shall be prospective only, and shall not
affect, to the detriment of any director, any limitation on
the personal liability of a director of the Corporation
existing at the time of such repeal, modification or
adoption.
Dated: March 10, 1997
______________________________
Nikki Gold, Incorporator
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<PAGE>
Exhibit 3.04
BYLAWS
OF
FSC SEMICONDUCTOR CORPORATION
ARTICLE I
STOCKHOLDERS
1.1 Meetings.
1.1.1 Place. Meetings of the stockholders shall be held at such place
as may be designated by the board of directors.
1.1.2 Annual Meeting. An annual meeting of the stockholders for the
election of directors and for other business shall be held on such date and
at such time as may be fixed by the board of directors.
1.1.3 Special Meetings. Special meetings of the stockholders may be
called at any time by the president, or the board of directors, or the
holders of a majority of the outstanding shares of stock of the Company
entitled to vote at the meeting.
1.1.4 Quorum. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote
on a particular matter shall constitute a quorum for the purpose of
considering such matter.
1.1.5 Voting Rights. Except as otherwise provided herein, in the
certificate of incorporation or by law, every stockholder shall have the
right at every meeting of stockholders to one vote for every share standing
in the name of such stockholder on the books of the Company which is entitled
to vote at such meeting. Every stockholder may vote either in person or by
proxy.
ARTICLE II
DIRECTORS
2.1 Number and Term. The board of directors shall have authority to (i)
determine the number of directors to constitute the board and (ii) fix the
terms of office of the directors.
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2.2 Meetings.
2.2.1 Place. Meetings of the board of directors shall be held at such
place as may be designated by the board or in the notice of the meeting.
2.2.2 Regular Meetings. Regular meetings of the board of directors
shall be held at such times as the board may designate. Notice of regular
meetings need not be given.
2.2.3 Special Meetings. Special meetings of the board may be called by
direction of the president or any two members of the board on three days'
notice to each director, either personally or by mail, telegram or facsimile
transmission.
2.2.4 Quorum. A majority of all the directors in office shall
constitute a quorum for the transaction of business at any meeting.
2.2.5 Voting. Except as otherwise provided herein, in the certificate
of incorporation or by law, the vote of a majority of the directors present
at any meeting at which a quorum is present shall constitute the act of the
board of directors.
2.2.6 Committees. The board of directors may, by resolution adopted by
a majority of the whole board, designate one or more committees, each
committee to consist of one or more directors and such alternate members
(also directors) as may be designated by the board. Unless otherwise
provided herein, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member. Except as otherwise
provided herein, in the certificate of incorporation or by law, any such
committee shall have and may exercise the powers of the full board of
directors to the extent provided in the resolution of the board directing the
committee.
ARTICLE III
OFFICERS
3.1 Election. At its first meeting after each annual meeting of the
stockholders, the board of directors shall elect a president, treasurer,
secretary and such other officers as it deems advisable.
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3.2 Authority, Duties and Compensation. The officers shall have such
authority, perform such duties and serve for such compensation as may be
determined by resolution of the board of directors. Except as otherwise
provided by board resolution, (i) the president shall be the chief executive
officer of the Company, shall have general supervision over the business and
operations of the Company, may perform any act and execute any instrument for
the conduct of such business and operations and shall preside at all meetings
of the board and stockholders, (ii) the other officers shall have the duties
customarily related to their respective offices, and (iii) any vice
president, or vice presidents in the order determined by the board, shall in
the absence of the president have the authority and perform the duties of the
president.
ARTICLE IV
INDEMNIFICATION
4.1 Right to Indemnification. The Company shall indemnify any person who
was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that
such person is or was a director or officer of the Company or a constituent
corporation absorbed in a consolidation or merger, or is or was serving at
the request of the Company or a constituent corporation absorbed in a
consolidation or merger, as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or is or was a
director or officer of the Company serving at its request as an
administrator, trustee or other fiduciary of one or more of the employee
benefit plans of the Company or other enterprise, against expenses (including
attorneys' fees), liability and loss actually and reasonably incurred or
suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law.
4.2 Advance of Expenses. Expenses incurred by a director or officer of the
Company in defending a proceeding shall be paid by the Company in advance of
the final disposition of such proceeding subject to the provisions of any
applicable statute.
4.3 Procedure for Determining Permissibility. To determine whether any
indemnification or advance of expenses under this Article IV is permissible,
the board of directors by a majority
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vote of a quorum consisting of directors not parties to such proceeding may,
and on request of any person seeking indemnification or advance of expenses
shall be required to, determine in each case whether the applicable standards
in any applicable statute have been met, or such determination shall be made
by independent legal counsel if such quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested directors so
directs, provided that, if there has been a change in control of the Company
between the time of the action or failure to act giving rise to the claim for
indemnification or advance of expenses and the time such claim is made, at
the option of the person seeking indemnification or advance of expenses, the
permissibility of indemnification or advance of expenses shall be determined
by independent legal counsel. The reasonable expenses of any director or
officer in prosecuting a successful claim for indemnification, and the fees
and expenses of any special legal counsel engaged to determine permissibility
of indemnification or advance of expenses, shall be borne by the Company.
4.4 Contractual Obligation. The obligations of the Company to indemnify a
director or officer under this Article IV, including the duty to advance
expenses, shall be considered a contract between the Company and such
director or officer, and no modification or repeal of any provision of this
Article IV shall affect, to the detriment of the director or officer, such
obligations of the Company in connection with a claim based on any act or
failure to act occurring before such modification or repeal.
4.5 Indemnification Not Exclusive; Inuring of Benefit. The indemnification
and advance of expenses provided by this Article IV shall not be deemed
exclusive of any other right to which one indemnified may be entitled under
any statute, provision of the Certificate of Incorporation, these bylaws,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall inure to the benefit of the
heirs, executors and administrators of any such person.
4.6 Insurance and Other Indemnification. The board of directors
shall have the power to (i) authorize the Company to purchase and
maintain, at the Company's expense, insurance on behalf of the
Company and on behalf of others to the extent that power to do so
has not been prohibited by statute, (ii) create any fund of any
nature, whether or not under the control of a trustee, or
otherwise secure any of its indemnification obligations, and
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(iii) give other indemnification to the extent permitted by statute.
ARTICLE V
TRANSFER OF SHARE CERTIFICATES
Transfers of share certificates and the shares represented thereby shall
be made on the books of the Company only by the registered holder or by duly
authorized attorney. Transfers shall be made only on surrender of the share
certificate or certificates.
ARTICLE VI
AMENDMENTS
These bylaws may be amended or repealed at any regular or special
meeting of the board of directors by vote of a majority of all directors in
office or at any annual or special meeting of stockholders by vote of holders
of a majority of the outstanding stock entitled to vote. Notice of any such
annual or special meeting of stockholders shall set forth the proposed change
or a summary thereof.
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<PAGE>
Exhibit 4.01
INDENTURE dated as of March 11, 1997, among
FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Company"), FSC SEMICONDUCTOR
CORPORATION ("Parent"), as Guarantor, and
UNITED STATES TRUST COMPANY OF NEW YORK, a
New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 10-1/8%
Senior Subordinated Notes Due 2007 (the "Initial Securities") and, if and
when issued pursuant to a registered exchange for Initial Securities, the
Company's 10-1/8% Senior Subordinated Notes Due 2007 (the "Exchange
Securities") and, if and when issued pursuant to a private exchange for
Initial Securities, the Company's 10-1/8% Senior Subordinated Notes Due 2007
(the "Private Exchange Securities", together with the Exchange Securities and
the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that
any such Restricted Subsidiary described in clauses (ii) or (iii) above is
primarily engaged in a Related Business.
"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" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
<PAGE>
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Sec-tions 4.04, 4.06 and 4.07 only, "Affiliate"
shall also mean any beneficial owner of Capital Stock representing 10% or
more of the total voting power of the Voting Stock (on a fully diluted basis)
of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an
Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions)
by the Company or any Restricted Subsidiary, including any disposition by
means of a merger, consolidation or similar transaction (each referred to for
the purposes of this definition as a "disposition"), of (i) any shares of
Capital Stock of a Restricted Subsidiary (other than directors' qualifying
shares or shares required by applicable law to be held by a Person other than
the Company or a Restricted Subsidiary), (ii) all or substantially all the
assets of any division or line of business of the Company or any Restricted
Subsidiary or (iii) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above,
(x) a disposition by a Restricted Subsidiary to the Company or by the Company
or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of
Section 4.06 only, a disposition that constitutes a Restricted Payment
permitted by Section 4.04 and (z) disposition of assets with a fair market
value of less than $100,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled
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principal payment of such Indebtedness or redemption or similar payment with
respect to such Preferred Stock multiplied by the amount of such payment by
(ii) the sum of all such payments.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to
be classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the earlier to occur of (A) the first
public offering of common stock of Parent or (B) the first
public offering of common stock of the Company, the
Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of the Company,
whether as a result of
3
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issuance of securities of the Parent or the Company,
any merger, consolidation, liquidation or dissolution
of the Parent or the Company, any direct or indirect
transfer of securities by Parent or otherwise (for
purposes of this clause (i) and clauses (ii) and (iv) below,
the Permitted Holders shall be deemed to beneficially own
any Voting Stock of a Person (the "specified entity") held
by any other Person (the "parent entity") so long as the
Permitted Holders beneficially own (as so defined), directly
or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent entity) PROVIDED,
HOWEVER, that notwithstanding the foregoing CVC shall be
deemed to beneficially own a majority of the voting power of
the Voting Stock of Sterling (or any successor) so long as
CVC, employees, officers and directors of CVC and
corporations, partnerships and other entities at least a
majority of the equity in which is held in the aggregate by
CVC and its employees, officers and directors hold in the
aggregate no less than a majority of the economic interests
in Sterling (or such successor);
(ii) after the earlier to occur of (A) the first public
offering of common stock of Parent or (B) the first public
offering of common stock of the Company, any "person" (as
such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is
or becomes the beneficial owner (as defined in clause (i)
above, except that for purposes of this clause (ii) such
person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than
35% of the total voting power of the Voting Stock of the
Company; PROVIDED, HOWEVER, that the Permitted Holders
beneficially own (as defined in clause (i) above), directly
or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Company than
such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors (for the
purposes of this clause (ii), such other person shall be
deemed to beneficially own any Voting Stock of a specified
entity held by a parent entity, if such other
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person is the beneficial owner (as defined in this clause
(ii)), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of such parent entity
and the Permitted Holders beneficially own (as defined
in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of
the Voting Stock of such parent entity and do not have
the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the board
of directors of such parent entity);
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors (a)
whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved or (b) who were
elected to the Board of Directors pursuant to the
Stockholders' Agreement) cease for any reason to constitute
a majority of the Board of Directors then in office; or
(iv) the merger or consolidation of the Company with or
into another Person or the merger of another Person with or
into the Company, or the sale of all or substantially all
the assets of the Company to another Person (other than a
Person that is controlled by the Permitted Holders), if the
securities of the Company that are outstanding immediately
prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Company
are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to
any other consideration, securities of the surviving Person
or transferee that represent, immediately after such
transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving Person or
transferee.
"Code" means the Internal Revenue Code of 1986, as amended.
5
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"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor
on the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days (or, if less,
the number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be provided to the Securityholders
pursuant hereto) prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1)
if the Company or any Restricted Subsidiary has Incurred any Indebtedness
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, (2) if the Company or any Restricted Subsidiary has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period
shall be calculated on a pro forma basis as if such discharge had occurred on
the first day of such period and as if the Company or such Restricted
Subsidiary has not earned the interest income actually earned during such
period in respect of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness, (3) if since
the beginning of such period the Company or any Restricted Subsidiary shall
have made any Asset Disposition, the EBITDA for such period shall be reduced
by an amount equal to the EBITDA (if positive) directly
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attributable to the assets which are the subject of such Asset Disposition
for such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (4) if since the beginning of such period the Company or
any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction requiring a calculation
to be made hereunder, which constitutes all or substantially all of an
operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period and (5) if since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (3) or (4) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on
the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income
or earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro
forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro
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forma effect, the interest of such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).
"Consolidated Current Liabilities" as of the date of determination
means the aggregate amount of liabilities of the Company and its consolidated
Restricted Subsidiaries which may properly be classified as current
liabilities (including taxes accrued as estimated), on a consolidated basis,
after eliminating (i) all intercompany items between the Company and any
Restricted Subsidiary and (ii) all current maturities of long-term
Indebtedness, all as determined in accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, without
duplication, (i) interest expense attributable to Capital Lease Obligations
and the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs
associated with Hedging Obligations (including amortization of fees), (vii)
Preferred Stock dividends accrued by Consolidated Restricted Subsidiaries in
respect of all Preferred Stock held by Persons other than the Company or a
Restricted Subsidiary, (viii) interest incurred in connection with
Investments in discontinued operations, (ix) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is
Guaranteed by (or secured by the assets of) the Company or any Restricted
Subsidiary and (x) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan
or trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
the Company and its consolidated Subsidi-
8
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aries; PROVIDED, HOWEVER, that there shall not be included in such
Consolidated Net Income:
(i) any net income of any Person (other than the
Company) if such Person is not a Restricted Subsidiary,
except that (A) subject to the exclusion contained in
clause (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to
the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or
other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated
Net Income;
(ii) any net income (or loss) of any Person acquired by
the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such
acquisition;
(iii) any net income of any Restricted Subsidiary if
such Restricted Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that
(A) subject to the exclusion contained in clause (iv)
below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash that could have been distributed by such Restricted
Subsidiary consistent with such restrictions during such
period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other
disposition of any assets of the Company or its
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<PAGE>
consolidated Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business
and any gain (or loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting
principles.
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Tangible Assets" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves
and other properly deductible items) which would appear on a consolidated
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated
Current Liabilities and, to the extent otherwise included, the amounts of :
(i) minority interests in consolidated Subsidiaries held by Persons other
than the Company or a Restricted Subsidiary; (ii) excess of cost over fair
value of assets of businesses acquired, as determined in good faith by the
Board of Directors; (iii) any revaluation or other write-up in book value of
assets subsequent to the Issue Date as a result of a change in the method of
valuation in accordance with GAAP consistently applied; (iv) unamortized debt
discount and expenses and other unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (v)
treasury stock; (vi) cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other retirement of Capital
Stock to the extent such obligation is not reflected in
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Consolidated Current Liabilities; and (vii) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on
the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending at least 45 days prior
to the taking of any action for the purpose of which the determination is
being made, as (i) the par or stated value of all outstanding Capital Stock
of the Company plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means the Credit Agreement to be entered into by
and among Parent, the Company, certain of its Subsidiaries, the lenders
referred to therein, Bankers Trust Company, as Administrative Agent, Credit
Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent, together with the related documents thereto
(including without limitation the term loans and revolving loans thereunder,
any guarantees and security documents), as amended, extended, renewed,
restated, supplemented or otherwise modified (in whole or in part, and
without limitation as to amount, terms, conditions, covenants and other
provisions) from time to time, and any agreement (and related document)
governing Indebtedness incurred to refund or refinance, in whole or in part,
the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement,
whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement to
which such Person is a party or beneficiary.
"CVC" means Citicorp Venture Capital Ltd.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
11
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"Designated Senior Indebtedness" means (i) the Bank Indebtedness;
PROVIDED, HOWEVER, that Bank Indebtedness outstanding under any Credit
Agreement that Refinanced in part, but not in whole, the previously
outstanding Bank Indebtedness shall only constitute Designated Senior
Indebtedness if it meets the requirements of succeeding clause (ii); and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to
lend up to, at least $10 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Securities; PROVIDED, HOWEVER, that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the first anniversary of the
Stated Maturity of the Securities shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the
provisions of Sections 4.06 and 4.09.
"EBITDA" for any period means the sum of Consolidated Net Income,
plus Consolidated Interest Expense plus the following to the extent deducted
in calculating such Consolidated Net Income: (a) all income tax expense of
the Company and its consolidated Restricted Subsidiaries, (b) depreciation
expense of the Company and its consolidated Restricted Subsidiaries, (c)
amortization expense of the Company and its consolidated Restricted
Subsidiaries (excluding amortization expense attributable to a prepaid
12
<PAGE>
cash item that was paid in a prior period) and (d) all other non-cash charges
of the Company and its consolidated Restricted Subsidiaries (excluding any
such non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash
charges of, a Restricted Subsidiary shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the
net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Foreign Subsidiary" means any Restricted Subsidiary not created or
organized in the United States of America or any State thereof and that
conducts substantially all its operations outside of the United States.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board,
(iii) such other statements by such other entity as approved by a significant
segment of the accounting profession and (iv) the rules and regulations of
the SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in
staff accounting bulletins and similar written statements from the accounting
staff of the SEC. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
13
<PAGE>
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other
Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay
or to maintain financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Guarantor" means the Parent and each Subsidiary Guarantor.
"Guaranty" means the Parent Guaranty or any Subsidiary Guaranty.
"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a successor to Parent, or any
Subsidiary Guarantor, becomes subject to the applicable terms and conditions
hereof.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall
14
<PAGE>
have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall not be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of
(A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such
Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and
all Attributable Debt in respect of Sale/Leaseback
Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed
as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such
Person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the
ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following payment on the letter of
credit);
(v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Subsidiary of
such Person, the liquidation preference with respect to, any
Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses
(i) through (v) of other Persons and all dividends of other
Persons for the payment of which, in either case, such
Person is responsible or liable,
15
<PAGE>
directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Guarantee;
(vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value
of such property or assets or the amount of the obligation
so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date; PROVIDED,
HOWEVER, that the amount outstanding at any time of any Indebtedness issued
with original issue discount shall be deemed to be the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such indebtedness at such time as determined in accordance with
GAAP.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement
or arrangement designed to protect such Person against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of the lender)
or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For
purposes of the definition of "Unrestricted Subsidiary", the definition of
"Restricted Payment" and
16
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Section 4.04, (i) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the
Company's "Investment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at
the time of such redesignation; and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the Board
of Directors.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring
Person of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form), in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP, as a consequence of
such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with
the terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order to obtain a
17
<PAGE>
necessary consent to such Asset Disposition, or by applicable law, be repaid
out of the proceeds from such Asset Disposition, (iii) all distributions and
other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (iv)
the deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company
or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Obligations" means with respect to any Indebtedness all
obligations for principal, premium, interest, penalties, fees,
indemnifications, reimbursements and other amounts payable pursuant to the
documentation governing such Indebtedness.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel
to the Company or the Trustee.
"Parent" means FSC Semiconductor Corporation, a Delaware
corporation.
"Parent Guaranty" means the Guaranty by Parent of the Company's
obligations with respect to the Securities contained herein.
"Permitted Holders" means (i) CVC, (ii) any officer, employee or
director of CVC or any trust,
18
<PAGE>
partnership or other entity established solely for the benefit of such
officers, employees or directors, (iii) any officer, employee or director of
Parent, the Company or any Subsidiary or any trust, partnership or other
entity established solely for the benefit of such officers, employees or
directors, and (iv) in the case of any individual, any Permitted Transferee
of such individual (as defined in the Stockholders' Agreement), except a
Permitted Transferee by virtue of Section 3.4(b)(iv) thereof; PROVIDED,
HOWEVER, that in no event shall individuals collectively be deemed to be
"Permitted Holders" with respect to more than 30% of the total voting power
of Parent or the Company.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms; PROVIDED, HOWEVER, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary
deems reasonable under the circumstances; (v) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are
made in the ordinary course of business; (vi) loans or advances to employees
made in the ordinary course of business consistent with past practices of the
Company or such Restricted Subsidiary; and (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; and (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for
an Asset Disposition as permitted pursuant to Section 4.06.
19
<PAGE>
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class
of such Person.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of (i) the Company or (ii) the Parent (to the extent
the proceeds thereof are contemporaneously contributed to the Company), in
each case pursuant to an effective registration statement under the
Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with this Indenture, including
Indebtedness that Refinances Refinancing Indebtedness; PROVIDED, HOWEVER,
that (i) such Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being Refinanced, (ii) such
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has
an aggregate principal amount (or if Incurred with original issue discount,
an aggregate issue price) that is equal to or less than the aggregate
20
<PAGE>
principal amount (or if Incurred with original issue discount, the aggregate
accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance costs) under the Indebtedness being
Refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of
the Company or (y) Indebtedness of the Company or a Restricted Subsidiary
that Refinances Indebtedness of an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement dated March 6, 1997, among Parent, the Company and Credit Suisse
First Boston Corporation, BT Securities Corporation and CIBC Wood Gundy
Securities Corp., as Initial Purchasers.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted
Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if
any) for an issue of Senior Indebtedness of the Company; PROVIDED, HOWEVER,
that if and for so long as any Senior Indebtedness lacks such a
representative, then the Representative for such Senior Indebtedness shall at
all times be the holders of a majority in outstanding principal amount of
such Senior Indebtedness.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any
sort in respect of its Capital Stock (including any payment in connection
with any merger or consolidation involving such Person) or similar payment to
the direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to
minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation)), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock
of the Company held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of the Company (other than a Restricted
Subsidiary), including the exercise of any option to
21
<PAGE>
exchange any Capital Stock (other than into Capital Stock of the Company that
is not Disqualified Stock), (iii) the purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Revolving Credit Facilities" means the revolving credit facility
contained in the Credit Agreement and any other facility or financing
arrangement that Refinances or replaces, in whole or in part, any such
revolving credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" of any Person means all (i) Bank Indebtedness
of or guaranteed by such Person, whether outstanding on the Issue Date or
thereafter Incurred, and (ii) Indebtedness of such Person, whether
outstanding on the Issue Date or thereafter Incurred, including interest
thereon, in respect of (A) Indebtedness for money borrowed, (B) Indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable and (C) Hedging
Obligations, unless, in the case of (i) and
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<PAGE>
(ii), in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such obligations are subordinate
in right of payment to the obligations under the Securities; PROVIDED,
HOWEVER, that Senior Indebtedness shall not include (1) any obligation of
such Person to any subsidiary of such Person, (2) any liability for Federal,
state, local or other taxes owed or owing by such Person, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course
of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior by its terms to
any other Indebtedness or other obligation of such Person or (5) that portion
of any Indebtedness which at the time of Incurrence is Incurred in violation
of this Indenture (but as to any such Indebtedness under the Credit
Agreement, no such violation shall be deemed to exist if the Representative
of the Lenders thereunder shall have received an officers' certificate of the
Company to the effect that the issuance of such Indebtedness does not violate
such covenant and setting forth in reasonable detail the reasons therefor).
"Senior Subordinated Indebtedness" means (i) with respect to the
Company, the Securities and any other Indebtedness of the Company that
specifically provides that such Indebtedness is to rank PARI PASSU with the
Securities in right of payment and is not subordinated by its terms in right
of payment to any Indebtedness or other obligation of the Company which is
not Senior Indebtedness of the Company and (ii) with respect to the Parent or
a Subsidiary Guarantor, their respective Guarantees of the Notes and any
other indebtedness of such Person that specifically provides that such
Indebtedness rank PARI PASSU with such Guarantee in respect of payment and is
not subordinated by its terms in respect of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such
Person.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed
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date on which the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency unless
such contingency has occurred).
"Sterling" means Sterling Holding Company LLC, a Delaware limited
liability company.
"Stockholders' Agreement" means the Securities Purchase and Holders
Agreement among the stockholders of Parent, as in effect on the Issue Date.
"Subordinated Obligation" means any Indebtedness of the Company or
any Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to, in the case
of the Company, the Securities or, in the case of such Subsidiary Guarantor,
its Subsidiary Guaranty, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) 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 (i) such Person, (ii) such Person and one or more Subsidiaries of such
Person or (iii) one or more Subsidiaries of such Person.
"Subsidiary Guarantor" means any subsidiary of the Company that
guarantees the Company's obligations with respect to the Securities.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor
of the Company's obligations with respect to the Securities.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or
any agency thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits
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maturing within 180 days of the date of acquisition thereof issued by a bank
or trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign
currency equivalent thereof) and has outstanding debt that is rated "A" (or
such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) investments in commercial paper,
maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time
as of which any investment therein is made of "P-1" (or higher) according to
Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, and (v) investments in securities with maturities
of six months or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States of America, or
by any political subdivision or taxing authority thereof, and rated at least
"A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Term Loan Facilities" means the term loan facilities contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part any such term loan facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
------
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
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"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial
Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, such designation would be
permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER,
that immediately after giving effect to such designation (x) the Company
could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (y) no
Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the resolution of the Board of Directors giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof)
for the payment of which the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the issuer's
option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership
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interests) of such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -----------
"Affiliate Transaction" ................ 4.08
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 13.08
"Offer" ................................ 4.07(b)
"Offer Amount" ......................... 4.07(c)(2)
"Offer Period" ......................... 4.07(c)(2)
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.03
"Purchase Date" ........................ 4.07(c)(1)
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
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"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words
in the plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by
virtue of its nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or
other discount security at any date shall be the principal
amount thereof that would be shown on a balance sheet of the
issuer dated such date prepared in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall
be (i) the maximum liquidation value of such Preferred Stock
or (ii) the maximum mandatory redemption or mandatory
repurchase price with respect to such Preferred Stock,
whichever is greater; and
(9) all references to the date the Securities were
originally issued shall refer to the date the Initial
Securities were originally issued.
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ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are
set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the
Appendix which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities, the Private Exchange 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). Each Security shall be
dated the date of its authentication. The terms of the Securities set forth
in the Appendix and Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue upon a written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant Secretary of the
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Company. Such order shall specify the amount of the Securities to be
authenticated (not to exceed $300,000,000) and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount
of Securities outstanding at any time may not exceed that amount except as
provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or
agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where Securities may be presented for payment (the "Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer
and exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Company
shall notify the Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant
to Section 7.07. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each
due date of the principal and interest
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on any Security, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal and interest when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment, and while
any such default continues, the Trustee may require the Paying Agent to pay
all money held by it to the Trustee. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and
hold it as a separate trust fund. 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 funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money delivered to
the Trustee.
SECTION 2.05. Securityholder 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 Securityholders. If the Trustee is not
the Registrar, the Company shall furnish to the Trustee, in writing at least
five Business Days before each interest 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
Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender
of a Security for registration of transfer. When a Security is presented to
the Registrar or a co-registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of
Section 8-401(1) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them
for an equal principal amount of Securities of other denominations, the
Registrar shall make the exchange as requested if the same requirements are
met. To permit registration of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at the Registrar's or
co-registrar's request. The Company may require payment of a sum sufficient
to pay all taxes, assessments or other governmental charges in connection
with
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any transfer or exchange pursuant to this Section. The Company shall not be
required to make and the Registrar need not register transfers or exchanges
of Securities selected for redemption (except, in the case of Securities to
be redeemed in part, the portion thereof not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and (subject to the provisions of the
Securities with respect to record dates) interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to
the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If
required by the Trustee or the Company, such Holder shall furnish an
indemnity bond sufficient in the judgment of the Company and the Trustee to
protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss which any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their
expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
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SECTION 2.08. Outstanding Securities. Securities outstanding at
any time are all 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. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser, in which
case the replacement Security shall cease to be outstanding, subject to the
provisions of Section 8-405 of the Uniform Commercial Code.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient
to pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may
be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. 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 and deliver them in exchange for temporary
Securities.
SECTION 2.10 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy all Securities surrendered for registration of
transfer, exchange, payment or cancellation and deliver a certificate of such
destruction to the Company unless the Company directs the Trustee to deliver
canceled
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Securities to the Company. The Company may not issue new Securities to
replace Securities it has redeemed, paid or delivered to the Trustee for
cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted
interest (plus interest on such defaulted interest to the extent lawful) in
any lawful manner. The Company may pay the defaulted interest to the persons
who are Securityholders on a subsequent special record date. The Company
shall fix or cause to be fixed any such special record date and payment date
to the reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience
to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any
defect in or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities or is required to redeem
Securities pursuant to paragraph 6 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities
to be redeemed and the paragraph of the Securities pursuant to which the
redemption will occur.
If the Company is required to redeem Securities pursuant to
paragraph 6 of the Securities, it may reduce the principal amount of
Securities required to be redeemed to the extent it is permitted a credit by
the terms of the Securities and it notifies the Trustee of the amount of the
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credit and the basis for it. If the reduction is based on a credit for
redeemed or canceled Securities that the Company has not previously delivered
to the Trustee for cancellation, it shall deliver such Securities with the
notice.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the
effect that such redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies
with applicable legal and securities exchange requirements, if any, and that
the Trustee in its sole discretion considers to be fair and appropriate. The
Trustee shall make the selection from outstanding Securities 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 the Trustee selects shall be in amounts of
$1,000 or a whole multiple 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 redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities
to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
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(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(5) if fewer than all the outstanding Securities are to
be redeemed, the identification and principal amounts of the
particular Securities to be redeemed;
(6) 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 on Securities (or portion thereof) called for
redemption ceases to accrue on and after the redemption
date;
(7) the paragraph of the Securities pursuant to which
the Securities called for redemption are being redeemed; and
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed
in such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in
trust) money sufficient to pay the redemption price of and accrued interest
(subject to the right of Holders of record on the
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relevant record date to receive interest due on the relevant interest payment
date) on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient
to pay all principal and interest then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company shall file with the
Trustee and provide Securityholders, within 15 days after it files them with
the SEC, copies of its annual report and the information, documents and other
reports which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company
may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall continue to file
with the SEC and provide the Trustee and Securityholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13
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and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed
and provided at the times specified for the filing of such information,
documents and reports under such Sections; provided, however, that the
Company shall not be required to file any report, document or other
information with the SEC if the SEC does not permit such filing. The Company
also shall comply with the other provisions of TIA Section 314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness unless, on the date of such Incurrence and after
giving effect thereto, the Consolidated Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company and
its Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(1) Indebtedness of the Company or any Restricted
Subsidiary Incurred pursuant to the Revolving Credit
Facilities; provided, however, that, immediately after
giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness incurred under this
clause (1) and then outstanding does not exceed the greater
of (A) $75 million and (B) the sum of 50% of the book value
of the inventory of the Company and its Restricted
Subsidiaries and 65% of the book value of the accounts
receivables of the Company and its Restricted Subsidiaries;
(2) Indebtedness of the Company Incurred pursuant to
the Term Loan Facilities; provided, however, that, after
giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness Incurred under this
clause (2) and then outstanding does not exceed $120 million
less the aggregate sum of all principal payments actually
made from time to time after the Issue Date with respect to
such Indebtedness (other than principal payments made from
any permitted Refinancings thereof);
(3) Indebtedness of the Company or any Restricted
Subsidiary owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any
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subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or another Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof;
(4) Indebtedness of the Company or any Restricted
Subsidiary owed to and held by any Restricted Subsidiary
(other than a Wholly Owned Subsidiary); provided, however,
that (i) any such Indebtedness shall be Subordinated
Obligations of the Company or such Restricted Subsidiary, as
applicable, and (ii) any subsequent issuance or transfer of
any Capital Stock of such Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the
Company, a Wholly Owned Subsidiary or another Restricted
Subsidiary) shall be deemed to constitute the Incurrence of
such Indebtedness by the issuer thereof;
(5) the Securities;
(6) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (1), (2), (3), (4) or
(5) of this Section 4.03(b));
(7) Refinancing Indebtedness in respect of
Indebtedness Incurred pursuant to Section 4.03(a) or
pursuant to clause (5) or (6) of this Section 4.03(b) or
this clause (7);
(8) Hedging Obligations of the Company or any
Restricted Subsidiary under or with respect to Interest Rate
Agreements and Currency Agreements entered into in the
ordinary course of business and not for the purpose of
speculation;
(9) Indebtedness of the Company or any Restricted
Subsidiary in respect of performance bonds and surety or
appeal bonds entered into by the Company and the Restricted
Subsidiaries in the ordinary course of their business;
(10) Indebtedness consisting of the Subsidiary
Guaranties and the Guarantees of Indebtedness Incurred
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pursuant to paragraph (a) or pursuant to clause (1), (2),
(5), (6) or (7) above or (14) below;
(11) Indebtedness of the Company or any Restricted
Subsidiary arising from the honoring by a bank or other
financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that such Indebtedness is
satisfied within five business days of Incurrence;
(12) Indebtedness of the Company or any Restricted
Subsidiary consisting of indemnification, adjustment of
purchase price or similar obligations, in each case incurred
in connection with the disposition of any assets of the
Company or any Restricted Subsidiary in a principal amount
not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such
disposition;
(13) Indebtedness of a Foreign Subsidiary Incurred to
finance the purchase, lease or improvement of property (real
or personal) or equipment, in each case incurred no more
than 180 days after such purchase, lease or improvement of
such property, and any Refinancing Indebtedness in respect
of such Indebtedness; provided, however, that, except in the
case of the Incurrence of any such Refinancing Indebtedness,
at the time of the Incurrence of such Indebtedness and after
giving effect thereto, (i) the Company would be able to
Incur an additional $1.00 of Indebtedness pursuant to
paragraph (a) above and (ii) the aggregate amount of all
Indebtedness Incurred pursuant to this clause (13) and then
outstanding (including any such Refinancing Indebtedness)
shall not exceed 20% of Consolidated Net Tangible Assets as
of the end of the most recent fiscal quarter ending at least
45 days prior to the date of such Incurrence; and
((14) Indebtedness of the Company in an aggregate
principal amount which, together with all other Indebtedness
of the Company and the Restricted Subsidiaries outstanding
on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (13) of this
Section 4.03(b) or Section 4.03(a)) does not exceed $50
million.
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(c) Notwithstanding the foregoing, the Company shall not, and
shall not permit any Restricted Subsidiary to, Incur any Indebtedness
pursuant to Section 4.03(b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities or the relevant
Subsidiary Guaranty, as applicable, to at least the same extent as such
Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described herein, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than
one of the types of Indebtedness described herein.
(e) Notwithstanding Section 4.03(a) or 4.03(b), the Company shall
not, and shall not permit any Subsidiary Guarantor to, Incur (i) any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of the Company or such Subsidiary
Guarantor, as applicable, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness or (ii) any Secured Indebtedness (other than trade
payables incurred in the ordinary course of business) that is not Senior
Indebtedness unless contemporaneously therewith effective provision is made
to secure the Securities or the relevant Subsidiary Guaranty, as applicable,
equally and ratably with such Secured Indebtedness for so long as such
Secured Indebtedness is secured by a Lien.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or
would result therefrom);
(2) the Company is not able to Incur an additional
$1.00 of Indebtedness under Section 4.03(a); or
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(3) the aggregate amount of such Restricted Payment and
all other Restricted Payments since the Issue Date would
exceed the sum of:
(A) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period)
from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the
Securities are originally issued to the end of the most
recent fiscal quarter ending at least 45 days (or, if
less, the number of days after the end of such fiscal
quarter as the consolidated financial statements of the
Company shall be provided to Securityholders hereunder)
prior to the date of such Restricted Payment (or, in
case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
the Company from the issuance or sale of its Capital
Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or
sale to an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries
for the benefit of their employees to the extent that
the purchase by such plan or trust is financed by
Indebtedness of such plan or trust to the Company or
any Subsidiary or Indebtedness Guaranteed by the
Company or any Subsidiary);
(C) the amount by which Indebtedness of the
Company or any Restricted Subsidiary is reduced on the
Company's consolidated balance sheet upon the
conversion or exchange (other than by a Subsidiary of
the Company) subsequent to the Issue Date of any
Indebtedness of the Company or any Restricted
Subsidiary convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair value of any
other property, distributed by the Company or any
Restricted Subsidiary upon such conversion or
exchange); and
(D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Sub-
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sidiaries resulting from dividends, repayments of loans or
advances or other transfers of assets subsequent to the
Issue Date, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries,
and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market
value of the net assets of an Unrestricted Subsidiary
at the time such Unrestricted Subsidiary is designated
a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment)
by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary.
(b) The provisions of Section 4.04(a) shall not
prohibit:
(i) any Restricted Payment made by exchange for, or out
of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary
of the Company or an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries
for the benefit of their employees to the extent that the
purchase by such plan or trust is financed by Indebtedness
of such plan or trust to the Company or any Subsidiary of
the Company or Indebtedness Guaranteed by the Company or any
Subsidiary of the Company); provided, however, that (A) such
Restricted Payment shall be excluded in the calculation of
the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the
calculation of amounts under clause (3)(B) of
Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value of Subordinated
Obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Indebtedness which is
permitted to be Incurred pursuant to Section 4.03; provided,
however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of
Restricted Payments;
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(iii) any purchase or redemption of Disqualified Stock
of the Company or a Restricted Subsidiary made by exchange
for, or out of the proceeds of the substantially concurrent
sale of, Disqualified Stock of the Company or a Restricted
Subsidiary which is permitted to be Incurred pursuant to
Section 4.03; provided, however, that such purchase or
redemption shall be excluded in the calculation of the
amount of Restricted Payments;
(iv) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted
by Section 4.06; provided, however, that such purchase or
redemption shall be excluded in the calculation of the
amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and
within 60 days after the completion of the offer to
repurchase the Securities pursuant to Section 4.09
(including the purchase of the Securities tendered), any
purchase or redemption of Subordinated Obligations required
pursuant to the terms thereof as a result of such Change of
Control at a purchase or redemption price not to exceed the
outstanding principal amount thereof, plus accrued and
unpaid interest (if any); provided, however, that (A) at the
time of such purchase or redemption no Default shall have
occurred and be continuing (or would result therefrom), (B)
the Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a) after giving pro
forma effect to such Restricted Payment and (C) such
purchase or redemption shall be included in the calculation
of the amount of Restricted Payments;
(vi) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such
dividend would have complied with Section 4.04(a));
provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of
the amount of Restricted Payments
(vii) the repurchase or other acquisition of shares of,
or options to purchase shares of, common stock of the
Company or any of its Subsidiaries from employees,
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former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees
of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto)
approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to
purchase or sell, shares of such common stock; provided,
however, that the aggregate amount of such repurchases and
other acquisitions shall not exceed the sum of $7.0 million
and the Net Cash Proceeds from the sale of Capital Stock to
members of management or directors of the Company and its
Subsidiaries that occurs after the Issue Date (to the extent
the Net Cash Proceeds from the sale of such Capital Stock
have not otherwise been applied to the payment of Restricted
Payments by virtue of clause (3)(B) of Section 4.04(a);
provided further, however, that (A) such repurchases shall
be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under
clause (3)(B) of Section 4.04(a);
(viii) dividends or advances to Parent in an amount
necessary to pay holding company expenses, such amount not
to exceed $500,000 in any fiscal year of the Company;
provided, however, that such dividends and advances shall be
excluded in the calculation of the amount of Restricted
Payments; or
(ix) Restricted Payments not exceeding $25.0 million in
the aggregate; provided, however, that (A) at the time of
such Restricted Payments, no Default shall have occurred and
be continuing (or would result therefrom) and (B) such
Restricted Payments shall be included in the calculation of
the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock to the Company or a Restricted Subsidiary
or pay any Indebtedness
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owed to the Company, (b) make any loans or advances to the Company or (c)
transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue Date,
including the Credit Agreement as in effect on the Issue
Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by such Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding
on such date;
(iii) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clause (i) or (ii)
of this Section 4.05 or this clause (iii) or contained in
any amendment to an agreement referred to in clause (i) or
(ii) of this Section 4.05 or this clause (iii); provided,
however, that the encumbrances and restrictions with respect
to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no more restrictive
in any material respect than the encumbrances and
restrictions with respect to such Restricted Subsidiary
contained in such predecessor agreements;
(iv) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing
leasehold interests to the extent such provisions restrict
the transfer of the lease or the property leased thereunder;
(v) in the case of clause (c) above, restrictions
contained in security agreements or mortgages securing
Indebtedness of a Restricted Subsidiary to the extent
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such restrictions restrict the transfer of the property
subject to such security agreements or mortgages;
(vi) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(vii) any restriction in any agreement that is not more
restrictive than the restrictions under the terms of the
Credit Agreement as in effect on the Issue Date.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless (i) the
Company or such Restricted Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value (including as
to the value of all non-cash consideration), as determined in good faith by
the Board of Directors, of the shares and assets subject to such Asset
Disposition and at least 85% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or cash
equivalents and (ii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company elects
(or is required by the terms of any Indebtedness), to prepay, repay, redeem
or purchase Senior Indebtedness or Indebtedness (other than any Disqualified
Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within one year from the
later of the date of such Asset Disposition and the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one year from the
later of the date of such Asset Disposition and the receipt of such Net
Available Cash; (C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to make an
Offer to the holders of the Securities (and to holders of other Senior
Subordinated Indebtedness designated by the Company) to purchase Securities
(and such other Senior Subordinated Indebtedness)
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pursuant to and subject to the conditions of Section 4.06(b); and (D) fourth,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C), to (x) the acquisition by the
Company or any Wholly Owned Subsidiary of Additional Assets or (y) the
prepayment, repayment or purchase of Indebtedness (other than any
Disqualified Stock) of the Company (other than Indebtedness owed to an
Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each
case within one year from the later of the receipt of such Net Available Cash
and the date the offer described in Section 4.06(b) is consummated; provided,
however, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness and shall
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, the Company
and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06(a) except to the extent
that the aggregate Net Available Cash from all Asset Dispositions which are
not applied in accordance with this Section 4.06(a) exceeds $10 million.
Pending application of Net Available Cash pursuant to this Section 4.06(a),
such Net Available Cash shall be invested in Permitted Investments or used to
reduce loans outstanding under any revolving credit facility.
For the purposes of this Section 4.06, the following are deemed to
be cash or cash equivalents: (x) the assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the
purchase of Securities (and other Senior Subordinated Indebtedness) pursuant
to Section 4.06(a)(ii)(C), the Company shall be required to purchase
Securities tendered pursuant to an offer by the Company for the Securities
(and other Senior Subordinated
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Indebtedness) (the "Offer") at a purchase price of 100% of their principal
amount (without premium) plus accrued but unpaid interest (or, in respect of
such other Senior Subordinated Indebtedness, such lesser price, if any, as
may be provided for by the terms of such Senior Subordinated Indebtedness) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 4.06(c). If the aggregate purchase
price of Securities (and any other Senior Subordinated Indebtedness) tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase thereof, the Company shall be required to apply the remaining Net
Available Cash in accordance with Section 4.06(a)(ii)(D). The Company shall
not be required to make an Offer to purchase Securities (and other Senior
Subordinated Indebtedness) pursuant to this Section 4.06 if the Net Available
Cash available therefor is less than $10 million (which lesser amount shall
be carried forward for purposes of determining whether such an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a
written notice stating that the Holder may elect to have his Securities
purchased by the Company either in whole or in part (subject to prorating as
hereinafter described in the event the Offer is oversubscribed) in integral
multiples of $1,000 of principal amount, at the applicable purchase price.
The notice shall specify a purchase date not less than 30 days nor more than
60 days after the date of such notice (the "Purchase Date") and shall contain
such information concerning the business of the Company which the Company in
good faith believes will enable such Holders to make an informed decision
(which at a minimum will include (i) the most recently filed Annual Report on
Form 10-K (including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on Form 10-Q and
any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports or, until such time as the Company shall become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, a
corresponding report prepared pursuant to Section 4.02), (ii) a description
of material developments
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in the Company's business subsequent to the date of the latest of such
Reports, and (iii) if material, appropriate pro forma financial information)
and all instructions and materials necessary to tender Securities pursuant to
the Offer, together with the information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided above, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.06(a). On
such date, the Company shall also irrevocably deposit with the Trustee or
with a paying agent other than the Company in Temporary Cash Investments,
maturing on the last day prior to the Purchase Date or on the Purchase Date
if funds are immediately available by open of business, an amount equal to
the Offer Amount to be held for payment in accordance with the provisions of
this Section. Upon the expiration of the period for which the Offer remains
open (the "Offer Period"), the Company shall deliver to the Trustee for
cancellation the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Purchase Date, mail or deliver payment to each tendering Holder in the amount
of the purchase price. In the event that the aggregate purchase price of the
Securities delivered by the Company to the Trustee is less than the Offer
Amount, the Trustee shall deliver the excess to the Company immediately after
the expiration of the Offer Period for application in accordance with this
Section.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed,
to the Company at the address specified in the notice at least three Business
Days prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives, not later than one Business
Day prior to the Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security which was delivered for purchase by the Holder and a statement that
such Holder is withdrawing his election to have such Security purchased. If
at the expiration of the
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Offer Period the aggregate principal amount of Securities (and any other
Senior Subordinated Indebtedness included in the Offer) surrendered pursuant
to the Offer exceeds the Offer Amount, the Company shall select the
Securities and other Senior Subordinated Indebtedness to be purchased on a
pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Securities and other Senior Subordinated Indebtedness in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Securities are purchased only in part shall be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section 4.06. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to
the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter
into or permit to exist any transaction (including the purchase, sale, lease
or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (i) are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is
not such an Affiliate, (ii) if such Affiliate Transaction involves an amount
in excess of $1.0 million, (1) are set forth in writing and (2) have been
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approved by a majority of the members of the Board of Directors having no
personal stake in such Affiliate Transaction and (iii) if such Affiliate
Transaction involves an amount in excess of $10.0 million, have been
determined by (A) a nationally recognized investment banking firm to be fair,
from a financial standpoint, to the Company and its Restricted Subsidiaries
or (B) an accounting or appraisal firm nationally recognized in making such
determinations to be on terms that are not less favorable to the Company and
its Restricted Subsidiaries than the terms that could be obtained in an
arm's-length transaction from a Person that is not an Affiliate of the
Company.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors, (iii) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors, (iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $5.0 million in the
aggregate outstanding at any one time, (v) reasonable fees, compensation or
employee benefit arrangements to and indemnity provided for the benefit of
directors, officers or employees of the Company or any Subsidiary in the
ordinary course of business, (vi) any Affiliate Transaction between the
Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries,
(vii) any Affiliate Transaction with National Semiconductor pursuant to
written agreements in effect on the Issue Date and as amended, renewed or
extended from time to time; provided, however, that any such amendment,
renewal or extension shall not contain terms which are materially less
favorable to the Company than those in the agreements in effect on the Issue
Date, and (viii) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company.
SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries. The Company shall not sell or otherwise dispose
of any Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or
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otherwise dispose of any of its Capital Stock except (i) to the Company or a
Wholly Owned Subsidiary, (ii) if, immediately after giving effect to such
issuance, sale or other disposition, neither the Company nor any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary, (iii) if,
immediately after giving effect to such issuance, sale or other disposition,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made under the covenant described in Section 4.04
if made on the date of such issuance, sale or other disposition or (iv)
directors' qualifying shares.
SECTION 4.09. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require that the
Company repurchase such Holder's Securities at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date), in accordance with the terms contemplated in Section 4.09(b).
In the event that at the time of such Change of Control the terms of any
Senior Indebtedness of the Company restrict or prohibit any offer pursuant to
this Section or the repurchase of Securities pursuant to this Section, then
prior to the mailing of the notice to Holders provided for in Section 4.09(b)
below but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all such Senior Indebtedness or offer to
repay in full all such Senior Indebtedness and repay such Senior Indebtedness
of each lender who has accepted such offer or (ii) obtain the requisite
consent under the agreements governing such Senior Indebtedness to permit the
repurchase of the Securities as provided for in Section 4.09(b). The Company
must first comply with the covenant described in the preceding sentence
before it will be required to purchase Notes in the event of a Change of
Control; provided, however, that the Company's failure to comply with the
covenant described in the preceding sentence or to make a Change of Control
offer because of any such failure shall constitute a Default described in
Section 6.01(4) (and not under Section 6.01(2)).
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(b) Within 30 days following any Change of Control but subject to
the provisions of Section 4.09(a), the Company shall mail a notice to each
Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase such
Holder's Securities at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid
interest (if any) to the date of purchase (subject to the
right of Holders of record on the relevant record date to
receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such
Change of Control;
(3) the repurchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is
mailed); and
(4) the instructions determined by the Company,
consistent with this Section, that a Holder must follow in
order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business
Day prior to the purchase date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security which was delivered for purchase by the Holder and a statement that
such Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancellation, and
the Company shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations
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in connection with the repurchase of Securities pursuant to this Section. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Section, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section by virtue thereof.
SECTION 4.10. Future Guarantors. In the event that, after the
Issue Date, any Restricted Subsidiary (other than a Foreign Subsidiary)
Incurs (i) any Indebtedness pursuant to paragraph (a) or pursuant to clause
(1) or (10) of Section 4.3(b) and (ii) until the termination of the Credit
Agreement, either has Guaranteed or will as a result of such Incurrence be
required to Guarantee any Obligations under the Credit Agreement, the Company
shall cause such Restricted Subsidiary to Guarantee the Notes by executing a
supplemental indenture hereto and shall cause all Indebtedness of such
Restricted Subsidiary owing to the Company or any other Subsidiary of the
Company and not previously discharged to be converted into Capital Stock of
such Restricted Subsidiary (other than Disqualified Stock).
SECTION 4.11. Compliance Certificate. The Company shall deliver
to the Trustee within 120 days after the end of each fiscal year of the
Company a certificate of the principal executive officer, the principal
financial officer or the principal accounting officer of the Company stating
that in the course of the performance by the signer of his or her duties as
an officer of the Company such officer would normally have knowledge of any
Default and whether or not the signer knows of any Default that occurred
during such period. If such signer does, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section
314(a)(4).
SECTION 4.12. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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ARTICLE 5
Successor Companies
SECTION 5.01. When Company May Merge or Transfer Assets. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor
Company (if not the Company) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this
Indenture;
(ii) immediately after giving effect to such
transaction (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Subsidiary as a
result of such transaction as having been Incurred by the
Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such
transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to
Section 4.03(a);
(iv) immediately after giving effect to such
transaction, the Successor Company shall have Consolidated
Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company immediately prior to
such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture;
provided, however, that clauses (iii) and (iv) above shall not
apply if, in the good faith determination of
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the Board of Directors, whose determination shall be evidenced by a
resolution of the Board of Directors, the principal purpose and effect of
such transaction is to change the jurisdiction of incorporation of the
Company.
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in
the case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities.
(b) The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or series of transactions, all or substantially all of its assets
to any Person unless: (i) the resulting, surviving or transferee Person (if
not such Subsidiary) shall be a Person organized and existing under the laws
of the jurisdiction under which such Subsidiary was organized or under the
laws of the United States of America, or any State thereof or the District of
Columbia, and such Person shall expressly assume, by an amendment to this
Indenture, in a form acceptable to the Trustee, all the obligations of such
Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after
giving effect to such transaction or transactions on a pro forma basis (and
treating any Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person as a result of such transaction as having been
issued by such Person at the time of such transaction), no Default shall have
occurred and be continuing; and (iii) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such amendment to this Indenture, if
any, complies with this Indenture. The provisions of clauses (i) and (ii)
above shall not apply to any one or more transactions which constitute an
Asset Disposition if the Company has complied with the applicable provisions
of Section 4.06.
(c) Parent will not merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or substantially
all of its assets to any Person unless: (i) the resulting, surviving or
transferee Person (if not Parent) shall be a Person organized and existing
under the laws of the jurisdiction under which
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Parent was organized or under the laws of the United States of America, or
any State thereof or the District of Columbia, and such Person shall
expressly assume, by an amendment to this Indenture, in a form acceptable to
the Trustee, all the obligations of Parent, if any, under the Parent
Guaranty; (ii) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time
of such transaction), no Default shall have occurred and be continuing; and
(iii) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such amendment to this Indenture, if any, complies with this Indenture.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on
any Security when the same becomes due and payable, whether
or not such payment shall be prohibited by Article 10, and
such default continues for a period of 30 days;
(2) the Company (i) defaults in the payment of the
principal of any Security when the same becomes due and
payable at its Stated Maturity, upon redemption, upon
declaration or otherwise, whether or not such payment shall
be prohibited by Article 10, or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture
or the Securities, whether or not such redemption or
purchase shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 or 4.10 (other than
a failure to purchase Securities when required
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under Section 4.06 or 4.09) and such failure continues for
30 days after the notice specified below;
(5) the Company fails to comply with any of its
agreements in the Securities or this Indenture (other than
those referred to in clause (1), (2), (3) or (4) above) and
such failure continues for 60 days after the notice
specified below;
(6) Indebtedness of the Company or any Significant
Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million, or
its foreign currency equivalent at the time;
(7) the Company or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws
relating to insolvency;
(8) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of
its property; or
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(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and
the order or decree remains unstayed and in effect for
60 days;
(9) any judgment or decree for the payment of money in
excess of $10.0 million or its foreign currency equivalent
at the time is entered against the Company or any
Significant Subsidiary, remains outstanding for a period of
60 days following the entry of such judgment or decree and
is not discharged, waived or the execution thereof stayed
within 10 days after the notice specified below; or
(10) the Parent Guaranty or any Subsidiary Guaranty
ceases to be in full force and effect (other than in
accordance with the terms of such Guaranty) or Parent or any
Subsidiary Guarantor denies or disaffirms its obligations
under the Parent Guaranty or its Subsidiary Guaranty, as
applicable.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or
is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or
any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4), (5), or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state
that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the
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form of an Officers' Certificate of any Event of Default under clause (6) or
(10) and any event which with the giving of notice or the lapse of time would
become an Event of Default under clause (4), (5) or (9), its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in principal amount of the Securities by notice
to the Company and the Trustee, may declare the principal of and accrued but
unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable
immediately; provided, however, that if upon such declaration there are any
amounts outstanding under the Credit Agreement and the amounts thereunder
have not been accelerated, such principal and interest shall be due and
payable upon the earlier of the time such amounts are accelerated and five
Business Days after receipt by the Company and the Representative under the
Credit Agreement of such declaration. If an Event of Default specified in
Section 6.01(7) or (8) with respect to the Company occurs, the principal of
and interest on all the Securities shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the
Trustee or any Securityholders. The Holders of a majority in principal
amount of the outstanding Securities by notice to the Trustee may rescind an
acceleration with respect to the Securities 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 acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest 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
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any of them in the proceeding. A delay or omission by the Trustee or any
Securityholder 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. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority
in principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of
the principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of
each Securityholder affected. When a Default is waived, it is deemed cured,
but no such waiver shall extend to any subsequent or other Default or impair
any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability; provided, however, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with
such direction. Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice
stating that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of
the Securities make a written request to the Trustee to
pursue the remedy;
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(3) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss, liability
or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
security or indemnity; and
(5) the Holders of a majority in principal amount of
the Securities do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, 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 such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) 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 then due and owing (together with interest
on any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. 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
Securityholders allowed in any judicial proceedings relative to the Company,
its creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee
in bankruptcy or other Person performing similar functions. The Trustee
shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the
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Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and its counsel, and any other amounts due the
Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section
7.07;
SECOND: to holders of Senior Indebtedness of the
Company to the extent required by Article 10;
THIRD: to Securityholders 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.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such
record date, the Company shall mail to each Securityholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. 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 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 6.07 or a suit by Holders of more than 10% in principal amount of the
Securities.
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SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to
the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension 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 that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and shall not hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE 7
Trustee
SECTION 7.01. 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 Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) 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, in the case of any such certificates or
opinions which, by any provision hereof, are required to be
furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
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(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) 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
(3) 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 6.05.
(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.
(e) 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.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
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 grounds to believe that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section
and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may
conclusively rely on any document believed by it to be genuine and to have
been signed or presented by the
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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 may require an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) Subject to Section 7.01(c), the Trustee shall not
be liable for any action it takes or omits to take in good faith
which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Securities shall be full and
complete authorization and protection from liability in respect
to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such
counsel.
SECTION 7.03. 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 its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and 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 the Securities, and it shall not be
responsible for any statement of the Company in the Indenture or in any
document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee,
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the Trustee shall mail to each Securityholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if any), 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
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. By July 15 of each
year, beginning with the July 15 following the date of this Indenture, the
Trustee shall mail to each Securityholder a brief report dated as of May 15
of each year that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay
to the Trustee from time to time reasonable compensation for its services.
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
promptly upon request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify the Trustee against any and all loss, liability or
expense (including attorneys' reasonable fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder, including the costs and expenses of enforcing this Indenture
(including this Section 7.07) against the Company and defending itself
against any claim (whether asserted by any Securityholder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent that any such loss,
liability or expense is attributable to its negligence or bad faith. The
Trustee shall notify the Company promptly of
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any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder
unless such failure prejudices the Company. The Company shall defend the
claim and the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
The Company need not pay for any settlement made by the Trustee without the
Company's consent, such consent not to be unreasonably withheld.
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 other than money or property held in trust
to pay principal of and interest on particular Securities.
The Company's payment obligations, and the lien granted to the
Trustee, pursuant to this Section shall survive the discharge of this
Indenture. When the Trustee incurs expenses or renders services after the
occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Company, the expenses and the compensation for the services (including
the fees and expenses of its agents and counsel) are intended to constitute
expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at
any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee
and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly
appoint 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, 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 Securityholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee,
provided that the amounts owing to the Trustee hereunder have been paid and
subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee provided that such successor shall
be eligible and qualified under Section 7.10.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall
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succeed to the trusts created by this Indenture any of the Securities shall
have been authenticated but not delivered, any such successor to the Trustee
may adopt the certificate of authentication of any predecessor trustee, and
deliver such Securities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to the Trustee
may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such
cases such certificates shall have the full force which it is anywhere in the
Securities or in this Indenture provided that the certificate of the Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
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 Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with 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.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancellation or
(ii) all outstanding Securities have become due and payable, whether at
maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such
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redemption date (other than Securities replaced pursuant to Section 2.07),
and if in either case the Company pays all other sums payable hereunder by
the Company, then this Indenture shall, subject to Sections 8.01(c), cease to
be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel and at the cost and expense
of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company
at any time may terminate (i) all its obligations under the
Securities and this Indenture ("legal defeasance option") or
(ii) its obligations under Sections 4.02 (subject to any
requirements of the TIA), 4.03, 4.04, 4.05, 4.06, 4.07, 4.08,
4.09 and 4.10 and the operation of Sections 6.01(4), 6.01(6),
6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries) and the limitations contained in
Sections 5.01(a)(iii) and (iv) ("covenant defeasance option").
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance
option.
If the Company exercises its legal defeasance option, payment of
the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9)
(but, in the case of Sections 6.01(7) and (8), with respect only to
Significant Subsidiaries) or because of the failure of the Company to comply
with Section 5.01(a)(iii) or (iv). If the Company exercises its legal
defeasance option or its covenant defeasance option, Parent shall be released
from all its obligations with respect to the Parent Guaranty and each
Subsidiary Guarantor, if any, shall be released from all its obligations with
respect to its Subsidiary Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the
Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
2.08, 7.07, 7.08, 8.04, 8.05 and 8.06 shall
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survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment
of principal of and interest on the Securities to maturity
or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited
U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as
the case may be;
(3) 123 days pass after the deposit is made and during
the 123-day period no Default specified in Sections 6.01(7)
or (8) with respect to the Company occurs which is
continuing at the end of the period;
(4) the deposit does not constitute a default under any
other agreement binding on the Company and is not prohibited
by Article 10;
(5) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the
deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such
Opinion of
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Counsel shall confirm that, the Securityholders
will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the
case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securityholders will not
recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the
Securities as contemplated by this Article 8 have been
complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold
in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
Money and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money
or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors.
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SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations
or the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with this Article 8; provided, however,
that, if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
provided, however, that the uncertificated Securities are
issued in registered form for purposes of Section 163(f) of
the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the
Code;
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(4) to make any change in Article 10 that would limit
or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10;
(5) to add guarantees with respect to the Securities,
including any Subsidiary Guaranties, or to secure the
Securities;
(6) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(7) to comply with any requirements of the SEC in
connection with qualifying, or maintaining the qualification
of, this Indenture under the TIA;
(8) to make any change that does not adversely affect
the rights of any Securityholder; or
(9) to release a Subsidiary Guaranty when permitted by
the terms of this Indenture.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in
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principal amount of the Securities then outstanding (including consents
obtained in connection with a tender offer or exchange for the Securities).
However, without the consent of each Securityholder affected thereby, an
amendment may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment
of interest on any Security;
(3) reduce the principal of or extend the Stated
Maturity of any Security;
(4) reduce the premium payable upon the redemption of
any Security or change the time at which any Security may or
shall be redeemed in accordance with Article 3;
(5) make any Security payable in money other than that
stated in the Security;
(6) make any change in Article 10 that adversely
affects the rights of any Securityholder under Article 10;
(7) make any change in Section 6.04 or 6.07 or the
second sentence of this Section; or
(8) make any change in the Parent Guaranty or any
Subsidiary Guaranty (including the subordination provisions
of any such Guaranty) that would adversely affect the
Securityholders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, 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 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
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After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in
effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same debt as the consenting Holder's Security,
even if notation of the consent or waiver is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Security or portion of the Security if the Trustee
receives the notice of revocation before the date the amendment or waiver
becomes effective. After an amendment or waiver becomes effective, it shall
bind every Securityholder. An amendment or waiver becomes effective upon the
execution of such amendment or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to
be taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return
it to the Holder. Alternatively, if the Company or the Trustee so determines,
the Company in exchange for the
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Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to
issue a new Security shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign
any amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing any
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for 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 to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment in
full in cash of all Obligations with respect to Senior Indebtedness of the
Company and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. The Securities shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of
the Company and only Indebtedness of the Company which is Senior Indebtedness
shall rank senior to the Securities in accordance with the
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provisions set forth herein. All provisions of this Article 10 shall be
subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a
total or partial liquidation or a total or partial dissolution or winding up
of the Company or upon any assignment for the benefit of creditors or
marshalling of assets of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary:
(1) the holders of Senior Indebtedness of the Company
shall be entitled to receive payment in full in cash of all
Obligations with respect to such Senior Indebtedness
(including all interest accruing subsequent to the filing of
a petition in bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) before
Securityholders shall be entitled to receive any payment or
distribution with respect to the Securities; and
(2) until all Obligations with respect to such Senior
Indebtedness are paid in full in cash, any payment or
distribution to which Securityholders would be entitled but
for this Article 10 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that
Securityholders may receive, in exchange for the Securities
in any proceeding of the type described above in this
Section 10.02, (x) equity securities of the Company which,
in any case, do not provide for any mandatory redemption or
similar retirement prior to the maturity of the Securities
or (y) unsecured debt securities of the Company which are
subordinated to at least the same extent as the Securities
to the payment of all Senior Indebtedness of the Company and
which, in any case, do not mature or become subject to a
mandatory redemption obligation prior to the maturity of the
Securities.
SECTION 10.03. Default on Senior Indebtedness. The Company may
not pay (in cash, property or other assets) the principal of, premium, if
any, or interest on the Securities or make any deposit pursuant to Section
8.01 and may not repurchase, redeem or (except for Securities
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delivered to the Trustee pursuant to the second sentence of paragraph 6 of
the Securities) otherwise retire any Securities (collectively, "pay the
Securities") if (i) any Obligations with respect to Senior Indebtedness are
not paid when due or (ii) any other default on Senior Indebtedness occurs and
the maturity of such Senior Indebtedness is accelerated in accordance with
its terms unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded or (y) such Senior Indebtedness
has been paid in full in cash; provided, however, that the Company may pay
the Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of such
Senior Indebtedness. During the continuance of any default (other than a
default described in clause (i) or (ii) of the preceding sentence) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, the Company may not pay the Securities for a
period (a "Payment Blockage Period") commencing upon the receipt by the
Company and the Trustee of written notice (a "Blockage Notice") of such
default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179
days thereafter (or earlier if such Payment Blockage Period is terminated (i)
by written notice to the Trustee and the Company from the Person or Persons
who gave such Blockage Notice, (ii) because no defaults continue in existence
which would permit the acceleration of the maturities of any Designated
Senior Indebtedness at such time) or (iii) because such Designated Senior
Indebtedness has been repaid in full in cash). Notwithstanding the
provisions described in the immediately preceding sentence (but subject to
the provisions contained in the first sentence of this Section), unless the
holders of such Designated Senior Indebtedness or the Representative of such
holders shall have accelerated the maturity of such Designated Senior
Indebtedness, the Company may resume payments on the Securities after
termination of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. For purposes of this Section, no default or event of default which
existed or was continuing on the date of the commencement of any Payment
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Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged and agreed that (x) any default or event of default as a result
of a continued failure to meet a financial covenant or test for a period
ended subsequent to the commencement of a Payment Blockage Period shall
constitute a new default or event of default, as the case may be, and shall
be deemed not to be a continuing default or event of default, as the case may
be, for purposes of this sentence and (y) any subsequent action which would
give rise to a default or an event of default pursuant to any provision under
which a default or event of default previously existed or was continuing
shall constitute a new default or event of default, as the case may be, for
this purpose and shall be deemed not to be a continuing default or event of
default, as the case may be, for purposes of this sentence).
SECTION 10.04. Acceleration of Payment of Securities. If payment
of the Securities is accelerated because of an Event of Default, the Company
or the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representatives) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10
should not have been made to them, the Securityholders who receive the
distribution shall hold it in trust for holders of Senior Indebtedness of the
Company and pay it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full in cash and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness.
A distribution made under this Article 10 to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not,
as between the Company and Securityholders, a payment by the Company on such
Senior Indebtedness.
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SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders,
the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from
exercising its available remedies upon a Default, subject to
the rights of holders of Senior Indebtedness of the Company
to receive distributions otherwise payable to
Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be
impaired by any act or failure to act by the Company or by its failure to
comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on
the Securities and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of
the Trustee receives notice satisfactory to it that payments may not be made
under this Article 10. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness may give
the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth
in this Article 10 with respect to any Senior Indebtedness of the Company
which may at any time be held by it, to the same extent as any other holder
of such Senior Indebtedness; and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in
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this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Company, the distribution may be made and the notice
given to their Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be
construed as preventing the occurrence of a Default. Nothing in this Article
10 shall have any effect on the right of the Securityholders or the Trustee
to accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the
proceeds of U.S. Government Obligations held in trust under Article 8 by the
Trustee for the payment of principal of and interest on the Securities shall
not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company
or any holder of Senior Indebtedness of the Company or any other creditor of
the Company, so long as the foregoing subordination provisions contained in
this Article 10 were not violated at the time the respective amounts were
deposited pursuant to the defeasance provisions of Article 8.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee
or agent or other Person making such payment or distribution to the Trustee
or to the Securityholders or (iii) upon the Representatives for the holders
of Senior Indebtedness of the Company for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders
of such Senior Indebtedness and other Indebtedness of the Company, the
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amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10. In the
event that the Trustee determines, in good faith, that evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness of
the Company to participate in any payment or distribution pursuant to this
Article 10, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to
the rights of such Person under this Article 10, 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. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and
the holders of Senior Indebtedness of the Company as provided in this Article
10 and appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders or
the Company or any other Person, money or assets to which any holders of
Senior Indebtedness of the Company shall be entitled by virtue of this
Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of the Company, whether such Senior Indebtedness 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 Indebtedness 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
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Indebtedness and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
ARTICLE 11
Guaranties
SECTION 11.01. Guaranties. Each Guarantor hereby unconditionally
and irrevocably guarantees, jointly and severally, to each Holder and to the
Trustee and its successors and assigns (a) the full and punctual payment of
principal of and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations
of the Company under this Indenture and the Securities and (b) the full and
punctual performance within applicable grace periods of all other obligations
of the Company under this Indenture and the Securities (all the foregoing
being hereinafter collectively called the "Indenture Obligations"). Each
Guarantor further agrees that the Indenture Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Guarantor and that such Guarantor will remain bound under this Article 11
notwithstanding any extension or renewal of any Indenture Obligation.
Each Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Indenture
Obligations and also waives notice of protest for nonpayment.
Each Guarantor waives notice of any default under the Securities
or the Indenture Obligations. The obligations of each Guarantor
hereunder shall not be affected by (a) the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Company or any other Person under
this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms
or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or
the Trustee for the Indenture Obligations or any of them; (e) the
failure of any Holder or the Trustee to exercise any right or
remedy against any other guarantor of
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the Indenture Obligations; or (f) any change in the ownership of such
Guarantor.
Each Guarantor further agrees that its Guaranty herein constitutes
a guarantee of payment, performance and compliance when due (and not a
guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Indenture Obligations.
Each Guaranty is, to the extent and in the manner set forth in
Article 12, subordinated and subject in right of payment to the prior payment
in full in cash of all Obligations with respect to all Senior Indebtedness of
the Guarantor giving such Guaranty and each Guaranty is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06,
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall
not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Indenture Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Securities or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the obligations, or by any other
act or thing or omission or delay to do any other act or thing which may or
might in any manner or to any extent vary the risk of such Guarantor or would
otherwise operate as a discharge of such Guarantor as a matter of law or
equity.
Each Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Indenture
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
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In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Company to pay the
principal of or interest on any Indenture Obligation when and as the same
shall become due, whether at maturity, by acceleration, by redemption or
otherwise, or to perform or comply with any other Indenture Obligation, each
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid amount of such Indenture
Obligations, (ii) accrued and unpaid interest on such Indenture Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Indenture Obligations of the Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Indenture Obligations guaranteed hereby until
payment in full of all Indenture Obligations and all obligations to which the
Indenture Obligations are subordinated as provided in Article 12. Each
Guarantor further agrees that, as between it, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the Indenture
Obligations Guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of such Guarantor's Guaranty herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the Indenture Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6,
such Indenture Obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder
in enforcing any rights under this Section.
SECTION 11.02. Limitation on Liability. Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount
of the Indenture Obligations guaranteed hereunder by any Subsidiary Guarantor
shall not exceed the maximum amount that can be hereby guaranteed without
rendering this Indenture, as it
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relates to such Subsidiary Guarantor, voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
SECTION 11.03. Successors and Assigns. This Article 11 shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested
in such transferee or assignee, all subject to the terms and conditions of
this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise
of any right, power or privilege. The rights, remedies and benefits of the
Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which either may have
under this Article 11 at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver
of any provision of this Article 11, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Trustee, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Guarantor in any case shall entitle
such Guarantor to any other or further notice or demand in the same, similar
or other circumstances.
SECTION 11.06. Release of Subsidiary Guarantor. Upon the sale
(including any sale pursuant to any exercise of remedies by a holder of
Senior Indebtedness) or other disposition (including by way of consolidation
or merger) of a Subsidiary Guarantor or the sale or disposition of all or
substantially all the assets of such Subsidiary Guarantor (in each case other
than to the Company or an Affiliate of the Company), such Subsidiary
Guarantor shall be deemed
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released from all obligations under this Article 11 without any further
action required on the part of the Trustee or any Holder. At the request of
the Company, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.
ARTICLE 12
Subordination of Guaranties
SECTION 12.01. Agreement To Subordinate. Each Guarantor agrees,
and each Securityholder by accepting a Security agrees, that the Indenture
Obligations (as used in this Article 12, the "Indenture Obligations" of each
Guarantor shall mean all Indenture Obligations guaranteed by such Guarantor
pursuant to Article 11 hereof) of such Guarantor are subordinated in right of
payment, to the extent and in the manner provided in this Article 12, to the
prior payment in full in cash of all Obligations with respect to Senior
Indebtedness of such Guarantor and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Indenture
Obligations of a Guarantor shall in all respects rank pari passu with all
other Senior Subordinated Indebtedness of such Guarantor and only Senior
Indebtedness of such Guarantor (including such Guarantor's Guarantee of
Senior Indebtedness of the Company) shall rank senior to the Indenture
Obligations of such Guarantor in accordance with the provisions set forth
herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Guarantor to creditors upon a
total or partial liquidation or a total or partial dissolution or winding up
of such Guarantor or upon any assignment for the benefit of creditors or
marshalling of assets for such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to such Guarantor or
its property, whether voluntary or involuntary:
(1) the holders of Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in
cash of all Obligations with respect to such Senior
Indebtedness (including all interest accruing subsequent to
the filing of a petition in bankruptcy at the rate provided
for in the documentation with respect
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thereto, whether or not such interest is an allowed claim under applicable
law) before Securityholders shall be entitled to receive any
payment or distribution with respect to any Indenture
Obligations of such Guarantor; and
(2) until all Obligations with respect to the Senior
Indebtedness of any Guarantor is paid in full in cash, any
payment or distribution to which Securityholders would be
entitled but for this Article 12 shall be made to holders of
such Senior Indebtedness as their interests may appear,
except that securityholders may, in any proceeding of the
type described in Section 10.02 with respect to such
Guarantor, receive securities of the Parent and/or the
Company as provided in clause (2) of Section 10.02, which,
in the case of debt securities of the Company, may be
guaranteed by the Guarantors on substantially the same basis
as provided in Article 11, so long as such guarantees are
expressly subordinated to all Senior Indebtedness at least
to the same extent as provided in this Article 12.
SECTION 12.03. Default on Senior Indebtedness of Guarantor. No
Guarantor may make any payment (in cash, property or other assets) pursuant
to any of its Indenture Obligations or repurchase, redeem or otherwise retire
or defease any Securities or other Indenture Obligations (collectively, "pay
its Guaranty") if (i) any Obligations with respect to Senior Indebtedness of
the Company is not paid when due or (ii) any other default on Senior
Indebtedness of the Company occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either
case, (x) the default has been cured or waived and any such acceleration has
been rescinded or (y) such Senior Indebtedness has been paid in full in cash;
provided, however, that any Guarantor may pay its Guaranty without regard to
the foregoing if such Guarantor and the Trustee receive written notice
approving such payment from the Representatives of such Senior Indebtedness.
No Guarantor may pay its Guaranty during the continuance of any Payment
Blockage Period after receipt by the Company and the Trustee (with a copy to
the Company) of a Blockage Notice under Section 10.03. Notwithstanding the
provisions described in the immediately preceding sentence (but subject to
the provisions contained in the first sentence of this Section), unless the
holders of Designated Senior
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Indebtedness giving such Blockage Notice or the Representative of such
holders shall have accelerated the maturity of such Designated Senior
Indebtedness, any Guarantor may resume payments pursuant to its Guaranty
after termination of such Payment Blockage Period.
SECTION 12.04. Demand for Payment. If a demand for payment is
made on a Guarantor pursuant to Article 11, the Trustee shall promptly notify
the holders of the Designated Senior Indebtedness (or their Representatives)
of such demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12
should not have been made to them, the Securityholders who receive the
distribution shall hold it in trust for holders of the relevant Senior
Indebtedness and pay it over to them or their Representatives as their
interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Guarantor is paid in full in cash and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 12 to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not,
as between the relevant Guarantor and Securityholders, a payment by such
Guarantor on such Senior Indebtedness.
SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Securityholders,
the obligation of such Guarantor, which is absolute and
unconditional, to pay the Indenture Obligations to the
extent set forth in Article 11 or the relevant Guaranty; or
(2) prevent the Trustee or any Securityholder from
exercising its available remedies upon a default by such
Guarantor under the Indenture Obligations, subject to the
rights of holders of Senior Indebtedness of such
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Guarantor to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of any Guarantor to enforce the
subordination of the Indenture Obligations of such Guarantor shall be
impaired by any act or failure to act by such Guarantor or by its failure to
comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or Paying Agent may continue to make payments on
any Guaranty and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of
the Trustee receives written notice satisfactory to it that payments may not
be made under this Article 12. The Company, the relevant Guarantor, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of the relevant Guarantor may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not the Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of any Guarantor which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article 12 shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness of any Guarantor, the distribution may be made and the notice
given to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under a Guaranty
or Limit Right To Demand Payment. The failure to make a payment pursuant to
a Guaranty by reason of any provision in this Article 12 shall not be
construed as preventing the occurrence of a default under such
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Guaranty. Nothing in this Article 12 shall have any effect on the right of
the Securityholders or the Trustee to make a demand for payment on any
Guarantor pursuant to Article 11 or the relevant Guaranty.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee
or agent or other Person making such payment or distribution to the Trustee
or to the Securityholders or (iii) upon the Representatives for the holders
of Senior Indebtedness of any Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders
of such Senior Indebtedness and other indebtedness of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 12. In the
event that the Trustee determines, in good faith, that evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness of
any Guarantor to participate in any payment or distribution pursuant to this
Article 12, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness of such Guarantor held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 12, 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. The provisions of Sections 7.01 and 7.02 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and
the holders of Senior Indebtedness of any Guarantor as provided in this
Article 12 and appoints the Trustee as attorney-in-fact for any and all such
purposes.
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SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of any Guarantor, whether such Senior Indebtedness 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
Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to Parent, the Company or any Subsidiary Guarantor:
Fairchild Semiconductor Corporation
333 Western Avenue
South Portland, Maine 04106
Attention of General Counsel
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if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Division
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 mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders 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 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee 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
(2) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have
been complied with.
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SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been
complied with.
SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the
Company or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable
rules for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in
the State of New York. If a payment date is a Legal Holiday, payment shall
be made
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on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts
of law to the extent that the application of the laws of another jurisdiction
would be required thereby.
SECTION 13.10. 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 this Indenture or
for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement. One signed copy is
enough to prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any
of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed as of the date first written above.
FAIRCHILD SEMICONDUCTOR
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CORPORATION,
by
________________________
Joseph R. Martin
Executive Vice President
and Chief Financial
Officer
FSC SEMICONDUCTOR CORPORATION,
as Guarantor,
by
________________________
Joseph R. Martin
Executive Vice President
and Chief Financial
Officer
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee,
by
________________________
Name:
Title:
99
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
*
**
No. $
10-1/8% Senior Subordinated Notes Due 2007
FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation, promises to
pay to , or registered assigns, the principal sum
of Dollars on March 15, 2007.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated:
FAIRCHILD SEMICONDUCTOR
CORPORATION,
by
_______________________
President
_______________________
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee,
[Seal] certifies that this is one
of the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
<PAGE>
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix and the
attachment from such Exhibit 1 captioned
"[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES
IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Securities Legend from Exhibit 1 to the Rule
144A/Regulation S Appendix and replace the Assignment Form included in this
Exhibit A with the Assignment Form included in such Exhibit 1.
2
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
10-1/8% Senior Subordinated Note Due 2007
1. Interest
Fairchild Semiconductor Corporation, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on
the principal amount of this Security at the rate per annum shown above;
provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on
this Security at a rate of 0.50% per annum, increasing by 0.50% per annum on
the 90th day after such Registration Default and on every 90th day thereafter
during the continuation of any Registration Default, to but excluding the
date on which all Registration Defaults have been cured; provided, however,
that such additional interest shall not exceed 2.0% per annum. The Company
will pay interest semiannually on March 15 and September 15 of each year,
commencing September 15, 1997. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from March 11, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Company shall pay interest on
overdue principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the
close of business on the March 1 or September 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. Payments in respect of
Securities (including principal,
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premium and interest) will be made by wire transfer of immediately available
funds to the accounts specified by the holders thereof or, if no U.S. dollar
account maintained by the payee with a bank in the United States is
designated by any holder to the Trustee or the Paying Agent at least 30 days
prior to the relevant due date for payment (or such other date as the Trustee
may accept in its discretion), by mailing a check to the registered address
of such holder.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York
banking corporation ("Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
March 11, 1997 ("Indenture"), among the Company, FSC Semiconductor
Corporation ("Parent"), as Guarantor and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $300,000,000 aggregate principal amount (subject to Section 2.07
of the Indenture). The Indenture limits, among other things, (i) the
incurrence of additional debt by the Company and its subsidiaries, (ii) the
payment of dividends on capital stock of the Company and the purchase,
redemption or retirement of capital stock or subordinated indebtedness, (iii)
certain transactions with affiliates, (iv) sales of assets, including capital
stock of subsidiaries, and (v) certain consolidations, mergers and transfers
of assets. The Indenture also prohibits certain restrictions on distributions
from subsidiaries. All of these limitations
4
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and prohibitions, however, are subject to a number of important
qualifications contained in the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not
be redeemed prior to March 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at
the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the related interest payment date), if redeemed during the 12-month period
beginning March 15 of the years set forth below:
Period Percentage
------ ----------
2002 ........................................... 105.063%
2003 ........................................... 103.375
2004 ........................................... 101.688
2005 and thereafter............................. 100.000
In addition, at any time prior to March 15, 2000, the Company may
redeem up to $105.0 million of the aggregate principal amount of Securities
with the proceeds of a Public Equity Offering, at any time or from time to
time, at a redemption price (expressed as a percentage of principal amount)
of 110% plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
related interest payment date); provided, however, that at least $150.0
million aggregate principal amount of the Securities must remain outstanding
after each such redemption.
6. Mandatory Redemption
On March 15, 2005 the Company will redeem $150.0 million principal
amount of Securities and on March 15, 2006 the Company will redeem $75.0
million principal amount of the Securities, in each case at a redemption
price of 100% of the principal amount plus accrued interest to the redemption
date (subject to the right of Holders of record on the relevant record date
to receive interest due on the related interest payment date). The Company
may receive a credit against the principal amount of the Securities required
to be redeemed pursuant to this paragraph equal to the principal amount
(excluding premium) of any Securities that the Company has acquired or
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redeemed other than pursuant to this paragraph and has delivered to the
Trustee for cancellation. The Company may receive the credit only once for
any Security.
7. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to
101% of the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record
on the relevant record date to receive interest due on the related interest
payment date) as provided in, and subject to the terms of, the Indenture.
9. Subordination; Guaranties
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company
agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
Parent has agreed to guarantee the obligations of the Company under
the Securities, and certain domestic subsidiaries of the Company may in the
future be required to guarantee such obligations. Any such guarantees will
be subordinated to any Senior Indebtedness of Parent or such subsidiaries, as
applicable.
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10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer of or
exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be
redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities.
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Subject to certain exceptions set forth in the Indenture, without the consent
of any Securityholder, the Company and the Trustee may amend the Indenture or
the Securities to cure any ambiguity, omission, defect or inconsistency, or
to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to
add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with
qualifying the Indenture under the Act, or to make certain changes in the
subordination provisions, or to release any guarantee of the Securities by
the Company's subsidiaries, when permitted by the Indenture, or to make any
change that does not adversely affect the rights of any Securityholder.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to
paragraph 5 or 6 of the Securities, upon acceleration or otherwise, or
failure by the Company to redeem or purchase Securities when required; (iii)
failure by the Company to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount
accelerated (or so unpaid) exceeds $10 million; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant
Subsidiaries, (vi) certain judgments or decrees for the payment of money in
excess of $10 million; and (viii) certain events with respect to the
guarantees of the Securities by the Parent and certain Restricted
Subsidiaries of the Company. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable
immediately, subject to certain conditions. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The
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Trustee may refuse to enforce the Indenture or the Securities unless it
receives reasonable indemnity or security. Subject to certain limitations,
Holders of a majority in principal amount of the Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing Default (except a Default in payment
of principal or interest) if it determines that withholding notice is in the
interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise
deal with the Company or its Affiliates with the same rights it would have if
it were not Trustee.
17. 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. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not
as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
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<PAGE>
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as
printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
21. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
22. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written request
and without charge to the Security
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<PAGE>
holder a copy of the Indenture which has in it the text of this Security in
larger type. Requests may be made to:
Attention of
_____________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to
act for him.
__________________________________________________________________
___________
Date: ________________ Your Signature: _____________________
__________________________________________________________________
___________
Sign exactly as your name appears on the other side of this
Security.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security
purchased by the Company pursuant to Section 4.06 or 4.09 of the
Indenture, check the box:
/ /
If you want to elect to have only part of this
Security purchased by the Company pursuant to Section 4.06 or
4.09 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
member firm of the New York Stock
Exchange or a commercial bank or trust
company)
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RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE
144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security bearing
the restricted securities legend set forth in Section 2.3(d) and which is
held by an IAI in accordance with Section 2.1(c).
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 10-1/8% Senior Subordinated Notes
Due 2007 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Credit Suisse First Boston Corporation,
BT Securities Corporation and CIBC Wood Gundy Securities Corp.
"Initial Securities" means the 10-1/8% Senior Subordinated Notes
Due 2007, issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver
to each Initial Purchaser, in exchange for the Initial Securities held by
such Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Purchase Agreement" means the Purchase Agreement dated March 6,
1997, between the Company and FSC
<PAGE>
Semiconductor Corporation, on the one hand, and the Initial Purchasers, on
the other.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities
registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated March 6, 1997, between the Company and FSC Semiconductor
Corporation, on the one hand, and the Initial Purchasers, on the other.
"Securities" means the Initial Securities, the Exchange Securities
and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto
and shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
issued by the Company, in connection with the offer and sale of Initial
Securities or Private Exchange Securities, pursuant to the Registration
Rights Agreement.
"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(d)hereto.
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1.2 Other Definitions
Defined in
----------
Term Section:
---- --------
"Agent Members".........................................................2.1(b)
"Global Security".......................................................2.1(a)
"Regulation S"..........................................................2.1(a)
"Rule 144A".............................................................2.1(a)
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a
QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each
case as provided in the Purchase Agreement, shall be issued initially in the
form of one or more permanent global Securities in definitive, fully
registered form without interest coupons with the global securities legend
and restricted securities legend set forth in Exhibit 1 hereto (each, a
Global Security"), which shall be deposited on behalf of the purchasers of
the Initial Securities represented thereby with the Trustee, at its New York
office, as custodian for the Depository (or with such other custodian as the
Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.
(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 for
such Global Security or Global Securities or the nominee of such Depositary
and (b) shall be delivered by the Trustee to such
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Depositary or pursuant to such Depositary's instructions or held by the
Trustee as custodian for the Depositary.
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 this Section
2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Initial Securities who are IAIs and are not QIBs
and did not purchase Initial Securities sold in reliance on Regulation S will
receive Definitive Securities; provided, however, that upon transfer of such
Definitive Securities to a QIB, such Definitive Securities will, unless the
Global Security has previously been exchanged, be exchanged for an interest
in a Global Security pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver:
(1) Initial Securities for original issue in an aggregate principal amount of
$300,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange,
respectively, pursuant to the Registration Rights Agreement, for a like
principal amount of Initial Securities, in each case upon a written order of
the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify
the amount of the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private
Exchange Securities. The aggregate
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<PAGE>
principal amount of Securities outstanding at any time may not exceed
$300,000,000 except as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations,
the Registrar or co-registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are
met; provided, however, that the Definitive Securities surrendered for
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to
the Company and the Registrar or co-registrar, duly executed
by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act,
pursuant to Section 2.3(b) or pursuant to clause (A), (B) or
(C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Securities are being
delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer, a
certification from such Holder to that effect (in the
form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that
effect (in the form set forth on the reverse of the
Security); or
(C) if such Definitive Securities are being
transferred (w) pursuant to an exemption from
registration in accordance with Rule 144; or (x) in
5
<PAGE>
reliance on another exemption from the registration
requirements of the Securities Act: (i) a certification
to that effect (in the form set forth on the reverse of
the Security) and (ii) if the Company or Registrar so
requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance
with the restrictions set forth in the legend set forth
in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the
reverse of the Security, that such Definitive Security is
being transferred (A) to a QIB in accordance with Rule 144A,
or (B) outside the United States in an offshore transaction
within the meaning of Regulation S and in compliance with
Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to
make, or to direct the Securities Custodian to make, an
adjustment on its books and records with respect to such
Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding
the Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased by the aggregate principal
amount of the Definitive Security to be exchanged and shall credit or cause
to be credited to the account of the Person specified in such instructions a
beneficial interest in the Global Security equal to the principal amount of
the Definitive Security so cancelled. If no Global Securities are then
outstanding, the Company shall issue and the Trustee shall authenticate, upon
written order of the Company in the
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<PAGE>
form of an Officers' Certificate, a new Global Security in the appropriate
principal amount.
(c) Transfer and Exchange of Global Securities. (i) The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor. A transferor of a beneficial interest
in a Global Security shall deliver to the Registrar a written order given in
accordance with the Depositary's procedures containing information regarding
the participant account of the Depositary to credited with a beneficial
interest in the Global Security. The Registrar shall, in accordance with such
instructions instruct the Depositary to credit to the account of the Person
specified in such instructions a beneficial interest in the Global Security
and to debit the account of the Person making the transfer the beneficial
interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this
Appendix (other than the provisions set forth in
Section 2.4), 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.
(iii) In the event that a Global Security is exchanged
for Securities in definitive registered form pursuant to
Section 2.4 or Section 2.09 of the Indenture, prior to the
consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect
to such Securities, such Securities may be exchanged only in
accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that
such transfers comply with Rule 144A or Regulation S, as the
case may be) and such other procedures as may from time to
time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following
paragraphs (ii), (iii) and (iv), each Security certificate
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evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor
or in substitution thereof) shall bear a legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE
SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
COMPANY THAT, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") ON WHICH THE HOLDING
PERIOD WITH RESPECT TO THE NOTES SET FORTH IN
CLAUSE (K) OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT HAS EXPIRED, (A) THIS NOTE MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (IV) TO THE COMPANY
OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE." THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
8
<PAGE>
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to
Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Registrar
shall permit the Holder thereof to exchange such
Transfer Restricted Security for a certificated
Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security that is represented by a Global Security, the
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a certificated
Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies
in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the
reverse of the Security).
(iii) After a transfer of any Initial Securities or
Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with respect
to such Initial Securities or Private Exchange Securities,
as the case may be, all requirements pertaining to legends
on such Initial Security or such Private Exchange Security
will cease to apply, the requirements requiring that any
such Initial Security or such Private Exchange Security
issued to certain Holders be issued in global form will
cease to apply, and a certificated Initial Security or
Private Exchange Security without legends will be available
to the transferee of the Holder of such Initial Securities
or Private Exchange Securities upon exchange of such
transferring Holder's certificated Initial Security or
Private Exchange Security or directions to transfer such
Holder's interest in the Global Security, as applicable.
9
<PAGE>
(iv) Upon the consummation of a Registered Exchange
Offer with respect to the Initial Securities pursuant to
which Holders of such Initial Securities are offered
Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders
be issued in global form will cease to apply and
certificated Initial Securities with the restricted
securities legend set forth in Exhibit 1 hereto will be
available to Holders of such Initial Securities that do not
exchange their Initial Securities, and Exchange Securities
in certificated or global form will be available to Holders
that exchange such Initial Securities in such Registered
Exchange Offer.
(v) Upon the consummation of a Private Exchange with
respect to the Initial Securities pursuant to which Holders
of such Initial Securities are offered Private Exchange
Securities in exchange for their Initial Securities, all
requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in
global form will still apply, and Private Exchange
Securities in global form with the Restricted Securities
Legend set forth in Exhibit 1 hereto will be available to
Holders that exchange such Initial Securities in such
Private Exchange.
(e) Cancellation or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
such Global Security shall be returned to the Depositary for cancellation or
retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
the principal amount of Securities represented by such Global Security shall
be reduced and an adjustment shall be made on the books and records of the
Trustee (if it is then the Securities Custodian for such Global Security)
with respect to such Global Security, by the Trustee or the Securities
Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee
10
<PAGE>
shall authenticate certificated Securities, Definitive
Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.06, 4.09 and
9.05).
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of (a) any
certificated or Definitive Security selected for redemption
in whole or in part pursuant to Article 3 of this Indenture,
except the unredeemed portion of any certificated or
Definitive Security being redeemed in part, or (b) any
Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem
Securities or 15 Business Days before an interest payment
date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and
treat the person in whose name a Security is registered as
the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such
Security and for all other purposes whatsoever, whether or
not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall
evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Securities surrendered
upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depositary or other
Person with respect to the accuracy of the records of the
11
<PAGE>
Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any
participant, member, beneficial owner or other Person (other
than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications
to be given to the Holders and all payments to be made to
Holders under the Securities shall be given or made only to
or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global
Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully
protected in relying upon information furnished by the
Depositary with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or
among Depositary participants, members or beneficial owners
in any Global Security) other than to require delivery of
such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such
Global Security or if at any time such Depositary ceases to be a "clearing
agency" registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or
12
<PAGE>
(iii) the Company, in its sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of certificated Securities under this
Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the
Depositary to the Trustee located in the Borough of Manhattan, The City of
New York, 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 of certificated Initial Securities of authorized
denominations. Any portion of a Global Security 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 certificated Initial Security delivered in
exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(d), bear the restricted securities legend set forth
in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), 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.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
13
<PAGE>
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
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
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER 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 OWNER HEREOF, CEDE & CO., 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.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT, PRIOR TO
THE DATE (THE "RESALE RESTRICTION
<PAGE>
TERMINATION DATE") ON WHICH THE HOLDING PERIOD WITH RESPECT TO THE NOTES SET
FORTH IN CLAUSE (K) OF RULE 144A PROMULGATED UNDER THE SECURITIES ACT HAS
EXPIRED, (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) TO THE COMPANY OR (V)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT
OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.](1)
- -------------------------
(1) Include if a Definitive Security to be held by an institutional
"accredited investor" (as defined in Rule 501(a), (1), (2), (3) or (7) under
the Securities Act).
2
<PAGE>
No. $
10-1/8% Senior Subordinated Notes Due 2007
FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation,
promises to pay to , or registered
assigns, the principal sum of Dollars on
March 15, 2007.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
Additional provisions of this Security are set forth on
the other side of this Security.
Dated:
FAIRCHILD SEMICONDUCTOR
CORPORATION,
by
---------------------------------
President
---------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee, certifies
[Seal] that this is one of
the Securities referred
to in the Indenture.
by
---------------------------------
Authorized Signatory
3
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10-1/8% Senior Subordinated Note Due 2007
1. Interest
FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on
the principal amount of this Security at the rate per annum shown above;
provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on
this Security at a rate of 0.50% per annum, increasing by 0.50% per annum on
the 90th day after such Registration Default and on every 90th day thereafter
during the continuation of any Registration Default, to but excluding the
date on which all Registration Defaults have been cured; provided, however,
that such additional interest shall not exceed 2.0% per annum. The Company
will pay interest semiannually on March 15 and September 15 of each year,
commencing September 15, 1997. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from March 11, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Company shall pay interest on
overdue principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the
close of business on the March 1 or September 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is
4
<PAGE>
legal tender for payment of public and private debts. Payments in respect of
the Securities represented by a Global Security (including principal, premium
and interest) will be made by wire transfer of immediately available funds to
the accounts specified by The Depository Trust Company. The Company will
make all payments in respect of a certificated Security (including principal,
premium and interest) by mailing a check to the registered address of each
Holder thereof; provided, however, that payments on a certificated Security
will be made by wire transfer to a U.S. dollar account maintained by the
payee with a bank in the United States if such Holder elects payment by wire
transfer by giving written notice to the Trustee or the Paying Agent to such
effect designating such account no later than 30 days immediately preceding
the relevant due date for payment (or such other date as the Trustee may
accept in its discretion).
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York
banking corporation ("Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
March 11, 1997 ("Indenture"), among the Company, FSC Semiconductor
Corporation ("Parent") as guarantor, and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $300,000,000 aggregate principal amount (subject to Section 2.07
of the Indenture). The
5
<PAGE>
Indenture limits, among other things (i) the incurrence of additional debt by
the Company and its subsidiaries, (ii) the payment of dividends on capital
stock of the Company and the purchase, redemption or retirement of capital
stock or subordinated indebtedness, (iii) certain transactions with
affiliates, (iv) sales of assets, including capital stock of subsidiaries,
and (v) certain consolidations, mergers and transfers of assets. The
Indenture also prohibits certain restrictions on distributions from
subsidiaries. All of these limitations and prohibitions, however, are
subject to a number of important qualifications contained in the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not
be redeemed prior to March 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at
the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the related interest payment date), if redeemed during the 12-month period
beginning March 15 of the year set forth below:
Period Percentage
------ ----------
2002.............................. 105.063%
2003.............................. 103.375
2004.............................. 101.688
2005 and thereafter............... 100.000
In addition, at any time prior to March 15, 2000, the Company may
redeem up to $105.0 million of the aggregate principal amount of Securities
with the proceeds of a Public Equity Offering, at any time or from time to
time, at a redemption price (expressed as a percentage of principal amount)
of 110% plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
related interest payment date); provided, however, that at least $150.0
million aggregate principal amount of the Securities must remain outstanding
after each such redemption.
6
<PAGE>
6. Mandatory Redemption
On March 15, 2005 the Company will redeem $150.0 million principal
amount of Securities and on March 15, 2006 the Company will redeem $75.0
million principal amount of the Securities, in each case at a redemption
price of 100% of the principal amount, plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date).
The Company may receive a credit against the principal amount of the
Securities required to be redeemed pursuant to this paragraph equal to the
principal amount (excluding premium) of any Securities that the Company has
acquired or redeemed other than pursuant to this paragraph and has delivered
to the Trustee for cancellation. The Company may receive the credit only
once for any Security.
7. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to
101% of the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record
on the relevant record date to receive interest due on the related interest
payment date) as provided in, and subject to the terms of, the Indenture.
7
<PAGE>
9. Subordination; Guaranties
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company
agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
Parent has agreed to guarantee the obligations of the Company under
the Securities, and certain domestic subsidiaries of the Company may in the
future be required to guarantee such obligations. Any such guarantees will
be subordinated to any Senior Indebtedness of Parent or such subsidiaries, as
applicable.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act, minimum denominations of $200,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and
to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities
selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed) or any Securities for a
period of 15 days before a selection of Securities to be redeemed or 15 days
before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
8
<PAGE>
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set
forth in the Indenture, without the consent of any Securityholder, the
Company and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of
the Indenture, or to provide for uncertificated Securities in addition to or
in place of certificated Securities or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act,
or to make certain changes in the subordination provisions, or to release any
guarantee of the Securities by the Company's Subsidiaries then permitted by
the Indenture, or to make any change that does not adversely affect the
rights of any Securityholder.
9
<PAGE>
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to
paragraph 5 or 6 of the Securities, upon acceleration or otherwise, or
failure by the Company to redeem or purchase Securities when required; (iii)
failure by the Company to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount
accelerated (or so unpaid) exceeds $10 million; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant
Subsidiaries; (vi) certain judgments or decrees for the payment of money in
excess of $10 million; and (viii) certain events with respect to the
guarantees of the Securities by the Parent and certain Restricted
Subsidiaries of the Company. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable
immediately, subject to certain conditions. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if
it determines that withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations
10
<PAGE>
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.
17. 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. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not
as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
22. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
21. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS
11
<PAGE>
OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written request
and without charge to the Security
12
<PAGE>
holder a copy of the Indenture which has in it the text of this Security in
larger type. Requests may be made to:
Attention of
- ------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
- ------------------------------------------------------------------------------
- ---------
Date: Your Signature:
--------------------------- -----------------------------
- ------------------------------------------------------------------------------
- ---------
Sign exactly as your name appears on the other side of this
Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such
Securities were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being transferred in accordance
with its terms:
13
<PAGE>
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) / / inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that purchases
for its own account or for the account of a
qualified institutional buyer to whom notice is
given that such transfer is being made in reliance
on Rule 144A, in each case pursuant to and in
compliance with Rule 144A under the Securities Act
of 1933; or
(4) / / outside the United States in an offshore
transaction within the meaning of Regulation S
under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5) / / pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse
to register any of the Securities evidenced by this
certificate in the name of any person other than the
registered holder thereof; provided, however, that if box
(4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, 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
14
<PAGE>
Signature Guarantee:
- ---------------------------- ------------------------------------
Signature must be guaranteed Signature
- ------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
--------------------- ------------------------------------------------
NOTICE: To be executed by
an executive officer
15
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global
Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
</TABLE>
16
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture,
check the box:
----
----
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.09 of the
Indenture, state the amount: $
Date: Your Signature:
------------------------------ -------------------------
(Sign exactly as your
name appears on the other
side of this Security.)
Signature Guarantee:
--------------------------------------------
(Signature must be guaranteed)
17
<PAGE>
Exhibit 4.02
FAIRCHILD SEMICONDUCTOR CORPORATION
$300,000,000
10 1/8% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
March 6, 1997
Credit Suisse First Boston Corporation
BT Securities Corporation
CIBC Wood Gundy Securities Corp.
In care of Credit Suisse First Boston Corporation
As Representative of the Several Initial Purchasers
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
Fairchild Semiconductor Corporation, a Delaware corporation
("Fairchild"), proposes, subject to the terms and conditions stated in a
purchase agreement of even date herewith (the "Purchase Agreement"), to issue
and sell to Credit Suisse First Boston Corporation, BT Securities Corporation
and CIBC Wood Gundy Securities Corp. (collectively, the "Initial Purchasers"),
$300,000,000 principal amount of 10 1/8% Senior Subordinated Notes Due 2007 (the
"Notes") to be unconditionally guaranteed on a senior subordinated basis by FSC
Semiconductor Corporation, a Delaware corporation (the "Guarantor", and together
with Fairchild, the "Company"). The Notes will be issued pursuant to an
indenture dated as of March 11, 1997 (the "Indenture"), between the Company and
United States Trust Company of New York, as trustee (the "Trustee"). As an
inducement to the Initial Purchasers, the Company hereby agrees with the several
Initial Purchasers, for the benefit of the holders of the Notes (including,
without limitation, the Initial Purchasers), the Exchange Notes (as defined
below) and the Private Exchange Notes (as defined below) (collectively, the
"Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its cost,
prepare and, not later than 60 days after (or if the 60th day is not a
business day, the first business day thereafter) the Issue Date (as defined
in the Indenture) of the Notes, file with the Securities and Exchange
<PAGE>
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer
(the "Registered Exchange Offer") to the Holders of Transfer Restricted Notes
(as defined below), who are not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Notes, a like aggregate
principal amount of debt securities (the "Exchange Notes") of the Company
issued under the Indenture and identical in all material respects to the
Notes (except for the transfer restrictions relating to the Notes) that would
be registered under the Securities Act. The Company shall use its best
efforts to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 150 days (or if the 150th day is
not a business day, the first business day thereafter) after the Issue Date
of the Notes and shall keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to
the Holders (such period being called the "Exchange Offer Registration
Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof; provided, however, that the Company has accepted all the
Notes theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes electing to exchange the Notes
for Exchange Notes (assuming that such Holder is not an affiliate of the Company
within the meaning of the Securities Act, acquires the Exchange Notes in the
ordinary course of such Holder's business, has no arrangements with any person
to participate in the distribution of the Exchange Notes and is not prohibited
by any law or policy of the Commission from participating in the Registered
Exchange Offer) to trade such Exchange Notes from and after their receipt
without any limitations or restrictions under the Securities Act and without
material restrictions under the securities laws of the several states
2
<PAGE>
of the United States. In connection with such Registered Exchange Offer, the
Company shall take such further action, including, without limitation,
appropriate filings under state securities laws, as may be necessary to
realize the foregoing objective subject to the proviso of Section 3(h).
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder that is a broker-dealer electing
to exchange Notes, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Notes (an "Exchanging
Dealer"), is required to deliver a prospectus containing the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, and in
Annex C hereto in the "Plan of Distribution" section of such prospectus in
connection with a sale of any such Exchange Notes received by such Exchanging
Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser
that elects to sell Exchange Notes acquired in exchange for Notes constituting
any portion of an unsold allotment is required to deliver a prospectus
containing the information required by Items 507 or 508 of Regulation S-K under
the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein in order to permit such prospectus to be lawfully delivered by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided, however, that (i) in the case
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser
of 180 days after the expiration date of the Registered Exchange Offer and the
date on which all Exchanging Dealers and the Initial Purchasers have sold all
Exchange Notes held by them (unless such period is extended pursuant to Section
3(j) below), and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Exchange Notes for a period not less than 90 days after the
consummation of the Registered Exchange Offer.
3
<PAGE>
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Company issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange
Notes and the Private Exchange Notes are herein collectively called the
"Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable law.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
4
<PAGE>
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer or the Private
Exchange, as the case may be;
(ii) deliver to the Trustee for cancellation all the Notes so accepted
for exchange; and
(iii) cause the Trustee to authenticate and promptly deliver Exchange
Notes or Private Exchange Notes, as the case may be, equal in principal
amount to the Notes of each Holder so accepted for exchange.
The Indenture will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company in writing that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Notes received by
such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to participate
in the distribution of the Notes or the Exchange Notes within the meaning of the
Securities Act, (iii) such Holder is not an "affiliate", as defined in Rule 405
of the Securities Act, of the Company or, if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer and that it is not engaged in, and does not intend to engage in,
the distribution of the Exchange Notes, and (v) if such Holder is a
broker-dealer, that it will receive Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto will comply in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer
5
<PAGE>
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 Exchange Offer Registration Statement, and any supplement to such
prospectus, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the date of this Agreement, (iii) any Initial Purchaser so requests
with respect to the Notes (or the Private Exchange Notes) not eligible to be
exchanged for Exchange Notes in the Registered Exchange Offer and held by it
following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Notes on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best
efforts to cause to be declared effective a registration statement (the
"Shelf Registration Statement"; each of it and the Exchange Offer
Registration Statement being referred to herein as a "Registration
Statement") on an appropriate form under the Securities Act relating to the
offer and sale of the Transfer Restricted Notes by the Holders thereof
from time to time in accordance with the methods of distribution set forth
in the Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities
held by it covered by such Shelf Registration Statement
6
<PAGE>
unless such Holder agrees in writing to be bound by all the provisions of
this Agreement applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities until the expiration of the holding period with respect
to the Securities set forth in clause (k) of Rule 144 promulgated under the
Securities Act (or for such longer period if extended pursuant to Section
3(j) below) or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement have been sold
pursuant thereto. The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by applicable
law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to
7
<PAGE>
the prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as such Initial
Purchaser reasonably may propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
Annex C hereto in the "Plan of Distribution" section of the prospectus
forming a part of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; (iii) if requested by
an Initial Purchaser, include the information required by Items 507 or 508
of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement;
(iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of
the Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
Exchange Notes received by such broker-dealer in the Registered Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies
have been publicly disseminated by the staff of the Commission or such
positions or policies, in the reasonable judgment of the Initial Purchasers
based upon advice of counsel (which may be in-house counsel), represent the
prevailing views of the staff of the Commission; and (v) in the case of a
Shelf Registration Statement, include the names of the Holders who propose
to sell Securities pursuant to the Shelf Registration Statement as selling
securityholders.
(b) The Company shall advise (and confirm such advice in writing if
requested by the recipient of the advice) the Initial Purchasers, the
Holders of the Securities and any Participating Broker-Dealer from
8
<PAGE>
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus does not contain an
untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective
9
<PAGE>
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those, if
any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall deliver to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment or supplement thereto
as such person may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto included in the Shelf Registration
Statement by each of the selling Holders of the Securities in connection
with the offering and sale of the Securities covered by such prospectus or
any such amendment or supplement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Participating Broker-Dealer and such other persons required
to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Notes covered by the
prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement.
10
<PAGE>
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
Securities covered by such Registration Statement; provided, however, that
the Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified or (ii) take any
action which would subject it to general service of process or to taxation
in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 3(b) above during the period for which the
Company is required to maintain an effective Registration Statement, the
Company shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Notes or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made,
11
<PAGE>
then the Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from
and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide one CUSIP number for all of the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement (which need not
be audited) satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days,
if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
12
<PAGE>
(n) Each Holder of Securities to be sold pursuant to the Shelf
Registration Statement shall furnish to the Company such information
regarding the Holder and the distribution of the Securities as the Company
may from time to time reasonably require and request for inclusion in the
Shelf Registration Statement (and shall promptly correct any information
previously furnished if the inclusion of such information in such
Registration Statement would be materially misleading), and the Company may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time
after receiving such request.
(o) The Company shall enter into such customary agreements (including
if requested an underwriting agreement in customary form) and take all such
other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant
to any Shelf Registration. If an underwriting agreement is entered into
pursuant to this paragraph, the Company shall cause any such agreement to
contain indemnification provisions and procedures substantially similar to
those set forth in Section 5 hereof (or such other procedures acceptable to
the Holders of a majority of the aggregate principal amount of the
securities registered under the applicable Registration Statement and the
managing underwriters, if any) with respect to all parties to be
indemnified pursuant to Section 5 hereof.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement, in each case as shall be reasonably necessary, in the judgment
of the Holder or
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<PAGE>
any such underwriter, attorney, accountant or agent
referred to in this paragraph, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
the foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers by you and on behalf of the other parties
by one counsel designated by and on behalf of such other parties as
described in Section 4 hereof and provided, further, that as to any
information that is designated in writing by the Company, in good faith, as
confidential at the time of delivery, such information shall be kept
confidential by the Holders or by any such underwriter, attorney,
accountant or other agent.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in
customary form addressed to such Holders and the managing underwriters, if
any, thereof and dated, in the case of the initial opinion, the effective
date of such Shelf Registration Statement (it being agreed that the matters
to be covered by such opinion shall include such matters as are customarily
included in opinions requested in underwritten offerings of such type;
(ii) its officers to execute and deliver all customary documents and
certificates and updates thereof reasonably requested by any underwriters
of the applicable Securities and (iii) its independent public accountants
to provide to the selling Holders of the applicable Securities and any
underwriter therefor a comfort letter in customary form and covering
matters of the type customarily covered in comfort letters in connection
with primary underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of
Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form set forth in
Section 6(e) of the Purchase Agreement with such changes as are customary
in connection with the preparation of a Registration Statement and (ii) its
independent public accountants
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<PAGE>
to deliver to such Initial Purchaser or such Participating Broker-Dealer a
comfort letter, in customary form, meeting the requirements as to the
substance thereof as set forth in Section 6(a) of the Purchase Agreement,
with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on the Notes so exchanged that such Notes are
being cancelled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall the Notes be marked as paid or
otherwise satisfied.
(t) The Company will use its best efforts to cause the Securities
covered by a Registration Statement to be rated (or to have any existing
rating confirmed) with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD")) thereof, whether
as a Holder of such Securities or as an underwriter, a placement
or sales agent or a broker or dealer in respect thereof, or otherwise, the
Company shall use its best efforts to assist such broker-dealer in complying
with the requirements of such Rules and By-Laws, including, without
limitation, by (A) if such Rules or By-Laws shall so require, engaging a
"qualified independent underwriter" (as defined in Section 2720 thereof) to
participate in the preparation of the Registration Statement relating to
such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement
15
<PAGE>
or sales agent, to recommend the yield of such Securities,
(B) indemnifying any such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 5 hereof and
(C) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules
of Fair Practice of the NASD.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses of
Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear, or reimburse the Holders of the
Securities covered thereby for, the reasonable fees and disbursements of one
firm of counsel designated by the Holders of a majority in principal amount of
the Securities covered thereby to act as counsel for the Holders of the
Securities in connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless (i) each Holder of the Securities, any Participating Broker-Dealer and
each person, if any, who controls such Holder or such Participating
Broker-Dealer within the meaning of the Securities Act or the Exchange Act,
(ii) each of their respective officers and directors and (iii) each other
person, if any, who controls any such person within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act (such persons being referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material
16
<PAGE>
fact contained in a Registration Statement or prospectus or in any
amendment 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
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
provided, however, that (i) the Company shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein and (ii) the Company shall not be
liable to any Indemnified Party pursuant to this section with respect to the
Registration Statement or prospectus to the extent that any such loss, claim,
damage or liability of such Indemnified Party results solely from an untrue
statement of a material fact contained in, or the omission of a material fact
from, the Registration Statement or prospectus, which untrue statement or
omission was corrected in an amended or supplemented Registration Statement or
prospectus if the Company had previously furnished copies thereof to such
Indemnified Party and delivery of a prospectus was required by the Act and if
the person alleging such loss, claim, damage or liability was not sent or given,
at or prior to the written confirmation of the sale to such person, a copy of
the amended or supplemented Registration Statement or prospectus; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party.
(b) Each Holder of the Securities covered by a Registration Statement,
severally and not jointly, will indemnify and hold harmless (i) the Company and
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, (ii) each of their respective directors,
(iii) each of their respective officers who signs such Registration Statement
and (iv) each other person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity
17
<PAGE>
from the Company to each such Holder, but only insofar as any losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact necessary to make the statements therein not
misleading in each case to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any
legal or other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action or proceeding (including a
governmental investigation), 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 of the commencement thereof; but the omission 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. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from
18
<PAGE>
the indemnifying party to such indemnified party of its election so to assume
the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened action in respect of which
any indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Notes,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company
19
<PAGE>
on the one hand or such Holder or such other indemnified person, as the case
may be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection
(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the Holders of the
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of
the Securities pursuant to a Registration Statement exceeds the amount of
damages which such Holders have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls such indemnified
party within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as such indemnified party and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
cash interest (the "Additional Interest") with respect to the Securities shall
be assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below a "Registration Default"):
(i) If by May 12, 1997, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the
Commission;
20
<PAGE>
(ii) If by September 8, 1997, neither the Registered Exchange Offer is
consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Notes during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement 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 (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Notes (over and above the interest set
forth in the title of the Notes) from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per annum, increasing
by 0.50% per annum on the 90th day during which such Registration Default
remains uncured and on every 90th day thereafter during the continuation of any
Registration Default and accruing to but excluding the date on which all
Registration Defaults have been cured; provided, that Additional Interest shall
not exceed 2.0% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the
21
<PAGE>
Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day following such 30 day period
until the date on which such Registration Default is cured.
(c) Any Additional Interest accruing on the Notes will be payable in
cash on the regular interest payment dates with respect to the Notes to the
holders of record on the applicable record date. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the date
on which such Security has been exchanged by a person other than a broker-dealer
for a freely transferrable Exchange Note in the Registered Exchange Offer, (ii)
following the exchange by a broker-dealer in the Registered Exchange Offer of
such Security for an Exchange Note, the date on which such Exchange Note is sold
to a purchaser who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Security has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Security is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Notes, make publicly available other information so long as necessary
to permit sales of their
22
<PAGE>
securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable
such Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144
and 144A (including the requirements of Rule 144A(d)(4)). The Company will
provide a copy of this Agreement to prospective purchasers of Notes
identified to the Company by the Initial Purchasers upon request. Upon the
request of any Holder of Transfer Restricted Notes, the Company shall deliver
to such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall
be deemed to require the Company to register any of its securities pursuant
to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Notes to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and with the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be
23
<PAGE>
made in writing by hand delivery, first-class mail, facsimile transmission,
or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each Holder,
the address of such Holder to which confirmation of the sale of the Notes
to such Holder was first sent by the Initial Purchasers, with a copy in
like manner to you as follows:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Fax No.: (212) 325-2017
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman
(2) if to the Initial Purchasers, at the addresses specified in
Section 9(b)(1);
(3) if to the Company, at its address as follows:
Fairchild Semiconductor Corporation
333 Western Avenue, Mail Stop 01-00
South Portland, Maine 04106
Fax No: (207) 761-6020
Attention: Daniel E. Boxer, Esq.
24
<PAGE>
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Fax No: (215) 994-2222
Attention: Christopher G. Karras, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) 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.
(d) Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each of the parties.
(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 WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
25
<PAGE>
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities 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.
(j) Agreements of the Guarantor. All agreements of the Guarantor
shall be effective following the date it becomes a party hereto.
Notwithstanding this section, this Agreement will be binding as between the
Company and the Initial Purchasers as of and following the date hereof.
26
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to CSFBC a counterpart hereof, whereupon this
Agreement will become a binding agreement among the Company and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
FAIRCHILD SEMICONDUCTOR CORPORATION
By:______________________
Name:
Title:
FSC SEMICONDUCTOR CORPORATION
By:______________________
Name:
Title:
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BT SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
by: CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 199
, all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.*
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that
- -----------------
* In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
31
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ANNEX D
____
/____/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________________
Address: _________________________________________
_________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement ("Agreement") is entered into this
11th day of March, 1997 by and between NATIONAL SEMICONDUCTOR CORPORATION, a
Delaware corporation having a principal place of business at 2900
Semiconductor Drive, Santa Clara, California 95119 (hereinafter "National")
and [FAIRCHILD SEMICONDUCTOR CORPORATION], a Delaware corporation having a
principal place of business at 333 Western Avenue, South Portland, Maine
04106 (hereinafter "Fairchild"). National and Fairchild may be referred to
herein as a "Party" and/or the "Parties" as the case may require.
RECITALS
WHEREAS, the parties have entered into that certain Asset Purchase
Agreement, dated the date hereof (hereinafter "Purchase Agreement"), under
which Fairchild is acquiring certain of the assets of National's Logic,
Memory, and Discrete Power and Signal Technologies Business Units as
historically conducted and accounted for (including Flash Memory but
excluding Public Networks, Programmable Products and Mil Logic Products) (the
"Business"); and
WHEREAS, pursuant to the transactions contemplated in the Purchase
Agreement, Fairchild is acquiring National's manufacturing facilities in
South Portland, Maine (excluding the 8-inch fab and related facilities); West
Jordan, Utah; Penang, Malaysia; and Cebu, Philippines (the "Facilities"); and
WHEREAS, after the Closing Date Fairchild will own and operate the
Facilities; and
WHEREAS, National has provided certain services to the Business in the
past; and
WHEREAS, in order to support the continued and uninterrupted operation of
the Business following the Closing, the parties desire to enter into this
Agreement, pursuant to which National will provide, for the time periods and
consideration described below, certain of the services that have been
provided by National to the Business prior to the Closing Date.
NOW, THEREFORE, in furtherance of the foregoing premises and in
consideration of the mutual covenants and obligations hereinafter set forth,
the parties hereto, intending to be legally bound hereby, do agree as follows:
1. DEFINITIONS
1.1 Closing Date: The date of closing of the trans-
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actions described in the Purchase Agreement. 1.2 Capitalized terms not
defined herein shall have the meaning set forth in the Purchase Agreement.
1.3 Fairchild: [Fairchild Semiconductor Corporation] and its Subsidiaries.
1.4 National: National Semiconductor Corporation and its Subsidiaries. 1.5
Subsidiary: Any corporation, partnership, joint venture or similar entity
more than fifty percent (50%) owned or controlled by a Party hereto, provided
that any such entity shall no longer be deemed a Subsidiary after such
ownership or control ceases to exist.
2. SERVICES TO BE PROVIDED BY NATIONAL
Following the Closing Date, National shall provide Fairchild the
following services (individually or collectively referred to herein as, the
"Service(s)") for a period not to extend beyond June 1, 1998, except as
otherwise provided herein:
2.1 Data processing and communications services and related support as
set forth in Schedule 2.1 hereto. National shall invoice Fairchild in the
manner and at the rates set forth herein.
2.2 Financial and administrative and related support as set forth in
Schedule 2.2 hereto. National shall invoice Fairchild in the manner and at
the rates set forth herein.
2.3 Purchasing services and related support as set forth in Schedule 2.3
hereto. National shall invoice Fairchild in the manner and at the rates set
forth herein.
2.4 Marketing and Sales services and related support as set forth in
Schedule 2.4 hereto. National shall invoice Fairchild in the manner and at
the rates set forth herein.
2.5 Logistics and Operational services and related support as set forth
in Schedule 2.5 hereto. National shall invoice Fairchild in the manner and at
the rates set forth herein.
2.6 Human resources and benefits services and related support as set
forth in Schedule 2.6 hereto. National shall invoice Fairchild in the manner
and at the rates set forth
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herein.
2.7 Security assistance and consulting services as set forth in Schedule
2.7 hereto. National shall invoice Fairchild in the manner and at the rates
set forth herein.
2.8 Certain additional services at the South Portland, Maine site will be
provided by Fairchild to National and by National to Fairchild, and at the
West Jordan, Utah site by Fairchild to National, under separate agreements
regarding shared facilities and services. The parties will also enter into
separate agreements regarding office space in Santa Clara to be leased by
National to Fairchild, office space in West Jordan to be leased by Fairchild
to National, and the lease of buildings in South Portland. In addition, the
Parties will enter into a letter agreement regarding certain environmental
matters, including the cleanup underway in South Portland and West Jordan.
2.9 Under another separate agreement, Fairchild will reimburse National
for lease payments to be made following the Closing by National in respect to
certain leased manufacturing and computer equipment used in Fairchild
facilities and used in the operation of the Business including but not
limited to that leased from GE Capital. Notwithstanding anything to the
contrary contained herein, Fairchild shall not be charged under this
Agreement for any Service that is specifically required to be performed under
any other agreement between National and Fairchild and any such other Service
shall be performed and charged for in accordance with the terms of such other
agreement.
3. TERMS OF SERVICE
3.1 The attached Schedules of Services and costs are subject to change with
the Parties' mutual written consent consistent with change methodologies applied
to National. Wherever practical, charges to Fairchild for Services shall be
based on actual incurred costs, not budgeted or estimated costs. The Parties
shall use good faith efforts to discuss any situation in which the actual charge
for a Service is reasonably expected to exceed the estimated charge, if any, set
forth on a Schedule for a particular Service; provided, however, that the
incurrence of charges in excess of any such estimate shall not justify stopping
a provision of, or payment for, Services under this Agreement. The Parties have
made good faith efforts as of the date hereof to identify each Service and to
complete the content of each Schedule to this Agreement. To the extent a
Schedule has not been prepared for a Service or a Schedule is otherwise
incomplete as of the date hereof, the Parties shall use good faith efforts to
prepare or complete Schedules as promptly as practicable. Any
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Service reflected on any such additional or amended Schedule shall be deemed
a "Schedule" as if set forth on such Schedule as of the date hereof.
3.2 National will have in place by the Closing Date all legal entities
necessary at each location to import and ship product and invoice customers
on behalf of Fairchild. The legal entity structure will be equivalent to
National's legal structure unless otherwise agreed in writing by Fairchild.
In the event that at any time any change is made by Fairchild to the legal
structure which adversely affects National's provision of Services under this
Agreement, National shall, in its sole discretion, have the right to cease
provision of such affected Service(s). Fairchild will operate under the
National systems, logistics and accounting calendar and observe all National
system cutoff schedules. With respect to Fairchild products for which
National performs an invoicing function, except in Japan, invoices will be
issued in Fairchild's name after the Closing Date, such invoices to
incorporate on behalf of Fairchild the same terms and conditions of sale as
used by National. While on National's systems, Fairchild will use National's
published company rates for foreign currency exchange and National's
practices with respect to use of currency.
3.3 Fairchild is contracting for use of National's system on an "as-is"
basis. It will be at National's discretion as to whether enhancements or
modifications to these systems will be made available to Fairchild. After the
Closing Date, there will be no modifications to National's systems at
Fairchild's request, except in National's sole discretion and at a price to
be agreed between the Parties and paid by Fairchild.
3.4 Prices to be paid by Fairchild for Services rendered by National
hereunder are listed in the Schedules hereto. One time systems and services
costs incurred to establish the capability of National and Fairchild to
operate as separate companies using common systems will be paid entirely by
National. Costs to support the ultimate separation of Fairchild and the
implementation of Fairchild's own independent systems and services will be
paid entirely by Fairchild. National agrees to cooperate as reasonably
requested by Fairchild in order to effectuate such separation.
4. ADDITIONAL SERVICES, SOFTWARE TRANSFERS AND SOFTWARE LICENSES
4.1 In addition to the specific services and facilities described above,
the parties hereto acknowledge that there may be additional services and
facilities which have not been
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identified herein but which have been used by the Business prior to the
Closing Date and which shall continue to be required or desired by Fairchild
until June 1, 1998, or such later date as the Parties may agree upon. If any
such additional services or facilities are identified and requested by
Fairchild, and National agrees to provide such services, Fairchild will be
charged at the rate paid by National for said services.
4.2 Upon the written request of Fairchild, National shall assign to
Fairchild, to the extent possible and subject to vendor legal or contractual
restrictions, all of its right, title, and interest in and to any software
licensed programs which between National and Fairchild are used solely and
exclusively for the benefit of Fairchild and are listed in Schedule 4.2
hereto.
4.3 National hereby grants Fairchild a paid-up, royalty-free, perpetual,
nonexclusive, irrevocable, worldwide, multi-site license to use, or have used
for its own benefit, National in-house developed business, engineering and
manufacturing systems software, as listed on Schedule 4.3 hereto, which is or
has been used by or for Fairchild, whether user or MIS developed and/or
supported (hereinafter "NS Software"). No termination of any Services
provided pursuant to this Agreement shall terminate or revoke Fairchild's
license to use, or have used for its own benefit, the NS Software.
4.4 Fairchild, its agents, it subsidiaries and its subsidiaries' agents
may make such copies of the NS Software as may be reasonably necessary for
their needs. Subject to 3.3 above, and during the term of this Agreement, if
National develops changes, modifications, enhancements or improvements to the
NS Software, National will use its best efforts to promptly disclose them to
Fairchild in accordance with National's current notification methods and they
shall be included within the scope of this license.
4.5 After discontinuation of the Service provided by National,
modifications or enhancements may be made by Fairchild, its subsidiaries or
their respective employees or agents which shall be the sole and exclusive
property of Fairchild (including all worldwide copyrights, trade secrets,
patents or other proprietary rights relating thereto). National is the owner
of the NS Software and any copyrights, trade secrets, patents or other
proprietary rights relating thereto and has the right to grant to Fairchild
the license to use the NS Software under this Agreement, in each case free of
any claim of any third party.
4.6 Any NS Software wrongly omitted from Schedule 3.3 shall be added with
both Parties' written consent. National
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<PAGE>
shall not unreasonably withhold such consent.
5. INDEMNIFICATION
In the event any act or omission of either Party or its directors,
officers, employees, servants, agents or representatives causes or directly
results in (i) loss, damage to, destruction of property of the other Party or
third Parties, and/or (ii) death or injury to persons including, but not
limited to, employees or invitees of either Party, then such Party shall
indemnify, defend and hold the other Party harmless from and against any and
all claims, actions, damages, demands, liabilities, costs and expenses
resulting therefrom. The indemnifying Party or its agent or representative
shall pay or reimburse the other Party promptly for any such loss, damage,
destruction, death or injury when notified promptly in writing of any claim
made hereunder and when given full and complete authority, information and
assistance (at the indemnifying Party's expense) for the defense of same. The
indemnifying Party shall not be responsible for any compromise or settlement
made without its written consent. With respect to third party claims, the
right of contribution shall exist as between the Parties.
6. NO WARRANTY
The level and quality of the Services shall be provided in good faith and
at a level and quality comparable to that performed for the benefit of
National prior to the date of execution of this Agreement. National shall not
be liable for any loss or damage suffered by Fairchild on account of any
failure by National to perform such service so long as such failure was not a
result of National's willful intent to breach this Agreement. Except as may
otherwise be explicitly set forth herein, National makes no representation or
warranty whatsoever with respect to the Services to be provided hereunder.
7. TERM AND TERMINATION
7.1 THE TERM OF THIS AGREEMENT SHALL BEGIN ON THE CLOSING DATE.
Services shall be provided by National hereunder until June 1, 1998, unless
otherwise provided herein.
7.2 Subject to the provisions of the Schedules hereto, Fairchild may
terminate any Service(s) provided pursuant to this Agreement on ninety (90)
days prior written notice to National, unless otherwise specified in the
Schedules hereto. If Fairchild elects to terminate a service, it will bear
the costs of
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interfacing any new system to the remaining National systems which it
continues to use. Fairchild shall no longer be obligated to pay National the
fee attributable to such cancelled Service(s) following the effective
termination date of such Service(s). Fairchild shall be liable for any
outstanding purchase orders placed with third parties by National on
Fairchild's behalf prior to National's receipt of the aforesaid written
notice of termination provided that any purchase order in an amount greater
than $1,000 shall have been issued with Fairchild's written consent.
7.3 Subject to the provisions of the Schedules hereto, in the event of a
material breach under this Agreement, the non-defaulting Party may terminate
the specific Service(s) to which such breach relates if the defaulting Party
fails to cure such breach within thirty (30) days of its receipt of a written
notice from the non-defaulting Party of such breach, provided that the duties
and obligations of the defaulting Party which have accrued prior to the
termination of such Service shall not be released or discharged by such
termination. During the pendency of any dispute resolution process with
respect to such purported default, the Service(s) in dispute will continue to
be provided and paid for.
7.4 Prior to termination of this Agreement, the Parties shall cooperate
with one another to maintain an orderly transfer of Services provided
hereunder and shall provide necessary assistance for an orderly transfer
thereof.
8. OWNERSHIP AND MAINTENANCE OF DATA
All records, data files (and the data contained therein), input
materials, reports and other materials received, computed, developed,
processed or stored for Fairchild by National (collectively the "Data")
pursuant to this Agreement after the Closing Date will be the exclusive
property of Fairchild, and National shall not possess any interest, title,
lien or right in connection therewith. National shall safeguard the Data to
the same extent it protects its own similar materials. Data shall not be
utilized by National for any purpose other than in support of National's
obligations hereunder. Neither the Data nor any part thereof shall be
disclosed, sold, assigned, leased or otherwise disposed of to third parties
by National or commercially exploited by or on behalf of National, its
employees or agents. In the event that either Party either determines on the
advice of its counsel that it is required to disclose any information
pursuant to applicable law or receives any demand under lawful process to
disclose or provide information of the other Party that is subject to the
confidentiality provisions hereof, such Party shall notify the other Party
prior
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to disclosing and providing such information and shall cooperate at the
expense of the requesting Party in seeking any reasonable protective
arrangements requested by such other Party. Subject to the foregoing, the
Party that receives such request may thereafter disclose or provide
information to the extent required by such law (as so advised by counsel) or
by lawful process. Upon termination of any Service provided hereunder,
National shall provide Fairchild reasonable access to retained Data for a
period not to exceed twelve (12) months following said termination whereupon
such Data will be transferred to Fairchild or otherwise made available to
Fairchild as Fairchild may reasonably request.
9. PAYMENT
9.1 During the term of the provision of any Service(s) hereunder,
National shall invoice Fairchild monthly, unless otherwise specified in the
Schedules hereto, itemizing the basis for each invoice amount.
9.2 Any out-of-pocket expense paid to a third party by National as result
of Services provided hereunder by National to Fairchild shall be invoiced
separately in National's customary form and detail and reimbursed by
Fairchild to National. The foregoing reimbursement shall be in addition to
the fees provided for in Section 9.1 above. In the event that any such
expense exceeds $1000, it must be approved in writing by Fairchild prior to
incurrence by National. Fairchild will not unreasonably withhold approval.
9.3 Unless otherwise provided in the Schedules, payment terms are Net,
thirty (30) days from date of invoice and payments shall be made in United
States Dollars. Each Party shall have the option to net payment obligations
owed to it against amounts due from the other Party. If payment amounts are
netted against receivable amounts, the netting Party will provide the
receiving Party with a reconciliation referencing the specific invoices
involved in the netting transaction. Netting shall not apply against payments
to be made under the Recapitalization or Asset Purchase Agreement.
10. CONFIDENTIALITY
The parties acknowledge that in the course of performance of their
respective obligations pursuant to this Agreement, each may obtain certain
confidential and/or proprietary information of the other or its affiliates or
customers, including the terms and conditions of this Agreement. Except as
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otherwise provided in the Technology Licensing and Transfer Agreement, dated
the date hereof, between National and Fairchild, each Party hereby agrees
that all information communicated to it by the other, its affiliates or
customers, whether before or after the Closing Date, shall be kept and was
received in strict confidence and shall be used only in accordance with this
Agreement, and shall not be disclosed by the other Party, its agents or
employees without the prior written consent of the first Party. In the event
that either Party either determines on the advice of its counsel that it is
required to disclosure any information pursuant to applicable law or receives
any demand under lawful process to disclose or provide information of the
other Party that is subject to the confidentiality provisions hereof, such
Party shall notify the other Party prior to disclosing and providing such
information and shall cooperate at the expense of the requesting Party in
seeking any reasonable protective arrangements requested by such other Party.
Subject to the foregoing, the Party that receives such request may thereafter
disclose or provide information to the extent required by such law (as so
advised by counsel) or by lawful process. Furthermore, the Parties shall take
reasonable steps necessary to ensure that all information and records
relating to the business of National and Fairchild are kept strictly
confidential. Notwithstanding the above, this Agreement imposes no obligation
on either Party with respect to information that is or becomes a matter of
public knowledge through no fault of that Party, is rightfully obtained by
either Party from a third party not in violation of any duty of
confidentiality, is disclosed by either Party to a third party without a duty
of confidentiality imposed upon the third party, or is independently
developed by either Party without reference to any proprietary or
confidential information of the other Party.
11. GENERAL
11.1 AMENDMENT: This Agreement may be modified only by a written document
signed by duly authorized representatives of the Parties.
11.2 FORCE MAJEURE: A Party shall not be liable for a failure or delay in
the performance of any of its obligations under this Agreement where such
failure or delay is the result of fire, flood, or other natural disaster, act
of God, war, embargo, riot, labor dispute, unavailability of raw materials,
or the intervention of any government authority, providing that the Party
failing in or delaying its performance promptly notifies the other Party of
its inability to perform and states the reason for such inability.
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11.3 ASSIGNMENT: This Agreement may not be assigned by any Party hereto
without the written consent of the other Party; provided that Fairchild may
assign its rights but not its obligations hereunder as collateral security to
any bona fide financial institution engaged in financing in the ordinary
course providing financing to consummate the transactions contemplated by the
Purchase Agreement or any bona fide financial institution engaged in
acquisition financing in the ordinary course through whom such financing is
refunded, replaced, or refinanced and any of the foregoing financial
institutions may assign such rights in connection with a sale of Fairchild or
the Business in the form then being conducted by Fairchild substantially as
an entirety. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon, and inure to the benefit of, and shall
be enforceable by, the respective successors and assigns of the Parties
hereto.
11.4 COUNTERPARTS: This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
11.5 CHOICE OF LAW: This Agreement, and the rights and obligations of the
Parties, shall be interpreted and governed in accordance with the laws of the
State of California, without giving effect to its conflicts of law
provisions.
11.6 WAIVER: Should either of the Parties fail to exercise or enforce any
provision of this Agreement, or waive any right in respect thereto, such
failure or waiver shall not be construed as constituting a waiver or a
continuing waiver of its rights to enforce any other provision or right.
11.7 SEVERABILITY: If any provision of this Agreement or the application
thereof to any situation or circumstance shall be invalid or unenforceable,
the remainder of this Agreement shall not be affected, and each remaining
provision shall be valid and enforceable to the fullest extent.
11.8 LIMITATION OF LIABILITY: IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM
THE OTHER PARTY'S PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, OR
THE FURNISHING, PERFORMANCE, OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT
HERETO, WHETHER DUE TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE OR
OTHERWISE, REGARDLESS OF WHETHER THE NONPERFORMING PARTY WAS ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES OR NOT.
11.9 EFFECT OF HEADINGS: The headings and sub-head-
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ings contained herein are for information purposes only and shall have no
effect upon the intended purpose or interpretation of the provisions of this
Agreement.
11.10 INTEGRATION: This Agreement, the Recapitalization and Purchase
Agreement, the Operating Agreements (as defined in the Recap Agreement) and
Schedules hereto and thereto, constitute the entire agreement and
understanding between the Parties with respect to the subject matter of this
Agreement and integrates all prior discussions and proposals (whether oral or
written) between them related to the subject matter hereof, provided that any
provisions hereof allowing for netting or offsetting of any payments to be
made hereunder shall not be deemed to permit that such netting or offsetting
apply against any payments to be made under the Recapitalization or Purchase
Agreement.
11.11 PUBLIC ANNOUNCEMENT: Prior to the closing of the transactions
contemplated under the Purchase Agreement, neither Fairchild nor National
shall, without the approval of the other Party hereto, make any press release
or other public announcement concerning the terms of the transactions
contemplated by this Agreement, except as and to the extent that any such
Party shall be so obligated by law, in which case the Party shall use its
Best Efforts to advise the other Party thereof and the Parties shall use
their Best Efforts to cause a mutually agreeable release or announcement to
be issued; provided that the foregoing shall not preclude communications or
disclosures necessary to (a) implement the provisions of this Agreement or
(b) comply with accounting, securities laws and Securities and Exchange
Commission disclosure obligations. Fairchild shall provide National with a
reasonable opportunity to review and comment on any references to National
made by Fairchild (and shall not include any such references to National
without the written consent of National, which consent shall not be
unreasonably withheld or delayed) in any written materials that are intended
to be filed with the Securities and Exchange Commission in connection with
obtaining financing required to effect the transactions contemplated in
connection with the Purchase Agreement or intended to be distributed to
prospective purchasers pursuant to an offering made under Rule 144A
promulgated under the Securities Act of 1933 in connection with obtaining
such financing.
11.12 NO PARTNERSHIP OR AGENCY CREATED: The relationship of National and
Fairchild shall be that of independent contractors only. Nothing in this
Agreement shall be construed as making one Party an agent or legal
representative of the other or otherwise as having the power or authority to
bind the other in any manner.
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11.13 BINDING EFFECT: This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the Parties
hereto and to their respective successors and permitted assigns. 11.14 EXPORT
CONTROL: The Parties shall comply with any and all export regulations now in
effect or as may be issued from time to time by the Office of Export
Administration of the United States Department of Commerce or any other
governmental authority which has jurisdiction relating to the export of
technology from the United States of America. 11.15 NOTICES: Any notice to be
made in connection with any right or obligation arising under this Agreement,
shall be provided by registered mail, telegram, facsimile or telex by one
Party to the other at the following addresses. Said notices shall be deemed
to be effective upon receipt by the receiving Party thereof.
National: National Semiconductor Corporation
2900 Semiconductor Drive
P.O. Box 58090
M/S 16-135 (Attn: General Counsel)
Santa Clara, CA 95052-8090
FAX: (408) 733-0293
Fairchild: Fairchild Semiconductor Corporation
MS 01-00 (General Counsel)
333 Western Avenue
South Portland, ME 04106
FAX: (207) 761-6020
Either Party may change its address by written notice given to the other
Party in the manner set forth above.
IN WITNESS WHEREOF, The Parties have had this Agreement executed by their
respective authorized officers on the date written below. The persons signing
warrant and represent that they are duly authorized to sign for and on behalf
of the respective Parties.
By and on behalf of By and on behalf of
NATIONAL SEMICONDUCTOR FAIRCHILD SEMICONDUCTOR
CORPORATION CORPORATION
By: ____________________________ By: ____________________________
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Its: ___________________________ Its: ___________________________
Date: __________________________ Date: __________________________
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SCHEDULE 2.1
DATA PROCESSING AND COMMUNICATIONS SERVICES
Up to and including June 1, 1998, unless otherwise agreed to in writing,
Fairchild will have access to and ability to use those National computer and
communications systems in use by Fairchild at the Closing Date. For all IS
services, unless otherwise agreed to in writing, Fairchild will be charged at
rates equal to those charged other National internal customers. National
shall invoice Fairchild each National period as part of the period closing
cycle. National shall invoice Fairchild for direct IS services in a
separately itemized and consolidated invoice.
Fairchild will be charged on a "pay for use,, model.
- "Pay for use" will be at regular IS usage rates set for all National
Corporate IS customers. As Fairchild migrates off of National systems,
Fairchild will no longer be charged for their use.
- For FY97 only, National Corporate Information Services over-absorption
will be passed back to Fairchild just like any other National division
on a fiscal quarter basis. Calculation of the Fairchild share of the
over-absorption will exclude the use of these funds to support
corporate initiatives where Fairchild is not a participant or
beneficiary. By the end of January 1997, National will establish and
publish new charge rates for FY98.
Fairchild will develop a detailed systems conversion plan for review with
National in March of 1997. Any conversion date on the plan which extends
beyond June 1, 1998 must be approved by National. If National elects not to
approve an extended date, the schedule will revert to the latter of June 1,
1998 or an alternative date determined by National. National agrees to
provide the resources necessary to allow Fairchild to meet the mutually
agreed upon milestones, timelines and resource requirements identified in the
final detailed systems conversion plan. Following this process the plan will
be considered firm and will be used by both National and Fairchild to
synchronize their own related project efforts. Any schedule modifications
occurring after the plan is firm will require joint approval by Fairchild and
National. National will provide Fairchild with a one-time automatic extension
of any schedule of up to ninety (90) days to ensure that all schedules are
protected by a reasonable contingency period. Should Fairchild not be
satisfied by any of the dates determined through the process of creating a
firm plan, National will, if requested by Fairchild and at Fairchild's
expense, create and technically implement a Fairchild-only version of the
system operating on a service bureau of Fairchild's choice.
If Fairchild materially increases its use of National's systems
<PAGE>
and such increased use contributes to the need for National to purchase
additional computing capacity that National will not utilize after final
separation, Fairchild will be financially responsible for that computing
capacity. National will provide Fairchild with periodic reporting on
performance metrics and give Fairchild advanced notice of capacity issues to
allow Fairchild to respond and possibly discontinue use of certain National
systems in advance of any additional purchases.
National will be responsible for resolving any third party mainframe and SAP
software restrictions on Fairchild use with costs paid as described below.
Fairchild will be responsible for resolving all other software license
issues, with costs paid as described below. National will be responsible for
any one-time up front third party software vendor costs associated with
Fairchild's use of National's mainframe computers and any one-time up front
costs associated with Fairchild's use of SAP on National's computers.
Fairchild will be responsible for all other one-time and all on-going third
party vendor software costs associated with their use. National will
reimburse Fairchild completely for up to $1.3 million of one-time up front
third party vendor software costs incurred to sustain current capabilities.
Should Fairchild spend more than $1.3 million in one-time up front third
party software costs to sustain current capabilities, National will reimburse
Fairchild 50% of its costs above $1.3 million up to a limit of $2.0 million.
National may elect to pay one or more of the vendors involved directly.
National will provide wide-area network support and help facilitate the
transition to a stand-alone Fairchild wide-area network.
Fairchild will elect either to be included or not included in National
Corporate IS projects. If included, costs will be determined on the same
basis as other National divisions and sites. If not included, Fairchild will
not be charged.
- - National will continue to provide Electronic Mail access including:
- Continued Lotus NOTES support
- Continued MailHub support
National will continue to provide Video Conferencing capabilities.
National has negotiated into current contracts the grandfathering of network
and telephone deals to Fairchild. Fairchild has the option of utilizing those
arrangements or establishing separate arrangements.
National will continue to provide Internet services and access. These
services will be provided at no charge in fiscal year 1997
2
<PAGE>
and will be charged at internal National rates in fiscal year 1998.
Fairchild will continue to be able to use National's help desk services.
MBayse support may at National's option, be offered to Fairchild beyond June
1, 1998. National will provide Fairchild with a minimum of twelve (12) months
notice prior to terminating this extended service.
National charges for MBayse, EBS and RETGEN systems and support will be based
on current allocation processes.
Use of MBayse data will be governed by rules developed by National's MBayse
group and approved by Fairchild.
3
<PAGE>
FY97 IS RATES AND FEES
Rev. 2.0
4
<PAGE>
CORPORATE INFORMATION SERVICES
COMPUTING RATES
SC VAX DATA CENTER (Account 908)
NON-
DATA BASE SERVICES PRIME PRIME
- --------------------------------------- --------- ---------
- -13 MIP processor/second-on-line....... .01560 .01170
- -13 MIP processor/second-batch......... .0078 .0078
- -26 MIP processor/second-on-line....... .0312 .02234
- -26 MIP processor/second-batch......... .0156 .0156
- -Connect time/minute-on-line........... .0052 .0039
- -Connect time/minute-batch............. .0026 .0026
- -Input/output per thousand............. .0625 .0625
- -512K bytes storage/day................ .07 .07
Interactive Services
- -13 MIP processor/second-on-line....... .012 .009
- -26 MIP processor/second-on-line....... .024 .018
- -Connect time/minute-on-line........... .004 .003
- -Input/output per thousand............. .05 .05
- -512K bytes storage/day................ .05 .05
Batch Services
- -13 MIP processor/second-batch......... .006 .006
- -26 MIP processor/second batch......... .012 .,012
- -Connect time/batch.................... .002 .002
- -Input/Output per thousand............. .05 .05
- -512K bytes storage/day................ .05 .05
Prime Time is 0600 to 1800 Monday thru Sunday
Non-Prime Time is 1800 to 0600 Monday thru Sunday
5
<PAGE>
CORPORATE INFORMATION SERVICES
COMPUTING RATES
BUSINESS DATA PROCESSING (Account 915)
SERVICES
DATA INTERACT
CPU TIME PER HOUR BASE IVE BATCH
- --------------------------------- ---------- ----------- ---------
HDS 8424......................... $1200.00 $1125.00 $900.00
Connect Time per Hour............ 1.00
Disk Reads/Writes per 1000....... .13 .10 .10
Tape Reads/Writes per 1000....... .50 .50 .50
Tape Mounts per Mount............ .50 .50 .50
Usage of the above resources on weekends (6:00 PM Friday to 6:00 AM Monday)
is charged at 25% of weekday rates.
Disk Space Storage
Megabytes per week............... .60 .30 .30
Paper Output
- -Stock forms per page............ .02 .02 .02
- -Custom forms per page
form dependent
Microfiche
- -Originals....................... 1.20
- -Duplicates...................... .12
6
<PAGE>
CORPORATE INFORMATION SERVICES
COMPUTING RATES
END USER COMPUTING (ACCOUNT 973)1
<TABLE>
SERVICES
--------------------
INTERACTIVE BATCH
-------------------- --------------------
NON- NON-
CPU TIME PER HOUR PRIME PRIME PRIME PRIME
- ----------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
20 MIP Processor $ 310.50 $ 62.10 $ 93.15 $ 31.05
Connect Time per Hour.................... .863 .173 .259 .0863
Disk Space Storage
712K Bytes per Day .0345 .0345 .0345 .0345
Disk Read/Writes per 1000................ .092 .023 .0276 .0115
Lines Printed per 1000................... .431 .086 .129 .0426
ENGINEERING COMPUTATION (Account 973)
20 MIP Processor $ 310.50 $ 62.10 $ 93.15 $ 31.05
Unix 20 MIP Processor.................... 53.82 53.82 53.82 53.82
Unix 6000 Compute Server................. 12.42 12.42 12.42 12.42
Connect Time per Hour.................... 0 0 0 0
Disk Space Storage
712K Bytes per Day .0345 .0345 .0345 .0345
Disk Read/Writes per 1000................ 0 0 0 0
Lines Printed per 1000................... 0 0 0 0
</TABLE>
Prime Time = 6:00 AM to 6:00 PM Monday thru Friday
Non-Prime Time = 6:00 PM to 6:00 Am Monday thru Thursday
Weekend Use = 6:00 PM Friday to 6:00 AM Monday is "no charge"
- ------------------------
(1) Includes Email
7
<PAGE>
SUBACCOUNT 922--DESKTOP SERVICES
(A) BASIC SERVICES FEES
SANTA CLARA & NA SALES OFFICES: $120.00 PER CALENDAR MONTH PER KNOWLEDGE
WORKER
ALL OTHER LOCATIONS: $218.50 PER CALENDAR MONTH PER NODE
KNOWLEDGE WORKERS DEFINED EXEMPTS EMPLOYEES
(B) ENHANCED SERVICES (PER USER):
- LOTUS NOTES MAIL HIGH- END $9.00 PER WEEK $3.00 PER WEEK
OPTION LOW-END OPTION
- GRAPEVINE $5.00 PER WEEK
- BUSINESS OBJECT $40.00 PER CALENDAR MONTH
- SUBACCT 944--VOICE MAIL (PER $6--$8 CALENDAR MONTH
ACCT)
SUBACCOUNT 974--CLIENT/ SERVER
(A) CPU MEMORY $0.65 PER MB PER DAY
(B) DISK SPACE $7.83 PER GB PER DAY
(C) AIX/NFS FEE PER ACCOUNT $15.00 PER CALENDAR MONTH
SUBACCOUNT 977 -
PHONE DEPR/LEASE/MAINT (PER EXT) $35.75 PER CALENDAR MONTH
8
<PAGE>
SCHEDULE 2.2
CORPORATE FINANCIAL SERVICES
National will provide Fairchild with the systems and services to value
inventory, physically ship & invoice material and intangibles, compute and
pay disbursements (ACCTS. payable, Payroll, Travel, etc.) and the ability to
produce, maintain and report stand-alone financial statements. Credit and
collection services will be provided by National as more fully set forth in
Schedule 2.4.
Fairchild will be charged a flat periodic service fee based on the rates
contained herein. These rates are determined on a department by department
basis. In general the applicable cost pool is charged out to Fairchild at 30%
of the total pool, which is based on the last twelve periods' Total Cost of
Sales for Fairchild as a percent of National's Total Cost of Sales. In
addition, direct expenses incurred on behalf of Fairchild will be reimbursed
100% by Fairchild.
Currently National and Fairchild share a common database and
infrastructure for financial systems. When Fairchild elects to terminate use
of a National system it will bear 100% of the cost to interface its
replacement system to other non-National systems. Likewise, Fairchild wi11
pay 100% of the cost to interface National systems to Fairchild systems at a
predetermined hourly rate.
Should National discontinue use of a system for its own purposes,
Fairchild will be allowed to continue to operate the system bearing the same
historical operating cost of the system, plus one-time cost for setup (if
any) for the term of this Agreement. Alternatively, at Fairchild's request,
National will transfer the discontinued system software to Fairchild or its
service provider in an orderly fashion, pursuant to the terms and conditions
set forth in paragraph 3.0 and 4.0 of the Transition Services Agreement.
GENERAL NON-EXCLUSIVE DESCRIPTION OF SERVICES BY FUNCTION
The description of services to be provided captures substantially all of
the services intended to be provided; however, the parties acknowledge that
such description may inadvertently be incomplete, and that additional
services closely related or ancillary to those described below shall also be
provided at Fairchild's request upon the same terms and conditions as apply
to the services described below.
9
<PAGE>
Department Name: Accounts Payable
Department Number: 99-011
1. Description of Services to be Provided:
Provide system support and capability to enable South Portland (NSFM) and
Salt Lake City (NSSL) facilities to process accounts payable via McCormack &
Dodge accounts payable system. The system will enable personnel at both sites
to process invoices, check requests and other payment instructions as they
currently do today within National. The system will be modified so that
checks will be processed in South Portland for both Salt Lake City and South
Portland disbursements. Santa Clara will not process accounts payable
disbursements for the Salt Lake City facility for liabilities recorded after
the Closing Date. If processing is required by National, processing of
National retained accounts payable liabilities will be performed in Salt Lake
City and South Portland on behalf of National. The system will be partitioned
so that Fairchild transactions will be segregated within the National system.
As such payables vouchered after the Closing Date will be paid under the
Fairchild tax identification number and checks will be drawn on a new
Fairchild bank account. Fairchild will be charged for a proportional share
of: all Information Services charges to department SC-99-0111, for management
time to address system-wide issues and support and annual maintenance for
system software. The costs to support Santa Clara payables such as A/P
processor's payroll, facilities cost and SC department operating expense will
not be charged to Fairchild.
Basic Services include:
<TABLE>
<S> <C>
1.1 IS Application and production support for IS jobs #800 and 801
1.2 Duplicate 800 & 801 jobs, and full cost will be absorbed by Fairchild.
1.3 Acquisition and implementation of software maintenance license and upgrades.
1.4 Annual system generation of Form 1099 Misc. for Fairchild U.S.
2. One-Time Actions Required to Modify IS Systems:
2.1 Set up new Group corporate for Fairchild
2.2 Set up new corporate code for Spor & SL
2.3 Set up new company code for NSME under National
10
<PAGE>
2.4 Convert open PO & unmatched Invoices to new company codes
2.5 Close converted PO & Invoices from old corporate code
2.6 Review & assess all AP/PO online, batch, security programs/jobs for special
company code processing. (vendor Master usage)
2.7 Modify GL & other interfaces (SMS)
</TABLE>
Stock
CIS
Marcom
PTS/FAS
3. List of Systems Utilized
3.1 System Number: S800 M&D (APPO)
Department Name: Payroll
Department Number 99-0114
4. DESCRIPTION OF SERVICES TO BE PROVIDED
National will provide IS programming support for Ceridian Inc. payroll
processing, and payroll tax, systems and related interfaces. National will
provide support and maintenance for timecard collection system and related
interfaces. Service includes the management of the network interfaces with
Ceridian, management of system interfaces to payroll (e.g. HR's MSA system),
management of vendor relationship including driving customer support of
special scheduling requests, payroll cycle management and customer service
problems/issues. Costs to be charged to Fairchild include the proportional
share of all IS costs, outside service fees to Ceridian where applicable and
the SC payroll manager's cost. The cost of payroll processing personnel,
department operating expense and facility expense related to the SC payroll
department will not be charged to Fairchild.
National may elect to replace the current payroll processor, Ceridian, with
another outside vendor or in-house software application prior to June 1, 1998.
If this occurs, National will provide Fairchild with 90 days notice of its
intent to terminate the Ceridian contract. National will use its best efforts to
transfer the terms and conditions of the Ceridian
11
<PAGE>
contract to Fairchild if Fairchild wishes to continue to utilize Ceridian as
its payroll processing vendor. National will not be responsible to Fairchild
for damages caused by failure of Ceridian to continue providing payroll
processing services to Fairchild upon termination of the Ceridian contract by
National.
Additional services to be provided for Santa Clara-based Fairchild
employees include:
<TABLE>
<S> <C>
4.1 Payroll processing
4.2 File Review & transfer & Interface
4.3 Answer Questions
4.4 Hand Checks
4.5 W2, W2C
4.6 Maintain deduction file
4.7 Tax Filing
4.8 Set up employees
4.9 Set up employee history & current earns/deduction
5. One-Time Actions Required to Modify IS Systems:
5.1 Set up Fairchild company code
5.2 Change bank account payment information
5.3 Change auto deposit instructions
5.4 Change benefit vendor files
5.5 Set up General Ledger entries
5.6 Set up stock administration interface (if necessary).
6. List of Systems Utilized
6.1 Ceridian Payroll System--Signature--Encore
6.2 MSA--weekly updates
6.3 G/L--weekly updates/edits
6.4 Stock Administration--Weekly updates
6.5 Deduction Files
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
6.6 HR SAP--N/A if applicable
6.7 Timecard System--All part of one system
6.8 SSIP/KEIP System--NIA
6.9 Travel Systems--Monthly updates to G/L, to P/R
6.10 Nova
6.11 Deja View
</TABLE>
Department Name: Fixed Assets
Department Number: 99-0172
7. DESCRIPTION OF SERVICES TO BE PROVIDED
Setup, maintenance and ongoing support for Global Fixed Asset System
(FAS), Project Tracking System (PTS) and I schedule reporting. Service
includes upgrades to new releases of software, table maintenance and
establishment of new company reporting. Costs to be charged to Fairchild
include the proportional share of IS costs, software maintenance fees and the
SC fixed asset manager's cost. Fairchild will pay directly, or reimburse
National, for the cost to establish new tax-basis values for Fairchild fixed
assets including, but not limited to, appraisal costs and outside service
fees to implement the new asset values in FAS.
Basic Services include:
<TABLE>
<S> <C>
7.1 Job Testing: PTS
7.2 FAS/GL Interface (GL's location)
7.3 Table Updates FAS: Company table, cost center table (location)
7.4 Security for company and personnel
7.5 Training
7.6 Provide historical data
7.7 Provide reporting for tax compliance
8. One-Time Actions Required to Modify IS Systems;
8.1 PTS--Add new location/change present location (FM/SL domestic
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
sites only)
Change programs coding (TE, SL, FM, SC)
8.2 FAS--New companies/keep the same location (FM, EP, CB, SL) (company table) (cost
center)
8.3 I-Sched--Testing and change programs, batch job
8.4 FAS--Update table and transfer assets to new company: update cost center table
(location), add new company, set up security.
8.5 I-Sched--FM, CB, EP, SL
8.6 FAS/PTS--Create new location code for ME and company code FC
8.7 FAS/PTS--Security for new location
8.8 PTS--Transfer procedure for FC projects
8.9 FAS--Transfer of assets between corporate codes. Test interface with G/L, CIS and APPO
9. List of Systems Utilized:
9.1 623 PTS
9.2 271 FAS
9.3 271 Focus--I-Schedule
9.4 AP/PO
9.5 CIS
9.6 GIL
</TABLE>
Department Name: Travel
Department Number: 99-0208
10. DESCRIPTION OF SERVICES TO BE PROVIDED
Maintenance and operation of Travelmaster software application for use by
South Portland and Salt Lake City. Costs charged to Fairchild are
proportional share of IS costs and software maintenance fees.
Services include:
14
<PAGE>
10.1 Provide disbursement files to Fairchild in order for Fairchild to pay
travel obligations
10.2 Running of Special request travel reports as needed (tuition,
relocation)
10.3 Access to on-line travelmaster system for Fairchild until they go on
alternative system
10.4 Compliance to statutory requirements in: educational assistance,
relocation expenses, miscellaneous expense treated as personal income,
provided Fairchild is utilizing National HR and payroll systems and policies
pursuant to this Agreement
11. ONE-TIME ACTIONS REQUIRED TO MODIFY IS SYSTEMS
11.1 Set up separate bank account 11.2 Modify EFT transmission
12. List of Systems Utilized:
12.1 Travel Master Daily input/Batch--weekly
cycle period end reports
12.2 Nova Weekly Interface
12.3 CIS Weekly Interface
12.4 G/L Weekly Edit, period end journal
12.5 Weekly Dept Update
12.6 Interrogator Period End 12.7 MSA Weekly Update
Department Name: Corporate Accounting (GL)
Department Number: 99-0109 & 99-0385
13. Description of Services to be Provided:
Establish ability to consolidate worldwide financial statements for
Fairchild Semiconductor utilizing National's GL90 general ledger system.
Modify the Financial Reporting System ("FRS") to produce the Fairchild
consolidated balance sheets and income statements. Reproduce existing
financial reporting books within Fairchild ledger. Manage all interfaces into
and out of the general ledger, including to Interrogator reporting system and
Nova.
15
<PAGE>
Costs charge to Fairchild include: a proportional share of the entire
Santa Clara General Ledger department consisting of one exempt manager and
two nonexempts, one current full-time IS programmer, one IS contractor,
department facilities and operating expenses and all IS costs. Also,
Fairchild will pay for one-half the cost of a new full time contractor who
will be hired to support the added programming requirements arising out of
the need to support Fairchild as an independent company. National will pay
for the other half of this added IS contract programmer.
Critical Services include:
13.1 Maintain Corporate Fairchild Ledger
13.2 Maintain FRS reports for Fairchild
13.3 Maintain WW Hierarchy for Fairchild
13.4 GL Vendor Maintenance Agreement
14 One-Time Actions Required to Modify IS Systems:
14.1 Create Consolidated Fairchild Ledger
14.2 Create Parallel FRS Systems
14.3 Add new legal entities for Fairchild
14.4 Isolate National History in unique locations
14.5 Establish new ledger to segregate ME National
14.6 DETERMINE FAIRCHILD VS. National Family Reporting Structure
14.7 Create new G/L reports-- Trial Balance, Transaction Analyzer's, etc.
14.8 Create parallel WW Hierarchy Files
14.9 Work with G/L Feeder Systems during Transition
14.10 Work with G/L End-users (Essbase, Interrogator, etc.) during transition
15. List of Systems Utilized:
15.1 J231 Financial Reporting
15.2 J111 General Ledger
16
<PAGE>
15.3 J951 WW Hierarchy
Department Name: Corporate Interlocation
Accounting Department Number: 99-0119
Assumptions
<TABLE>
<S> <C>
1 Infrastructure/Licensing per National defined Legal Structure for Fairchild
2 Fiscal Calendar Same As Today
3 Inter platform hardware relationships same as today.
4 Functional core processes of CIS remain the same as today.
</TABLE>
16. Description of Services to be Provided:
Provide ability to generate commercial invoices for Fairchild to enable
the global shipment & billing of physical product between: Fairchild
entities, between Fairchild entities and its subcontractors and between
Fairchild entities and National entities. Allow for the creation of
intangible billing within Fairchild entities. Maintain interfaces with key
upstream and downstream systems (Workstream, FLS, LOTS, General Ledger, SAP,
etc.). Generate shipping documents such as commercial invoices, attachments
and customs notices. Generate auto booking instructions to the General
Ledgers for both Fairchild intercompany transactions and trade transactions
between Fairchild and National. Maintain intracompany transfer price file to
enable legal transfer pricing for Fairchild shipments between Fairchild legal
entities. Establish and maintain new contract price files (and booking
instructions) for the flow of goods and services between Fairchild and
National, based on contractual prices established in the supply and service
agreements between the two companies. Maintain historical transactions for
audit purposes. Fairchild will have full access to the worldwide Access
To CIS History ("WATCH") system, a client/ server based access tool.
Fairchild will be charged a proportional share of the entire Interlocation
Accounting department, including IS support for the systems listed below which
is charged directly to this department. Fairchild will also pay for one-half
the cost of a new full-time programmer who will be hired to support the added
17
<PAGE>
program requirements caused by the new, and complex, third-party relationship
for tangible and intangible flows between Fairchild and National. National
will pay for the other half of this added IS contract programmer.
Service Summary:
16.1 J281 Maintain transfer pricing file(s).
16.2 J28X Create and maintain special contract pricing file for transactions
between Fairchild and National. Develop and maintain jobs to capture, book
and report transactions.
16.3 J285 CIS: Maintain operational and reporting processes.
16.4 J686/J685 SEA Inbound & Outbound Accounting: Maintain operational and
reporting processes.
16.5 J286/J287 U.S./Europe/Japan Inbound & Outbound Accounting: Maintain
operational and reporting processes.
16.6 Support Fairchild Corporate Consolidation Training
17. One-Time Actions Required to Modify ID Systems:
Establishment of Relationships:
National < --- > Fairchild: Financial/Physical Flows (e.g., 2nd leg invoicing
NSIL)/Financial Relationships (e.g., Consignment/ Sell--Buy Back, etc.)
National < --- > SubK: Financial/Physical Flows (e.g., NRNL/consignment)
Fairchild < --- Fairchild Financial/Physical Flows (e.g., 2nd leg invoicing
NSIL)/Financial Relationships (e.g., Intercompany Sales, Cost of Goods
Sold/Margins)
Fairchild < --- > SubK: Financial Relationships (e.g., Consignments/Sell BuyBack
etc.)
National < --- >SubK < --- > Fairchild: Financial/Physical Flows/Financial
Relationships
Define the following for all flows:
17.1 #) Pricing (e.g., Contract Price/Std/Margins)
17.2 #) System Edits (e.g., Intangibles/NSIL Rules, etc.)
17.3 #) System Edits (e.g., Tangible Import/export, DOL, etc.)
18
<PAGE>
17.4 #) General Ledger Journal vouchers (e.g., Separate Ledgers/2nd leg
entries, SAP, etc.)
17.5 #) Report
17.6 #) Interfaces (e.g., Workstream/TRS/Trade-Sale-Recon, FLS, LOTS, etc.)
17.7 #) Documents (e.g., Invoices/Attachments/Preclearence, etc.)
ASSESSMENT ANALYSIS ALIGN INTERCO-SHIP DATA WITH BUSINESS PROCESSES
DEVELOPMENT/IMPLEMENTATION PHASES
<TABLE>
<S> <C>
18. List of Systems Utilized:
18.1 J285 Commercial Invoicing System
18.2 J286 U.S. Europe/Japan Outbound Accounting
18.3 J287 U.S./Europe/Japan Inbound Accounting
18.4 J685 SEA Outbound Accounting
18.5 J281 Contract Prices/Transfer Prices
18.6 J686 SEA Inbound Accounting
18.7 Jxxx Interface Feeds from/to multiple systems. (e.g., Workstream, SMS, LOTS, TRS, SAP,
FLS, APPO, payroll, travel, mis etc.)
18.8 J285 Subcontractor Accounting
</TABLE>
Department Name: Cost Accounting
Department Number: 99-0116
19. DESCRIPTION OF SERVICES TO BE PROVIDED
Provide the ability to: value in-line work in process inventory via the
280 standard cost system and the Transfer Reporting System (TRS) and its
related subsystems. Provide the ability to value finished goods at standard
cost utilizing the 280 standard cost systems, LOTS and related subsystems.
Generate standard cost files for use in transfer pricing intracompany
19
<PAGE>
shipments. Provide the ability to change local and worldwide standard cost of
inventory. The support systems required to effect a global standard change
will be made available at a minimum of once per year. Global standards
changes for National and Fairchild will be coordinated to achieve a common
schedule. Selected standard changes for particular Fairchild product lines or
sites will be performed per schedules mutually agreed upon between Fairchild
and the National Corporate Controller.
Fairchild will also have use of
the National Inventory Reserve systems, the O/A (aged and obsolete inventory)
and LCM (Lower of Cost or Market) systems as long as Fairchild utilizes
National's inventory tracking system (LOTS) and inventory valuations systems.
Fairchild will be charged a proportional share of the whole Corporate
Cost Accounting department. IS support for the systems listed below is
charged directly to this department.
<TABLE>
<S> <C>
Summary list of Services:
19.1 J280 Standard Cost File System
19.2 maintain/Run jobs for separate on-line standard update maintenance table
19.3 Maintain/Run jobs for local, matrix, and worldwide files
19.4 J282 Standard Cost File for Transfer Price System
19.5 Maintain/Run jobs for separate journal vouchers and worldwide transaction code
listings
19.6 J500 CWIP and RDS files
19.7 J265 TRS inventory records
19.8 J563 MPE/NMPE/CCIM earnings records for function 09
19.9 J975 OA File records
19.10 J975 LCM file records
19.11 Provide access to, and maintenance for, the on-line Inventory Analysis System (IAS)
20. One Time Actions Required to Modify IS Systems:
20.1 J280 Standard Cost File System--Create and set up
20.2 Build on-line standard update maintenance table
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
20.3 Set up local, matrix, and worldwide files
20.4 J282 Standard Cost File for Transfer Price System--Create and set up
20.5 Separate TVS and Worldwide transaction code listings--Create and set up
20.6 J500 CWIP and RDS files--Extract and build
20.7 J265 TRS Inventory records--Extract and build
20.8 J563 MPE/NMPE/CCIM earnings records for function 09--Extract and build
20.9 J975 OA file records--Extract and build
20.10 J975 LCM file records--Extract and build
21. List of Systems Utilized:
21.1 J280 Standard Cost for Local, Matrix, and Worldwide files
21.2 J500 CWIP, RDS for Inventory Report System
21.3 J282 Standard Cost file for Transfer Price System
21.4 J284 Transaction Value System
21.5 J281 Transfer Price File
21.6 J265 Transfer Reporting System (TRS)--Inventory Report
21.7 J291 Intransit System.
21.8 J9750A System
21.9 J975 LCM System
21.10 J563 MPE/NMPE/CCIM Earnings (Function 09) Worldwide Transaction Code Listing
21.11 J281 Inventory Analysis System (IAS)
21.12 J281 Worldwide Standard Revision Impact Study
</TABLE>
21
<PAGE>
Department Name: Interrogator
Department Number: 99-0420
Services Provided:
Fairchild will have access to its corporate financial information through
the Interrogator client/server based information access application. National
will modify and maintain the organization table for Fairchild, monitor and
maintain all the interfaced data loads to the database. Fairchild will pay a
proportional share of the cost of this department as it does for the General
Ledger department.
Department Name: Inpat/Expat Accounting
Department Number: 99-0205
Services Provided:
National will provide Inpatriate & Expatriate accounting services to
Fairchild as requested. Fairchild will be charged based on the number of
expatriate and inpatriated personnel as a percentage of the combined
Fairchild and National expatriate/inpatriate personnel.
Department Name: Risk Management
Department Number: 99-0108
Services Provided:
Approximately 20% of one National employee's time to support health
insurance, life insurance and accidental death insurance coverage for
Fairchild personnel. Fairchild will be charged based on the estimated
percentage of effort required to support the above mentioned insurance
programs.
Department Name: Treasury
Department Number: 99-0179
Services Provided:
National will provide cash transfer services including remittance of
collected North American receivables to Fairchild designated bank accounts on
mutually agreed upon remittance schedule, and will provide Fairchild with
access to credit reporting services used by it as defined in Schedule 2.4.
22
<PAGE>
National will also provide accounting services related to the bank transfers.
National will service the GE Capital leases of production equipment which are
subleased by National to Fairchild. Fairchild will reimburse National for the
monthly equipment lease payments. Fairchild will be charged an annual fee per
the attached rate schedule. The service fee covers labor and related overhead
including bank fees for lockbox services and on-line banking software
licenses.
Department Name: SC Site Accounting
Department Number: 99-0425
Services provided:
Support for the Semiconductor Material System, including raw material
excess analysis. Support from the Human Resources Controller regarding Health
and Life Insurance charges, administration of charges for common benefit
services provided to Fairchild as described in the Corporate Human Resources
Services Agreement, paragraph A. 1. "Description of Benefit Services".
Fairchild will be charged a proportional share of the loaded labor cost of
these two employees only. Fairchild will not be charged for other SC Site
Service accounting costs or National Corporate Division accounting costs.
23
<PAGE>
HQ FINANCIAL SERVICES PROPOSAL
<TABLE>
<CAPTION>
- -----------------------------------
SC SITE FINANCE FY97
YEAR FY97 FIXED 4TH QTR TOTAL
ACCOUNTING RATE FY97
- ------------------- -------------- --------- ------------- ---------
DEPT
<S> <C> <C> <C> <C>
0111 Corp AP $114 $29 $29
0114 Payroll $172 $43 $43
0138 Archives $0 $0 $0
0172 Property $100 $25 $25
0208 Travel $7 $2 $2
0425 SC Supp $24 $6 $6
Sub Total $417 $104 $104
-------------- --------- ------------- ---------
CORPORATE FINANCE
YEAR FY97
DEPT
0106 Ext Report $0 $0 $0
0109 GL $210 $53 $53
0116 Cost Acctg $371 $93 $93
0118 Corp Cont $0 $0 $0
0119 Interlocation $164 $41 $41
0205 Expat/Inpat $75 $19 $19
0236 ABM $0 $0 $0
0385 GL Proj $8 $2 $2
Sub Total $828 $207 $207
-------------- --------- ------------- ---------
RISK
YEAR FY97
0108 Risk Mgmt $45 $11 $11
TREASURY
YEAR FY97
0179 Treasury $77 $19 $19
INTERROGATORY
YEAR FY97
0420 Interrogatory $75 $19 $19
OTHER
YEAR FY97
0107 Int'l Audit $0 $0 $0
0110 VP Finance $0 $0 $0
0424 Plan/Anal $0 $0 $0
0430 COO VP Fin $0 $0 $0
0431 COO VP Sup $0 $0 $0
02-2431 VP Op's Fin $0 $0 $0
0117 Corp Tax $0 $0 $0
Dept
Sub Total $0 $0 $0
Total W/O IS $1,442 $361 $361
-------------- --------- ------------- ---------
1/2 IS person $68 $17 $17
1/2 IS person $68 $17 $17
Adm Support $100 $25 $25
</TABLE>
24
<PAGE>
Total All $1,610 $403 $403
Charges
-------------- --------- ----------- ---------
-------------- --------- ----------- ---------
HQ FINANCIAL SERVICES PROPOSAL
<TABLE>
<CAPTION>
SC SITE FINANCE FY98
YEAR FY98/99 FIXED 1ST 2ND QTR 3RD 4TH QTR
ACCOUNTING RATE
DEPT
- ----------------- -------------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
0111 Corp AP $116 $ 29 $ 29 $ 29 $ 29
0114 Payroll $173 $ 43 $ 43 $ 43 $ 43
0138 Archives $ 0 $ 0 $ 0 $ 0 $ 0
0172 Property $101 $ 25 $ 25 $ 25 $ 25
0208 Travel $ 8 $ 2 $ 2 $ 2 $ 2
0425 SC Supp $ 18 $ 5 $ 5 $ 5 $ 5
Sub Total $416 $104 $104 $104 $104
CORPORATE FINANCE
YEAR FY98/99
DEPT
0106 Ext Report $ 0 $ 0 $ 0 $ 0 $ 0
0109 GL $223 $ 56 $ 56 $ 56 $ 56
0116 Cost Acctg $378 $ 95 $ 95 $ 95 $ 95
0118 Corp Cont $ 0 $ 0 $ 0 $ 0 $ 0
0119 Interlocution $178 $ 45 $ 45 $ 45 $ 45
0205 Expat/Inpat $ 0 $ 0 $ 0 $ 0 $ 0
0236 ABM $ 0 $ 0 $ 0 $ 0 $ 0
0385 GL Proj $ 8 $ 2 $ 2 $ 2 $ 2
Sub - Total $787 $197 $197 $197 $197
-------------- --------- --------- ----- --------- ----
RISK
YEAR FY98/99
0108 Risk Mgmt $45 $11 $11 $11 $11
TREASURY
YEAR FY98/99
0179 Treasury $80 $20 $20 $20 $20
INTERROGATORY
YEAR FY98/99
0420 Interrogatory $150 $38 $38 $38 $38
OTHER
YEAR FY98/99
0107 Int'l Audit $ 0 $0 $0 $0 $0
0110 VP Finance $ 0 $0 $0 $0 $0
0424 Plan/Anal $ 0 $0 $0 $0 $0
0430 COO VP Fin $ 0 $0 $0 $0 $0
0431 COO VP Sup $ 0 $0 $0 $0 $0
02-2431 VP Op's Fin $ 0 $0 $0 $0 $0
0117 Corp Tax $ 0 $0 $0 $0 $0
Dept
Sub-Total $ 0 $0 $ 0 $0 $0
Total W/O IS $1.478 $370 $370 $370 $370
1/2 IS person $ 68 $17 $ 17 $ 17 $ 17
1/2 IS person $ 68 $17 $ 17 $ 17 $ 17
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
SC SITE FINANCE
ACCOUNTING
- --------------------------------- FY98
YEAR FIXED
DEPT FY98/99 RATE 1ST 2ND QTR 3RD 4TH QTR
- ----------------- -------------- --------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Adm Support.. $100 $25 $25 $25 $25
Total All
Charges $1,714 $429 $429 $429 $429
-------------- --------- --------- ----- --------- ---
-------------- --------- --------- ----- --------- ---
</TABLE>
26
<PAGE>
SCHEDULE 2.3
PURCHASING SERVICES
Joint purchasing arrangements will be established by National as set
forth below. Said arrangements will include all Fairchild sites which are
defined as FM, EP, SL and CB and the following National sites defined as SC, TE,
ME, UK and EM.
Costs charged to Fairchild will be direct out-of-pocket for systems.
Commodity Management Team expenses will be shared equally.
Access to National owned crystal grower capacity will be controlled by
National on the basis set forth below. Agreement will be made to provide access
to approx. 30% of available capacity to Fairchild for the term of this
Agreement.
SILICON CRYSTAL GROWER PROGRAM
It is recognized that Fairchild is potentially vulnerable for silicon
support due to its dependence upon both four inch and five inch silicon wafers
at its South Portland wafer fabrication facility.
The Parties recognize that the primary silicon producers have notified
the semiconductor industry that production of these smaller diameter wafers will
diminish and eventually be discontinued.
Based upon these market conditions, National will cooperatively work
with Fairchild to increase its supply base and assist it in securing these types
of products. It is incumbent upon Fairchild to exercise its full resources to
qualify additional suppliers identified by National.
In the event that normal market capacity cannot be found to provide
adequate support to Fairchild, National will make available a portion of its
dedicated capacity from the MEMC Crystal Grower Program.
This portion will be 12,800,000 grams of Zero Dislocation annually, to
be taken on a linear basis. The access to this material will be directly
through National's Central Purchasing Group in Santa Clara, CA. Fairchild may
not directly contact National's supplier with respect to the puller program.
If Fairchild requires more than the allocated material, National will
review its then current requirements and if possible provide additional short
term support.
27
<PAGE>
National will not renegotiate any supplier agreements as part of this
contract. This agreement will allow access to Fairchild to the grower program
through National until July 31, 1999, which is the end of the puller program.
JOINT PURCHASING ARRANGEMENTS
1.0 Commodity Management and Purchasing
1.1 National and Fairchild will combine their purchasing requirements,
where practical, and apply National's Commodity Management Team (CMT)
approach to material purchases for the benefit of both parties. This
process requires that each Party assign CMT members, commodity
managers and team leaders with sufficient knowledge, dedicated time
and authority to effectively represent their respective companies.
1.2 Due to the geographic distances involved each Party will support all
required travel for team member attendance at bid evaluation meetings,
commodity team meetings, supplier negotiations and other meetings
required to support the process. Expenses for meetings (conference
rooms, meal service, copying expense etc.) will be shared on a 50/50
basis between the parties.
1.3 The CMT process requires a team approach to decision making. In the
event that a CMT is unable to reach a decision the assigned commodity
manager will make the final decision. All appeals will be reviewed
and decided upon by the Directors or Purchasing for Fairchild and
National.
1.4 The types of commodities to be included in the this agreement will be
mutually agreed upon on an annual basis by the respective Directors of
Purchasing. It also understood that as business conditions change the
parties may alter or review the commodities included in this process.
However, once a commodity has been negotiated with the suppliers and
an agreement signed by Fairchild, National and the supplier, both
parties will remain bound for the duration of the agreement.
2.0 Quest for Gold Supplier Quality Rating Program
2.1 National and Fairchild will consolidate their effort to conduct Quest
for Gold (QFG) supplier rating and rankings. This is a parallel
effort to the CMT Process and is a part of the basis of supplier
selection and supplier business share. It is expected that the CMT
leader for each commodity will collect data from each site and report
the QFG results to QFG coordinator in
28
<PAGE>
National's Central Purchasing Group in Santa Clara, Ca.
2.2 Any costs associated in supporting this program will be shared as
mutually agreed by the Directors of Purchasing.
3.0 Purchasing Support for Fairchild Personnel Located at NSSC
3.1 National will provide necessary purchasing support for Fairchild
personnel located at the Santa Clara, Ca. site, the cost of which will
be the same allocation method used for all National personnel. The
allocation will be based upon either $8/ invoice or 0.75% of the
requisition dollars.
4.0 Termination
4.1 The above joint purchasing arrangements can be terminated by mutual
consent of the parties with a minimum ninety (90) days written notice
to allow sufficient time for both parties to make alternate
arrangements for material support. In the event that one party takes
unilateral action to breach or renegotiate a specific commodity
agreement, the other party, at its discretion, may terminate its
participation in said commodity agreement upon thirty (30) days
written notice.
NATIONAL OWNED STAMPING TOOLS AT DCI
National will make shared tools available for Fairchild use for the
life of the tool, subject to National's needs. Maintenance and refurbishment
shall be shared pro rata between the Parties based on use. In the case of
shared matrix tools, neither party may unilaterally allow a supplier to treat a
shared tool as open tooling. All tools used exclusively by Fairchild for
Fairchild products will be Fairchild owned and will be made available for
National's use upon request subject to Fairchild needs.
OTHER NATIONAL OWNED TOOLS AT THIRD PARTIES
National will make available for use by Fairchild all current tooling
in the possession of suppliers or subcontractors, subject to National's needs
without the right to modify, for the life of the existing tooling. Maintenance
and refurbishment costs shall be shared pro rata between the Parties based on
use. Upon request by Fairchild, and subject to National's needs, National will
also make arrangements for the use of supplier owned tooling incorporating
National Intellectual Property, such as etched frame tooling or other production
equipment built to provide National's custom materials. All tools used
exclusively
29
<PAGE>
by Fairchild for Fairchild products will be Fairchild owned and will be made
available for National's use upon request subject to Fairchild needs.
DCI LEAD FRAME COMMITMENT
The Parties will cooperate in the 80% lead frame purchasing commitment
made to DCI in a Supply Agreement dated January 20, 1996.
30
<PAGE>
SCHEDULE 2.4
WW MARKETING & SALES
Below are assumptions common to the following six Service lists:
Assumptions:
- -WWMS will create a Fairchild Semiconductor legal entity at each of the
locations from which invoices are generated.
- -Invoices in Fairchild's name will be issued from day one of the existence of
Fairchild as a separate legal entity.
- -Fairchild will operate under National's systems and logistics practices.
- -Fairchild will operate under National's standard Ts & Cs and Financial Calendar
- -Service agreements between National WWMS and Fairchild may not be assigned to
third parties.
- -All services end at the final separation date in June 1998.
- -Up front one time set up costs will be paid by National.
- -At final systems separation date, June 1998, all separation costs including
conversion of data to Fairchild systems will be to Fairchild's account.
- -WWMS Personnel dedicated to Fairchild may be offered employment with the
corresponding Fairchild legal entities in each WWMS region at close.
- -At the end of the service period in June 1998, records and books of Fairchild
and functional responsibilities will be handed over to Fairchild employees
Service duration and cost:
The attachment below identifies the cost and duration of services from National
WWMS to Fairchild.
Should Fairchild require a service after the scheduled end date, Fairchild will
be charged at the annualized rate plus any additional costs incurred by
National.
31
<PAGE>
(a)IS Function
Service to be provided:
(i)Swiss
Provide WW technical and business support to sustain the production
environment and day-to-day business needs and requirements, including:
-Swiss (on-line system and daily/weekly/periodic batch processing)
-ONLINE (SWISS order entry/maintenance/etc), CRS, CMF, MEDT
-Batch (allocation, packlist generation, ship confirmation & invoicing and
B/L reporting)
(ii)C-FAP
Provide WW continuous technical support for current customers on the CFAP
program and for continuous roll out of new customers using the standard
models or the standard models modified for specific customer requirements.
(iii)EDI
Provide continuous WW technical & business support for all existing EDI
messages in production and for the continuous roll out of new customers on
existing developed message. This also includes support and maintenance
(labor & contract) for the EDI translation packages (EDICS & QUANTUM) plus
participation in the Harbinger user group and the EIDX organization
meetings.
(iv)ACCORD/MPL
Provide WW technical support & business support for price management. This
includes maintenance of the existing functions and support of requirements
and needs necessary to sustain the day-to-day business needs/requirements,
including:
-ONLINE: ALL ACCORD & MPL processing for ALL regions
-BATCH: Interfaces to SWISS & prices books for NAD & EUR
-ONLINE & BATCH process for Southeast Asia's "SEA-SWISS"
system
32
<PAGE>
(v)Other Systems
Provide WW technical & Business Support for all other systems in WW
Marketing & Sales and to sustain current functions and the day-to-day
business needs/requirements. This currently includes:
-Worldwide Contracts: ONLINE and Batch process to support contract
negotiation and WW maintenance
-Disti Resales and Inventory processing, plus reporting of information
(RCODES/CUBA/351 rpt/ASP margin/OSD rpt/ Marketing rpt/audit/OSS/ATS)
Decision Support Systems
Provide WW technical support & business support to sustain the production
environment and the day-to-day operations of the Information Warehouse that
supports EXPERTS and Business Objects including normal upgrades. Upon
separation from National, Fairchild will be required to acquire its own
license for Business Objects.
IS Managers/Support
Provide managerial administration and support for all systems listed in
this agreement, as well as for IS components of Americas Region service
agreement (Arlington IS, Automotive Support, Building 16 infrastructure).
(b)MARCOM
Services to be provided shall include, without limitation:
(i)Technical Documentation
Document & Publishing: Replacing National with Fairchild logo,
programming and transformation; New Coris Publisher Instance
(including ISDN line and Ascend router); CD-ROM Artwork; copyright
references, National references in text, last page logo and sales
office listing.
SGML: DTD & FOSI modification, package drawing and content manager
client license.
Inventory Management: Programming (Scopus & Crawfordville), move
inventory, programming.
Response Management: Need to capture inquiries, fulfillment and
analysis.
33
<PAGE>
(ii)Internet
Server - Hardware, Cadis License, Sybase License, Netscape Server
License, Software Compiler, Development Workstation, Analysis License,
Analysis Server, Full Text Search License, Consulting & Training,
Installation & Configuration, Split Product Hierarchy in Cadis,
Physical Split Datasheet & Product Fold
(iii)Sales Force Automation
Charge for Lotus Notes connectivity
(c)SEA
One time Service to be provided:
(i)Set up legal entities
Subsidiaries: (Hong Kong, Singapore, NSFH holding the Cebu plant to
be taken over by Fairchild)
(ii)Registration/License
Tax registration, business/company registration, customs registration,
labour registration, retirement/Provident fund registration, share
registration, obtain the necessary licenses (excluding export
distribution license)
(iii)Banking
Open bank accounts, negotiate and obtain banking facilities, set up
electronic banking system, pass banking resolution
(iv)Insurance Coverage
(v)Communications
Inform customers, distributors and other business partners of the
change
(vi)Staffing/Benefits Administration
As long as there are no legal constraints, National will use its best
efforts to set up at Close and administer on behalf of Fairchild:
-. Payroll Function
34
<PAGE>
National will perform payroll function including tax
reporting.
-. Leave Record
National will maintain a full leave record of each employee to
meet statutory requirements.
-. Individual Employee File
National will maintain employee record to meet statutory
requirements.
Service fees does not include any modification to current SAP and
HR/Payroll related computer system.
(vii)Other HR Functions
For HR function other than the above, such as recruiting, selection,
pay program design, training and employee relations matters, National
agrees to provide on needed basis and charge a project/consultant fee
for each request for services. The project/consultant fee has to be
approved by Fairchild management prior to carrying out any activities.
(viii)Systems Setup/Modification
Quotation (ACCORD): Separate Fairchild and National quotations, with
proper part number validation. Pricing (MPL), Order processing
(SWISS/SEA-SWISS, CMF): Separate Fairchild and NS orders to be
captured, separate order acknowledgments. L/C (SWISS): Invoicing
(SWISS): Separate invoices and packing lists. Account (M&D, CIS,
LOTS): Separate ledgers. HR (HRIS, IPL): Separate payroll. office
automation (Lotus Notes, MS Office, PC), Information Access (BO,
XPERTS)
(ix)Set up new ledgers GL, FA, AP, EP, AR, CIS Payroll
(x)Credit Management
Set up credit limit and credit terms for customers common to both
Fairchild and National
(xi)Initial financial statements
Prepare initial Balance Sheet and P&L upon acquisition.
(xii)Stationery/Signage
35
<PAGE>
(xiii)Facility
Move Fairchild employees to a suitable centralized location in the
office
(xiv)Due Diligence Audit
ON-GOING SERVICES:
(1)Accounting
A/P, E/P, A/R, interco, inventory, FA, GL payroll, incentive data, P
Fund, customer claims/returns, CN, DN, travel authorization & expense
reimbursement, approval matrix management, PI of inventory and fixed
assets, financial statements and statutory accounts.
(2)Cash management
Receipt, disbursement and remittance, bank reconciliation, bank
accounts management, cash forecast, petty cash and traveler
cheque/travel advance.
(3)Insurance
Renewal of policy, review coverage with insurance broker and provision
of regular and ad hoe information to insurer.
(4)Purchasing
PR, PO, receiving processes and capital expenditure management.
(5)Tax
VAT/GST/Sales/Turnover Tax; employee/payroll tax/levy #; income tax #,
customs and ad valorem duty. Tax planning service will not be
provided.
(6)Audit
Coordinate with auditor on statutory audit process, prepare supporting
schedules and provide information and answer queries as requested.
(7)Record Retention
Compliance with local legal requirements.
36
<PAGE>
(8)Management reporting
Financial statements, expense management, performance evaluation
reports and provide data to Fairchild for the purpose of its
management of incentive scheme.
(9)C&C
Credit evaluation, approval and control, setting credit terms and
limits; Collection: L/C, DA, DP, OA, cash collection forecast and bad
debt provision.
(10)Order Processing
RFQ/Quotation, order acknowledgment, order entry and backlog
scheduling, change and cancellation, sample, datasheet and literature
fulfillment.
(11)Shipping
Delivery and return, import and export documentation.
(12)Warehousing: Storage
(13)Export Control: Compliance
(14)Facility
Telecom, Telephone, Office space/existing furniture, existing office
equipment and mailing and document collection/delivery.
(15)Systems Use & Support
Transaction systems, office automation tools (Lotus Notes, MS Office),
data warehouse (BO), data query tools (EXPERTS) and system security
and operation.
(16)Staffing/Benefits Administration
As long as there are no legal constraints, National will use its best
efforts to set up at Close and administer on behalf of Fairchild:
-. Payroll Function
National will perform payroll function including tax reporting.
-. Leave Record
37
<PAGE>
National will maintain a full leave record of each employee to
meet statutory requirements.
-. Individual Employee File
National will maintain employee record to meet statutory
requirements.
Service fees does not include any modification to current SAP and
HR/Payroll related computer system.
(17)Other HR Functions
For HR function other than the above, such as recruiting, selection,
pay program design, training and employee relations matters, National
agrees to provide on needed basis and charge a project/consultant fee
for each request for services. The project/consultant fee has to be
approved by Fairchild management prior to carrying out any activities.
(d)Europe Division
One time services to be provided:
(i)Customer Communication
(ii)Due Diligence Audit
National Internal Audit to coordinate process. Audit to be made
by independent third party, level of materiality $100K, (Scope:
Account records, balance sheet, revenue, reserves, inventory,
expenses, accruals and liabilities).
ON-GOING SUPPORT SERVICES
(1)External FSE/FAE
If either party's employees cover the other party's accounts, a
cost per hour charge will be negotiated.
(2)Inside Sales Support
Order entry, quoting, backlog management, contract compliance and
maintenance, administrative work and sales support functions.
(iii)Marcom
PR activities, BAS fulfillment, Internet, production,
38
<PAGE>
advertising.
(iv)Finance
Accounting, set up two Fairchild locations in SAP, Fairchild
departments, payroll, accounts payable, intercompany, fixed asset
transfer and maintenance, close for both ledgers and legal
entities, accruals, reserves, special sales reserves, discounts,
revaluation of balance sheet and backlog; data for sales
incentives, rep commissions, SSIP; interface with Fairchild
management, quarterly reserve review, annual audit support,
establishment and review of approval procedures; setting up two
bank accounts with B of A, cash administration reconciliations;
tax, VAT, corporation tax filing and tax accrual calculations,
coordination with Fairchild tax advisors, annual meeting minutes
(Note: assume no tax planning); treasury; reporting, FX;
credit and accounts receivable, ship and debit & export
compliance, customer account contract, collection, cash
forecasting, credit monitoring, credit reporting, D&B credit
checks, S&D processing, distribution audit and export compliance.
(v)MIS and Systems
EDI, Operations, LAN/WAN support, network and desktop.
(vi)Facilities
Reach agreement on facilities, FFB, LN, FR, IT, based on
headcount and sq. ft., termination period, base price agreement,
support infrastructure, travel agency, insurance coverage for
business and transactions, utility charges, parking, use of phone
system. Transfer of car leases, reception service, canteen,
security. Physically separate two businesses, signage and
records retention.
(vii)Logistics & Warehouse
Agree process for inventory movement, inventory level required
and export control procedures, establish customs office contact,
agree product flow and carrier, run monthly duty reports,
inventory control, carrier rate negotiation and delivery
performance.
(e)AMERICAS DIVISION
39
<PAGE>
(i)Outside Sales
ASSUMPTIONS: National will provide data for Fairchild
commissionable sales, but will assume no responsibility for
commission calculation or payment. Any use of field offices
required by Fairchild will need to be negotiated separately.
Fairchild will have own reps with own contract.
ONE TIME: Positioning National/Fairchild with customer. Keeping
customer informed on transition. Incorporate clause in new
National rep contract limiting National liability for existing
Fairchild backlog.
(ii)Latin American Sales
ASSUMPTIONS: Separate Fairchild rep contract will be
established.
SERVICES: Fairchild will utilize the existing services being
provided, including: applications support, sales channel
development for countries outside Brazil and local manufacturing
development.
(iii)Contract Administration
ASSUMPTIONS: Only looking at active NA awarded contracts prior
to closing date.
SERVICES: Current support consists of: contract process from
pre-RFQ through award load, changes to active NA contracts,
ensure the worldwide contract system is updated and correct,
provide a central repository for all approved NA corporate
contracts.
(iv)Distribution
ASSUMPTIONS: Fairchild pick up full liability and balance sheet
reserves for inventory. National/Fairchild will cooperate to
support the transition of some products and some Distributors to
a Market Price Program. Fairchild will require separate
franchise agreement. No systems development will be done to
accommodate Fairchild unique disti programs.
SERVICES: Generation of unique Fairchild pricebook(s) at
Fairchild expense. Asset management training in progress on
services delivered by Asset Management group-anticipate 3 months
support will be required from National AM group to Fairchild AM
group to familiarize them with systems/procedures. Asset
management-systems Experts/BO/DDF, SWISS and ACCORD.
40
<PAGE>
(v)CSC, TRG, CRG
ASSUMPTIONS: CSC: Assume business as usual/no separation of
inside sales force. Quote/Acknowledge/Order
Schedule/Change/Cancellation. CRG/TRG: National provides service
to Fairchild.
SERVICES: Customer response group. Technical response group.
Field marketing group. OEM group. Ops (telecom, network,
applications, finance, training). Administration.
(vi)NMPE
ASSUMPTIONS: Planning-dedicated resources have been identified.
This includes the management of consignment warehouses. Special
programs at Lucent, Nortel, IBM. Export control.
SERVICES: Provide continued service to the Core Automotive
Customers in the US, Europe & Asia, to include Delco Electronics,
Ford, Chrysler, Delphi Energy & Engine Management, Kimball
Electronics, TRW/TED Transportation Electronics, Motorola AIEG,
ITT Delmex. Support for the Automotive field sales force: act as
the corrective action focal point on unresolved service related
issues - delivery, response, etc. Develop and implement service
programs both customer and National initiated directed at
building and maintaining service relationship. Act as contact
point for bookings, billing, backlog and forecasts as well as
allocation disbursements if required. Contact with customers
Material/Production control planning organization as well as
secondary contact for purchasing. Huntsville warehouse for
support of Chrysler JIT system. Span warehouses used to service
Ford locations.
(vii)Finance
ASSUMPTIONS: Independent Fairchild entity will require separate
invoicing. No unique customer codes in SWISS. CARMS
accommodates Fairchild balances through separate "business".
SERVICES: Distribution audit. Distribution
accounting/reserves/resales & inventory data - Fairchild accounts
for disproportionate amount of workload. Credit & Collections -
cash application, cash forecast, credit evaluation/
approval/control, setting credit terms and limits, collections,
bad debt
41
<PAGE>
provisions. Modify CARMS - new "businesses". Set up Fairchild
location modify interface. New Fairchild BofA account/lock
boxes. Report modification to provide cash management
visibility. EDI - modification of messages for Fairchild -
invoice, payment, contract sales debit, CSD, disti resales and
inventory.
(f)JAPAN
Similar Services will be provided as in Sections 3, 4 and 5 of this
Schedule. In addition, Japan division will provide all sales and
marketing headcount and act as the Fairchild agent under a Toiya
agreement.
All employees, even if Fairchild dedicated, will be employees of NSJK
until May 1998.
One time Service to be provided to set up the operations:
(i)Registration/License#
Tax registration, business/company registration, customs
registration, labor registration, retirement/Provident fund
registration, share registration, obtain the necessary licenses
(excluding export distribution license)
(ii)Banking
Open bank accounts (with Bank of America), negotiate and obtain
banking facilities (may require Fairchild parent guarantee), set
up electronic banking system (with Bank of America)
(iii)Authorization
Design approval matrix for Fairchild
(iv)New Agreements
Distributor agreements, Business contracts, Supplier contracts
and Intercompany service agreements
(v)Insurance Coverage
(vi)Communications
Inform customers, distributors and other business partners of the
change, remind them to place orders under and pay invoices to
different companies
42
<PAGE>
(vii)Systems Setup/Modification
Quotation (ACCORD): Separate Fairchild and National quotations,
with proper part number validation. Pricing (MPL), Order
processing (SWISS/ SEA-SWISS, CMF): Separate Fairchild and
National orders to be captured; separate order acknowledgments.
Invoicing (SWISS): Separate invoices and packing lists. A/R
(MSA): Accounting (M&D, CIS, LOTS): Separate ledgers. HR (HRIS,
IPL). Set up new ledgers: GL, FA, AP, EP, AR, CIS
(viii)Credit Management
Set up credit limit and credit terms for customers common to both
Fairchild and National. Tailored credit limit and terms
Distributors
(ix)Initial financial statements
Prepare initial Balance Sheet and P&L upon acquisition.
(x)Stationery/Signage
(xi)Facility
Move Fairchild employees to a centralized location in the office.
ON-GOING SERVICES:
(1)Sales & Marketing
Dedicated 2OH/C S&M which included small allocated sales work for
Fairchild business.
(2)QRA
Dedicated 6H/C QRA work for QA activity (PQA etc) for Fairchild
business.
(3)Planner
Dedicated 2H/C planner work for Fairchild business.
(4)Procurement
Purchasing business like a Toshiba OEM products
(5)Accounting (Finance)
A/P, E/P, A/R, interco, inventory, FA, GL; payroll,
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<PAGE>
incentive programs, P Fund; customer claims/returns, CN, DN;
travel authorization & expense reimbursement; approval matrix
management; PI of inventory and fixed assets; financial
statements and statutory accounts.
(6)Cash management (Finance)
Receipt, disbursement and remittance, bank reconciliation, bank
accounts management, cash forecast, petty cash and traveler
cheque/travel advance.
(7)Insurance (Finance)
Renewal of policy, review coverage with insurance broker and
provision of regular and ad hoc information to insurer.
(8)Purchasing (Finance)
PR, PO, receiving processes and capital expenditure management.
(9)Tax (HR/GA)
VAT/GST/Sales/Turnover Tax; employee/payroll tax/levy# income
tax#.
(10)Audit (Finance)
Coordinate with auditor on statutory audit process, prepare
supporting schedules and provide information and answer queries
as requested.
(11)Record Retention (Legal)
Compliance with local legal requirements.
(12)Management reporting (Finance)
Financial statements, expense management, performance evaluation
reports.
(13)C&C (Finance)
Credit evaluation, approval and control, setting credit terms and
limits; collection, cash collection forecast and bad debt
provision
(14)Order Processing (Sales & Marketing)
RFQ/Quotation; order acknowledgment; order entry;
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backlog scheduling, change and cancellation; sample, datasheet
and literature fulfillment.
(15)Shipping (Logistics)
Delivery and return, import and export documentation.
(16)Warehousing# (Logistics)
Storage
(17)Export Control (Logistics) Compliance
(18)Facility (HR/GA)
Telecom, Telephone, Office space/existing furniture, existing
office equipment and mailing and document collection/delivery.
(19)Systems Use & Support (IS)
Transaction systems., office automation tools (Lotus Notes, MS
office), data warehouse (BO), data query tools (EXPERTS) and
system security and operation.
(20)HR (HF/GA)
Compliance with local HR related legislation, staffing
(recruitment, termination, transfer), payroll administration,
benefits management, expatriation/repatriation administration and
training management.
NOTE:
All direct expenses and disbursements, including fees and charges
paid to third-parties, notably legal, audit and tax fees and
facility setup expenses will be borne by Fairchild directly;
these costs are not included in the proposed service fee.
"#" indicates that a service will be performed mainly by outside
professionals.
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SCHEDULE 2.4
NSC WMS Transition Service Agreement with FSC cost and schedule
summary
EM, DH, DM, CB
FY98
<TABLE>
<CAPTION>
<S> <C>
Annual
Charge $M
CORPORATE MARCOM 1.39
Tech Doc 0.43
Internet 0.49
Sales Force Automation 0.48
AMERICAS 4.83
Latin America sales 0.25
Contract Admin 0.34
CSC 3.52
Automotive support 0.21
Huntsville/Span whse 0.03
Finance 0.49
EUROPE 2.69
CSC 1.60
Marcom 0.10
Finance/HR 0.54
Logistics 0.20
Facilities 0.25
SEA 2.72
CSC 1.07
Finance 0.98
Logistics 0.20
Facilities 0.25
HR 0.23
JAPAN 5.83
Outside Sales/Inside Sales 1.99
Marketing 0.89
Marcom 0.05
G&A 1.20
Planners/QA 1.26
Logistics 0.20
Procurement 0.24
TOTAL WORLD FSC 17.47
Sales & Marketing 11.91
GFXA 3.43
NMPE 1.89
MPE 0.24
Re total 17.47
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</TABLE>
<PAGE>
Notes:
1. Japan -- KWE FY98 charges assumed direct to FSC @$600K -- if charged to
NSC then NSC will charge FSC at same allocation basis as in FY97
2. The attachment identifies the cost and duration of services from NSC WMS
to FSC. Should FSC require a service after the scheduled end date, FSC
will be charged at the annualized rate.
3. QA -- Europe costs are direct to FSC
4. Planning -- all regions except Japan -- all planners direct to FSC
5. Logistics -- FLS costs are assumed direct to FSC-Japan see note 1.
Through the end of fiscal year 97, Fairchild will pay charges at the
same rate and under the same charging arrangements as prior to Close.
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SCHEDULE 2.5
LOGISTIC AND OPERATIONAL SERVICES
National will provide to Fairchild worldwide Logistics services and
support as needed, to sustain the Physical Receiving, Storage and
Distribution of Finished Goods and other materials from the Fairchild and
National Factories and/or Subcontractors, to Fairchild's worldwide customer
base.
Service Agreement Terms
Fairchild will have throughout the world a separate Legal Entity
with a similar structure to National's. In the case of Japan, National will
act as an agent on Fairchild's behalf under a Toiya agreement.
Fairchild will be the importer of record for its products in any
country where National is currently the importer of record.
No Fairchild inventory can be owned by a National entity in any
location of National.
RCW inventory of Fairchild products will be owned by Fairchild in the
USA.
Regional inventory will be owned by a local Fairchild legal entity.
Products will be sold under their own name. Fairchild products will
have separate Fairchild invoices and documents.
Fairchild products will have separate Terms and Conditions, which will
be the same as National's unless Fairchild notifies National in writing of a
change that National can reasonably implement on behalf of Fairchild.
There will be a single process for the systems that support the
physical distribution of product in the areas of Finance, Customs, Export
Control, Inventory Management and Importation. The system will differentiate
between Fairchild and National product. Any change initiated by Fairchild or
National or the successors supporting the physical distribution of products will
be done at the cost of the initiating Party providing the changes have been
mutually agreed in writing by both Parties.
National product at a Fairchild origin will be shipped
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under a separate AWB and logistics costs will be based on the T & Cs of the
purchase order. Fairchild will pay for the transportation charges including
customs clearance and brokerage fees for all Fairchild origin based product.
Fairchild will not change the current product part numbers for their
product.
Fairchild part marking with the National Worldmark Logo will change
over time and to the extent reasonably practicable.
The current inventory will not be remarked, relabeled or repacked
without a mutually agreed to process. Any re-label, re-mark or re-pack
activities will be paid for by Fairchild.
Non-Finished Goods logistics cost will be included in the sale of the
goods and freight cost will be dependent on the terms of sale (bill collect
etc.)
All FOB point Logistics services, with the exception of No. America
(SC Bldg.26), will be charged according to the WW Sales & Marketing agreement
(Schedule 2.4).
Fairchild and National will use their best efforts in connection with
the Federal Express contract in order to minimize costs to both companies and
pursue jointly to set-up separate contracts with Federal Express.
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LOGISTICS SYSTEMS SERVICES
ONGOING TECHNICAL SUPPORT COSTS: (SEE FOLLOWING SERVICE AGREEMENT COST SCHEDULE)
A. CSTS J564SC
-Pack list tracking from allocation to POD
-Cycle time activity and reporting
-Pack list confirmation capability
-Pack list void capability
-Freight charge calculation/distribution
-Freight charge auditing
-Customer freight invoicing
-Shipment manifest reporting
-Advanced shipment notification (A.SN)
-Receiving labels - SC FOB Direct Ship
B. LOTS J563XX (XX=location)
-Global F/G inventory repository
-Lot level inventory tracking/visibility
-Lot level inventory transactions
-Lot allocation
-Pack list print for non-RCW locations
-Interface to CIS, SWISS, ASPC, IRIS
-Interface to costing systems
-Inventory aging
-HTB inventory monitoring
-Consignment Inventories
-Barcode Services
*WIP intermediate labels
*F/G Intermediate & shipping labels
*Customer specific labels
*Delco Pull Signal
C. GILS J566SC
-Customer instructions/Constraints
*Repository
*On-line update
*On-line visibility
-Demand Order Generator
-Direct Interface with FedEx Systems
D. CLM J454SC
-Import/Export license repository
-License validation
-License value and Quantity Tracking
-Problem Management and Reporting
-On-line access
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E. LTS J565SC
-Lot traceability from assy to P/L
-Access to lot level attributes die run code, date code, etc.
-Lot shipment history
-On line access
-Reporting
ONE TIME UP FRONT SEPARATION COSTS: (SEE FOLLOWING SERVICE AGREEMENT COST
SCHEDULE)
A. CSTS J564SC
-Batch system interface modifications
-Freight charge calculation and invoicing
-Report distribution modifications
-EDI shipment activity separation
-Shipment manifest reporting
B. LOTS J563XX (XX=location)
-Set up new batch process for (lot allocation, receiving, issues, etc.)
Fairchild IL
-Set up new batch process for Fairchild JK and SC
-online program modifications
-Pack list print program modifications
-DDN assignment program modifications
-Inventory conversion to new location
-Inventory aging enhancements
C. GILS J566SC
-Batch system interface modifications
-Demand order modifications
D. CLM J454SC
-Duplicate database environment and on-line data entry
-Modify "call" program
-Modify batch process
E. LTS J565SC
-Batch system interface modifications
-Access to lot level attributes die run code, date code, etc.
-Lot shipment history
-Reporting
-On line access
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ONE TIME FINAL SEPARATION COSTS: (SEE FOLLOWING SERVICE AGREEMENT COST
SCHEDULE)
A. CSTS J564SC
-Batch system interface modifications
-Freight charge calculation and invoicing
-Report distribution modifications
-EDI shipment activity separation
-Shipment manifest reporting
B. LOTS J563XX (XX=location)
-Set up new batch process for (lot allocation, receiving,
issues, etc.) Fairchild IL
-Set up new batch process for Fairchild JK and SC
-On-line program modifications
-Pack list print program modifications
-DDN assignment program modifications
-Inventory conversion to new location
-Inventory aging enhancements
C. GILS J566SC
-Batch system interface modifications
-Demand order modifications
D. CLM J454SC
-Duplicate database environment and on-line data entry
-Modify "call" program
-Modify batch process
E. LTS J565SC
-Batch system interface modifications
F. LEC&C (FLS)
-Develop capability to separate freight logically and physically for
Phase 2 and Phase 3 by location code
-Enhance document printing to accommodate 2 forms of each document
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Final Split to Fairchild Systems
*Planning
*CLM -License extraction and clean-up of processing job and schedules
*GILS -Instruction extraction and clean-up
*LOTS-Inventory conversion to support physical move
- -Provide inventory historical data
- -Clean-up
*CSTS-Provide inventory historical data
LOGISTICS SERVICES: (SEE FOLLOWING SERVICE AGREEMENT COST SCHEDULE)
Shipments from National to Fairchild
Service
Logistics to provide warehousing, packaging and transportation from
National Origin for Fairchild destination for non-finished goods, materials.
This includes but is not limited to:
shipment preparation
export compliance
transportation costs
customs clearance
brokerage fees
Finished Goods Physical Distribution: (RCW)
Service:
To provide for the in-bound clearance and brokerage and in-bound
transportation cost of FG to the FedEx Regional Consolidated Warehouse from
Fairchild origin Plants
National, in collaboration with Federal Express, will continue to
provide for the receiving, storage, customer order processing and shipment
preparation within the RCW. To support the management of the RCW process
through QA, Customer Service Inventory Control, R.O.S. and Scrap.
Information Systems and Engineering, including all 3rd Party charges for WMS
and Japan operations plus associated management fees, as well all other
National expenses to support the RCW operation.
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Finished Goods Physical Distribution (Transportation)
Service
National, in collaboration with Federal Express, will provide Phase
2 freight services (including associated management fee) from the RCW to
National's point of destination in HK, England, USA and Japan
Provide Phase 3 International Priority Services (including
associated management fee) via FedEx from RCW direct to customer dock
Provide customs brokerage, freight forwarding and transportation
from point of destination to local FOB point, until Fairchild has established
an alternative site or process. For Europe, SEA and Japan, National will
provide returns processing and storage until Fairchild has established an
alternative process.
Finished Goods Physical Distribution (Strategic Inventory)
Service
Provide local warehousing, in Santa Clara and AP FOB, of Fairchild
strategic inventory returns, materials to National FOB points including
receiving, storage, traffic, customer order processing and transportation
from National's FOBS to the region's customers
Provide local warehousing in NSSC for Fairchild sample inventory
including receiving, storage, customer order processing, inventory
procurement and global transportation until Fairchild has established an
alternative site or process
Central Logistics Management
Service
Provide Central Logistics for Barcoding, Labeling Packaging 3rd
Party account management, Consignment Warehousing, External Customer
Logistics Solutions and specific projects
Incremental travel and program management costs to achieve
separation of data bases and establish separate processes
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<PAGE>
EXPORT ADMINISTRATION
Service to be Provided:
Export Administration to provide export compliance and licensing
support:
a. determine license requirements for Fairchild product shipments
1. develop product matrix
2. determine license requirements
3. obtain licenses as required
b. install third Party vendor software for licensing, government filings, and
regulatory updates
1. set up OCR software (Fairchild to purchase software)
2. train on use
c. develop and implement export management system (EMS) system
1. draft procedures:
classification
customer qualifications
regulatory updates
training procedures
reviews
government filings
recordkeeping
2. train on specific tasks
3. implement program
d. program CLM information to accommodate system changes Customs department to
provide customs support:
e. set up broker
f. implement Customs compliance program
1. draft procedures
classifications
recordkeeping
government filings
2. train of specific tasks
3. implement program
g. set up legal counsel for import and export
h. trip costs paid by Fairchild as required
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<PAGE>
LOGISTICS SERVICES AND SUPPORT
COST SCHEDULE
Service to be provided Charges to be:
Fixed Annual Amount One Time Charge
Logistics Systems Services
STS Direct Prorated Costs $24K-Paid by
J564SC National
LOTS Direct Prorated Costs $78K-Paid by
J563XX National
(XX-
Iocation)
GILS Direct Prorated Costs $15K-Paid by
J566SC National
CLM J454SC Direct Prorated Costs $39K-Paid by
National
LTS J565SC Direct Prorated Costs $6K-Paid by
National
LEC&C
(FLS) Direct Prorated Costs $15OK-Paid by
National
Logistics Services
Logistics to provide warehousing, Direct billing to
packaging and transportation from Fairchild
National origin to Fairchild
destination
Inbound clearance, brokerage and Direct billing to
inbound transportation cost of FG Fairchild
to Fedex Regional Consolidated
Warehouse
Receiving, storage, customer order
processing and shipment
preparation within the RCW:
Per each box received Same as paid by
National
Per each box stored per month Same as paid by
National
Per each box picked Same as paid by
National
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<PAGE>
Transaction cost will be based on the total cost of the process, as
defined above under "Finished Goods Physical Distribution," related to the
actual number of transactions.
Fairchild/National will work jointly to reduce overall cost of
services provided by Federal Express. Net cost changes will be reflected in
the mutually agreed rate structure, based on transactional pricing from
Federal Express.
Central Logistics Management (see above description) will be charged
to Fairchild according to the current basis. These charges to include, in
addition to the services described above, logistics systems services costs.
The total costs, on an annual basis, are to be 22% of the departmental
spending determined in a manner consistent with past practice.
For those logistics Services provided in collaboration with Federal
Express, Section 7.2 of the Agreement is replaced by the following: Fairchild
may terminate these agreed Services at any time without default by National
by giving written notice no less than three hundred and sixty five (365) days
prior to the effective date set forth in the notice. In the event that
Fairchild terminates for convenience, Fairchild shall be liable for any and
all pre-approved costs incurred by National under the terms of National's
contract with Federal Express from the date of notice of termination until
the date such services would otherwise have terminated. These would include,
but not be limited to, applicable costs specified in Article 3 and 8 of the
Logistics Service Agreement between National and Federal Express.
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<PAGE>
LOGISTICS SERVICES AND SUPPORT
COST SCHEDULE
Costs for the following services will be on the same basis as charged by
National business groups
Service to be Provided
Provide Phase 2 freight services: Cost based on weight shipped
Provide Phase 3 International Priority Services: Cost based on Fedex rates
Customs brokerage, freight forwarding and transportation to local FOB point:
Direct billing to Fairchild
Provide local warehousing in Santa Clara; provide local warehousing in AP
FOB; provide local warehousing in NSSC for Fairchild sample: Cost based on
packlists
Incremental travel and program management: Paid by National
Export Administration
Export Administration to provide export compliance
and licensing support $80K per year
Customs department to provide customs support: $9K per year
Trip costs paid by National as required: $15K
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SCHEDULE 2.6
CORPORATE HUMAN RESOURCES AND BENEFITS
A. Benefits
DESCRIPTION OF SERVICES
National will make available the services of its Corporate Benefits
department to administer such plans as set forth in this Schedule 2.6, and
will provide the following services, subject to the conditions set forth
below:
U.S. Health & Welfare Plans: Maintain vendor/carrier relations,
provide eligibility information to carriers, process invoices and either pay
obligations directly to vendors or administrators (to be reimbursed by
Fairchild) or notify Fairchild of amounts due, whereupon Fairchild will pay
the obligations directly, respond to plan appeals, maintain information on
plan experience, provide plan administration, provide communications
(benefits statements, summary plan descriptions, etc.), continue review of
program design and provide recommendations for change.
U.S. Retirement and Savings Program: None.
Foreign Plans: Provide administrative services for all plans
established by Fairchild that correspond to the Foreign Plans set forth on
Schedule 3.19(k) to the Asset Purchase Agreement, in exchange for a monthly
service fee equal to National's allocation for benefits services for the
appropriate fiscal year. Any special request considered outside the normal
services will be provided at the sole discretion of National. Such services
will be considered one-time activities and Fairchild will be subject to
charge on a project basis. Such extraordinary services may be associated
with modifications to benefit systems and processes after the Closing Date.
Cost will be negotiated and agreed to by Fairchild and National before any
work is initiated. National will determine in its sole discretion whether or
not requests to modify National systems or processes to accommodate Fairchild
will be accepted.
Conditions; Duration: In consideration for the services provided by
National hereunder, Fairchild will pay all costs and fees set forth in this
Schedule 2.6, and will indemnify and hold National harmless from any and all
claims, damages, liabilities, costs and expenses (including without
limitation reasonable attorneys fees) resulting or arising from National's
good faith administration of the plans. The foregoing services will only be
provided if, to the extent that and for so long as the employee benefit plans
of Fairchild are, in National's reasonable
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judgment, substantially similar to the corresponding National plans in all
features relevant to benefit administration. Fairchild shall notify National
in writing at least 60 days before the effective date of any amendment to any
Fairchild plan being administered by National hereunder, which notice shall
include a detailed summary of the amendment and any actual text of such
amendment or draft of such text then in existence, and as soon as
practicable, but in any event within 30 days after receipt of any such
notice, National shall notify Fairchild in writing as to whether or not it
will continue to administer such plan after such amendment takes effect. In
addition, Fairchild may terminate National's administration of any plan at
any time upon 30 days' written notice or such shorter period as the parties
may agree in writing. In any event, National will not be obligated to
provide any further administrative services under this Section 2.6 after
December 31, 1997.
Costs: Fairchild will be responsible for all liabilities with
respect to or arising under Fairchild's plans, as more fully set forth in,
and subject to the terms and conditions of, Section 5.5 of the Asset Purchase
Agreement. In addition, in consideration of the services rendered by
National hereunder, Fairchild will pay National a monthly service fee equal
to the appropriate fiscal year corporation allocation for benefits services
based on the allocation formula used in the 1997 fiscal year budget planning
process of National. The fee may be revised depending on allocations used in
National's FY98 budget planning process. Fairchild will also be charged
postage expense for mailings to Fairchild employees and for any special
services performed after the Closing Date (either by National or outside
vendors) specifically incurred in connection with the Fairchild plans or in
connection with modifications to benefit systems and processes on or after
the Closing Date. Costs for these services will be negotiated and agreed
before any work is initiated. For purposes of this entire Schedule 2.6,
National and Fairchild will cooperate in good faith to provide services and
exchange information necessary to enable Fairchild plans to separate from
National plans at no cost to Fairchild other than the corporate allocation.
Special costs and services necessary to create and sustain Fairchild plans as
separate plans after the Closing Date shall be borne by Fairchild or
reimbursed by Fairchild to the extent borne by National. National will have
sole discretion to determine whether or not to accept requests to modify any
National system and/or process. Specific costs for each U.S. plan are
detailed below. If any plans are partially or fully funded by employee
contributions, Fairchild will ensure that employee contributions are remitted
to National or to the appropriate trustee, as directed by National.
Payment Terms: The monthly service fee will be payable on thirty
(30) day terms. The precise arrangements for payment of plan costs will be
as agreed by National and Fairchild. In
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some instances, Fairchild may pay costs directly to vendors. In other cases,
National will pay plan costs and seek reimbursement from Fairchild. In the
latter instance, National will use its reasonable best efforts to advise
Fairchild of amounts for which Fairchild is liable in advance of any payments
being made by National on behalf of Fairchild. However, once National has
advanced an amount for plan expense for which Fairchild is liable, Fairchild
will reimburse National within twenty-four hours of the later of the time the
payment was made or of the time Fairchild is notified by National that the
payment has been made. Such payments shall be made by wire transfer of
immediately available funds.
Specific U.S. Plans:
(g)Medical and Dental Plans:
(i)Self-Insured Plans: Fairchild will reimburse National for any payments
made by National with respect to benefits under Fairchild's plans or for
which Fairchild's plans are made responsible under Section 5.5 of the Asset
Purchase Agreement.
(ii)Insured Plans: Fairchild is responsible for payment of all premiums
attributable to Fairchild's plans. To extent these are not paid by Fairchild
directly, Fairchild will reimburse National for any premium payments made by
National.
(iii)COBRA: National will administer COBRA continuation coverage under
Fairchild's plans for so long as it administers the underlying plans.
National will bill COBRA participants for the premium charges. With respect
to self-insured coverage under COBRA, Fairchild will reimburse National for
any expenses incurred by National that exceed the monthly premium charged the
COBRA participants.
(h) Vision Service Plan ("VSP"): Fairchild will reimburse National for its
monthly cost of $6.34 per participant.
(i) Prescription Plans: Fairchild will reimburse National for prescription
claims paid by National.
(j) Employee Assistance Plan: Fairchild will reimburse National for the
monthly employee charge imposed by the outside vendor (currently $29.99
per participant) for each Fairchild employee participating in the plan.
(k) Family Care Referral: Fairchild will reimburse National for its allocated
portion of the flat fee charged to National during the time, if any, that
National administers the plan for Fairchild after the Closing Date.
Allocation will be based on number of Fairchild employees to National
employees.
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(1)Life Insurance: Fairchild will be responsible for all premium expense under
its plans.
Basic Life (Company Paid): Fairchild will reimburse National for any
premiums paid by National promptly following each such payment.
Optional Life, Spouse, Dependent, and AD&D (Employee Paid):
Fairchild will reimburse National for any premiums paid by National
on a basis coincident with each payroll cycle.
(m) Disability: During any period after the Closing Date when
Transferred Employees (as defined in the Asset Purchase Agreement)
continue to participate in either of the Out-of-California Short
Term Disability ("OOCSTD") and the Long Term Disability Plan
("LTD"), Fairchild will insure that employee contributions are
remitted to National, if applicable, for deposit into the trust
accounts maintained for such plan(s). National will administer such
plan(s) and process disability claims, with claims paid by the
applicable trust. Fairchild will reimburse National periodically
for expenses incurred by National in connection with such
administration (including without limitation trustee fees, auditor
fees, disability claims and administrator fees) based on the
relative headcount of Fairchild employees and National employees
participating therein after the Closing Date.
California Voluntary Plan (CVP): If permitted by California law,
National will administer a California Voluntary Plan for Fairchild
employees to provide for short term disability claims by California
residents, unless such plan is determined not to be necessary due to
any Fairchild disability plan or until Fairchild assumes
administration of such plan. Fairchild will reimburse National for
actual claims paid. Plan expense fees (auditor fee, disability
claims administrator fee, state assessment fees) will be charged to
Fairchild based on the relative headcount of Fairchild employees and
National employees participating therein after the Closing Date. If
California does not permit a Voluntary Plan for Fairchild, then to
the extent required by California law, California Fairchild
employees will be enrolled in the State Disability Plan. In such
case, National will arrange for payment of amounts withheld from
employee pay to be paid to the State Disability Insurance fund and
will charge Fairchild for reimbursement of same, to the extent
National has not received such amounts directly from employee pay.
Fairchild will remit to National all employee withholdings for
transmittal to the State. Note: It is entirely possible that
California will not permit Fairchild to have a voluntary plan,
because
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Fairchild may not meet the minimum state requirements.
(n) Retirement and Savings Program ("RASP"): The monthly service fee
charged to Fairchild pursuant to the paragraph headed "Costs" above
will include the amount of expenses incurred by National in the
administration from and after the Closing Date of accounts of
Transferred Employees under the RASP. To the extent such expenses
do not include any legal fees paid by National with respect to QDRO
and joinder actions involving Fairchild employees, Fairchild will
also reimburse National for such legal fees. In addition, Fairchild
will reimburse National for any expenses incurred by National in
connection with the disposition, as required by Section 5.5(e) of
the Asset Purchase Agreement, of National stock held in the RASP
accounts of Transferred Employees that is not registered as of the
date of the Asset Purchase Agreement
(o) Benefit Restoration Plan ("BRP"). National will provide
recordkeeping services for accounts under Fairchild's BRP, which
will be maintained by Fairchild as liabilities on its books.
Fairchild will reimburse National for fees of its outside
recordkeeper, based on the relative headcount of participants in
Fairchild's BRP to participants in National's BRP who are not
Transferred Employees.
(p) Tuition Reimbursement. Fairchild will reimburse National for
tuition reimbursements made by National to Fairchild employees for
classes completed on or after the Closing Date.
(q) National Semiconductor University ("NSU"). Fairchild will pay
National for courses attended by Fairchild employees at National
sites on and after the Closing Date to the extent provided in the
sections of this Schedule relating to National HR Services for
Fairchild employees on the Santa Clara site. National will pay
Fairchild for courses attended by National employees at Fairchild
sites on and after the Closing Date.
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B. Human Resource Information Systems (HRIS) Services
1. Description of Ongoing Services. National will provide system
support to transact Human Resources data associated with maintaining human
resources and payroll records, applications used to manage various HR
processes and a core data base for reporting for the period of time defined
below. National will not participate in providing support to Fairchild in
converting to an independent human resources system, other than maintaining
necessary records/files which eventually will be transferred to Fairchild's
new system. Systems to be maintained for limited duration defined below
include:
Dun & Bradstreet (MSA) - Core data base of Human Resource
information interfaced with Ceridian payroll system, time collection system,
HRS reporting data base and other business applications.
Training Audit System (TAS) - System maintains course catalog and
database of courses taken by US employees. Has multiple registration and
training management functions built in. Interfaces with HRS system to capture
employee data. Operates on corporate sync machine on VM environment.
(Transitioning to new platform TBD based on Nationals plan to eliminate VM
environment)
Reporting System: Human Resource System (HRS) - Extract file from
MSA supplemented by about a dozen stand alone tables and data base master
files used for focus reporting (both standard menu driven and user ad hock
query). Operates on corporate sync machine on VM environment. Feeds other
site sub systems such as the FM 360 Peer review system. (Transitioning to new
platform TBD based on Nationals plan to eliminate VM environment)
Call-Up Directory System - Maintains individual and organizational
data on employees. Has multiple search functionality and interfaces with
mail systems and other communication related and security processes.
Compensation Systems - Job code data base including all Jobs and
related data such as job titles, salaries, workers comp codes and EEO data.
Salary planning system, KEIP data base.
Time Collection System: Finance system co-owned by finance. System
interfaces with both employee core data base (D&B MSA) and Ceridian payroll
system. Maintains templates on work schedules, business rules related to pay
administration, a collection front end and storage capability.
2. Ongoing operating Costs. Fairchild will be charged a monthly
fee for such services equal to the appropriate
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fiscal year corporate allocation for HRIS services based on the allocation
formula used in the fiscal year budget planning process until August 15,
1997. These operating costs cover ongoing maintenance and operation of above
system's based on National schedules and programs. Any modification to
system will be captured in separation costs listed below. If National is no
longer using systems, Fairchild's charges will increase to cover the full
cost of maintaining and operating the systems after August 15, 1997.
3. Duration. National is in the process of discontinuing many of
its HRIS systems. Three factors are driving discontinuation of above
systems: 1.) Implementation of SAP core HR system-Targeted to be complete by
June 30 1997, but in no event later than June 1, 1998, 2.) Elimination of
underlying technical infrastructure on which system resides i.e. VM will be
eliminated by May 25 1997, and 3.) Replacement or upgrade of application due
to change in business requirements i.e. implementation of SAP training
application by May 25 1997. It is National's intent to discontinue each of
legacy systems between now and June 1997.
National will continue to maintain several HRIS systems beyond June
1997, a planned date of the SAP implementation. MSA will continue to be
supported through August 15, 1997 at the fiscal year allocated cost.
Associated sub-systems such as TAS, HRS, and Salary Planning will
also be maintained if National transitions them to post VM platforms. Upon
close of sale, any required licensing will be paid for by the company using
the license.
In the event that Fairchild requires continued operation and
services of MSA and other HRIS systems which National is no longer using
after August 15, 1997, then Fairchild will be required to pay the full loaded
cost. In no circumstance will any continuation of systems service or usage
be considered for extension beyond December 1, 1997.
4. Separation costs. Currently National and Fairchild share a
common data base and infrastructure for each of the above systems.
Separating these systems will fall into three general categories.
-- One time activities aimed at making these systems usable in current
state by both entities. This would include items such as recoding
of employees to identify which entity employees belong in, setting
up appropriate security access and reconfiguring standard interfaces
to payroll and time collection systems. One time systems and
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service costs incurred to establish the capability of National and
Fairchild to operate as separate companies using common systems will
be paid by National. Detailed list of one time costs outlined in an
October 17, 1996 memo RE "Fairchild Spin Off" authored by Neil
Nesenblatt HRIS Director.
-- Special Requests for systems modification based on changes to
Fairchild's programs or other business needs. Requests by Fairchild
will be reviewed on a request basis. Given the pending elimination
of legacy systems National has not maintained the capacity to modify
these systems and changes will require negotiations with independent
systems contractors. National will reserve the right to refuse any
modification to system regardless of need or funding source based on
the potential impact to the systems integrity and operation. Any
costs associated with major modifications to the system requested by
Fairchild and accepted by National, will be paid by Fairchild.
-- Once National discontinues use of systems, the intent is to turn
these systems off. Fairchild may negotiate to continue to operate a
system at full cost, plus one time cost for set up. Each
application will be unique and will be negotiated if and when the
need arises. National will determine whether or not continued
support can be provided. Costs to support the ultimate separation of
Fairchild and the implementation of Fairchild's own independent
systems and services will be paid entirely by Fairchild.
C. Compensation Services
1. Description of ongoing Services. National will continue to
provide the following services as long as Fairchild is dependent upon Human
Resource systems support that stores compensation-related information, and
National's compensation programs are being utilized by Fairchild. There is a
close connection between some services provided by Corporate Compensation and
data that may be utilized as a result of Fairchild using National's Human
Resources Information Systems. Services provided include: Determine salary
ranges; establish merit increase budgets; determine market position;
establish salary administration guidelines including increase matrix - Focal
Review (All administrative and systems support during focal process);
maintain/develop Market Survey sources; maintain job descriptions/leveling
criteria; establish/maintain job codes; job
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titling guidelines for Executives; establish targets by job level; KEIP
program development (pool building and distribution guidelines), coordinate
participation; Success Sharing - program design, payout administration; Stock
Options - determine grant ranges and participation by level, coordinate stock
option share approval by BOD, participate in surveys to establish competitive
stock option levels. National will also provide such other services that
have been administered by the Corporate Compensation department.
2. Ongoing Operating Costs. Fairchild will be charged a monthly
fee for such services equal to the appropriate fiscal year corporate
allocation for Compensation services based on the allocation formula used in
the fiscal year budget planning process.
3. Duration. This service will be provided until Fairchild no
longer remains on National's compensation programs and compensation
activities connected with National's Human Resources Information Systems, or
December 31, 1997, which ever comes first. In no event will services or
National's compensation programs be provided to Fairchild beyond December 31,
1997.
4. Separation Cost. Any special request considered outside
Corporate Compensation normal services identified in section #1 above will be
considered one time activities and Fairchild will be subject to charge on a
project basis. Such extraordinary services may be associated with separation
of Fairchild and request for modifications to compensation systems and
processes. Cost will be negotiated and agreed to by Fairchild and National
before any work is initiated. National will determine whether or not
requests to modify National systems or processes to accommodate Fairchild
will be accepted.
D. Staffing Services
Description of Ongoing Services. None.
Ongoing Operating Costs. None.
Duration. Not applicable.
E. National University Services
None (except as provided below regarding HR Services on Santa Clara site).
Services. None.
Ongoing Operating Costs. None.
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Duration. Not applicable.
F. N/News
Services. Basis news feed and specific information regarding the
semiconductor industry.
Costs. Services will be charged according to National's usual charge
policies. Also, Fairchild will be responsible for any expense associated
with contractors and/or the purchasing of equipment necessary to provide
basic news feed, specific information regarding the semiconductor
industry and Fairchild specific information.
Duration. Service will continue until June 1, 1998, but may be canceled
at any time on 60 days, notice.
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NATIONAL HR SERVICES
FOR FAIRCHILD EMPLOYEES ON NATIONAL'S SANTA CLARA SITE
Purpose: The purpose of this document is to define the areas,
duration, and cost methodology of HR services provided by
National to Fairchild employees on National's site in Santa
Clara.
A. Benefits
1. Service. Services are covered under Benefits section of Corporate
HR Services document.
2. Costs. See Benefits section in Corporate HR Services document.
3. Duration. See Benefits section in Corporate HR Services document.
B. Human Resources Information Systems (ERIS)
1. Services. National will provide systems support to transact HR data
associated with maintaining human resources and payroll records,
applications, and core database for recording for the period of time
defined in the Corporate RR Services document.
2. Costs. See HRIS section in Corporate HR Services document.
3. Duration. See HRIS section in Corporate HR Services document.
C. Compensation
1. Service. No day to day site services. Corporate compensation
services are covered under the compensation section of the Corporate
HR Services document, above.
2. Costs. See compensation section in Corporate HR Services document.
3. Duration. See compensation section in Corporate HR Services
document.
D. Staffing
1. Service. None.
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2. Costs. None.
E. National University
1. Services. Training Development activities and training facilities.
2. Costs. Fairchild participation will be on a pay-as-you-go basis.
Certain proprietary classes will not be open to Fairchild employees.
Overhead allocation will be charged according to National's usual
charge policy.
3. Duration. National will continue to offer National University
services until Fairchild no longer requests services or June 1,
1998, whichever comes first.
F. Employee Relations
1. Services. None.
2. Costs. None.
G. Service Center
1. Services. None.
2. Costs. None.
H. Cafeteria
1. Services. Cafeteria services will be provided in Cafe 10.
2. Costs. To be charged according to National's usual charge policies.
3. Duration. National will offer cafeteria services in Cafe 10 until
Fairchild no longer requests service, moves off site, or June 1,
1998, whichever comes first.
I. Fitness Center
1. Services. Health & Fitness - open to Fairchild employees on site
according to current policies.
2. Costs. Parties will negotiate a monthly fee per employee for use.
3. Duration. National will continue to offer Health & Fitness Center
services until Fairchild no longer requests services, moves off site,
or June 1, 1998,
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whichever comes first.
J. Credit Union (Service provided subject to any applicable legal or
regulatory restrictions)
1. Services. Banking services.
2. Costs. Service costs will be charged according to National's usual
charge policies.
3. Duration. Fairchild employees will be allowed to continue Credit
Union membership under the current rules and regulations of Credit
Union.
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SCHEDULE 2.7
SECURITY SERVICES
National will make available to Fairchild consulting services and assistance
in the following areas of Corporate Security:
Logistics: Corporate Security will provide expertise in the risk analysis of
product movement via road or air both domestically and internationally.
Also, assistance in the investigation of losses.
Business Interruption Intelligence: Corporate Security monitors information
affecting National plants, and will provide similar services for Fairchild
locations.
Site Evaluation: Corporate Security conducts site evaluations to identify
threats and risks, including to systems, processes and intellectual property.
Also, value enhancement studies of construction and expansion projects.
Security training: Corporate Security organizes an annual security managers
meeting for all National security managers.
Workplace violence: National will provide this program and training to
Fairchild sites. In addition, the corporate Security and Workplace violence
Prevention Team will be available to assist with workplace violence issues.
Intellectual Property and Network security: Corporate security will advise on
policies and procedures to enhance security in these areas. Also, provide
assistance with investigations involving intellectual property and computer
crimes.
Fairchild will elect the services it will use and will pay any direct
out-of-pocket expenses National will incur providing the services, on a case
by case basis.
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SCHEDULE 4.2
The general model is that Fairchild will obtain the "Right to Use"
all systems necessary to run the business. These lists attempt to identify
all possible systems but others may be identified in the separation process
and systems can be added with written approval of Fairchild and National.
Ownership
Fairchild will receive ownership of the "Engineering Database" and
"Engineering Workbench." This explicitly excludes MBayse and RSTATS.
INSERT CHARTS
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SCHEDULE 4.2
System Function
Manufacturing Systems
Workstream Shop Floor Control System
Grapheq SECS Communication Tool
SAS Statistical Analysis Product
Suite
SQL Runner Database Access Tool
Harris Autocad Board design and layout
software
RWM/AI Realtime Wafer MAP from AI
Decision Support Systems
NOVA Mainframe based on-line report
viewing system.
Finance Systems
CHESS Cebu Financial System
Worldwide and Local Costing Inventory costing systems
Payroll Systems Employee payroll system.
Currently outsourced.
General Ledger Financial System
Invoicing and Accounts Rec. Invoicing and Accounts
Receivable Systems
Cebu Inventory Module, Accounts
Payable, MAS/Payroll/PLS,
Transaction History
Site Finance, Costing and Tax Local Audit support systems
Systems
Human Resources
MSA Old Payroll system. Need data
to update Ceridian payroll
system
Resumix Potential employee resume
tracking system.
HRS Human Resources System
COMCAL Compensation/Salary Planning
System (PC based)
Business and Production
Planning
FLS/Shipping Federal Express shipping and
warehouse management in
Singapore.
McCormick & Dodge Accounts Payable, Purchasing,
Receiving, Shipping, Stores
CAS FAB Planning, Die Stores
Sales and Marketing
EDI General electronic data
interchange
SGML Electronic Data Sheets
Lotus Notes Mail
Scopus Customer Response Center System
Lotus Notes INFO Exchange
Product Line
a/Soft nuTPU - vaxTPU editor
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CADENCE Product Design
- -Analog Artist
- -Dracula DRC, ERC, LPE, LVS
- -Dracula Plotting
- -Dracula Fracture
- -Verilog XL
- -Spectre Spice/HDL
- -Inquery and DLR
- -Hspice Interface
- -DIVA Systems
- -Virtuoso
- -OPUS
- -Block Place and Route
- -Edge
Hewlett Packard ICCAP
Hewlett Packard ICMS
Kiethley CV System Software
Leapfrog VHDL Simulator
Legato Networker Backup clients
MAE - Macintosh emulation
environment
Mentor
- -Meta Hspice Software
- -Synopsys Software
- -TSSI Software
- -EPIC Powermill
- -CATS Software
Nutmeg Post Processor
PDF Solutions simulation
software
- -PDFab
- -PDPCA
- -PD Worksheet
- -PDX ess Spreadsheet
SoftQaud HotMetal Pro
Technology Modeling Associates
Simulators and Tools
- -Suprem3
- -Suprem4
- -Depict
- -Terrain
- -Medici
- -Davinci
- -Raphael
- -Michalengelo
- -Visualizer
- -Layout
- -TMA Workbench
- -Studio
TssTerm - terminal emulator
Summit Probe Control Software
Sun Showme
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Vista
Miscellaneous Systems
Digital Products Digital Software License
Documentum Document Control
Framemaker Word Processor
Hewlett-Packard Products HP Software Licenses
Microsoft Windows & Office
Netscape World-wide WEB Browser
Novell Network Operating System
Oracle DBMS & RDB
Personal Computer Products All personal computer software
running on Fairchild PC's
SAS Products Statistical Analysis Package
SUN Products SUN Microsystems Software
Licenses
Sybase Relational Database
Tyecin MANSIM Modeling & Simulation
EP System Dependencies
Accounts Payable System Payment of local and foreign
vendors
IPPS Payroll System Payroll processing and
personnel records
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SCHEDULE 4.3
System Function
Manufacturing Systems
All Workstream Maintenance Tool Tools and support the
Kit and System Enhancements, maintenance of Workstream and
including but not limited to: system enhancements
- - ALL NSC Modifications
- - RSPC
- - STEP (Workstream and EDB Pieces)
- - Inspection Database
- - Mask Management
- - ADAC
- - CWI
- - Costing
- - All site developed code
Factory Automation Tool kit, Entire Suite of products to
including but not limited to: assist in equipment integration
- - Grapheq DMQ Protocol efforts.
Process
- - Grapheq Sybase Protocol
Process
- - All Sybase Open Servers
- - All developed equipment
interfaces
- - ASM Job Transfer System
Engineering Analysis Systems, Suite of products to assist in
including yield enhancement
- - Engineering DB
- - Engineering Workbench
- - STDF+
- - Extracts
- - Trendgraph
- - TAM-NET
- - Mbayse (executable code only)
- - RSTATS (executable code only)
- - ATSQC
- - Program Writer, M2PW
- - MRL
- - Basicwriter
Best Pack Barcode System Barcode Label printing for
finished goods use
Pack Template Packing Instructions for
finished goods
CSPEC Customer Drawing - Work
instructions
Easyfind Easy flow instruction document
for Assembly and EOL (PT)
Eflow Electronic Flow book for Test
(PT instruction Document)
TDS Test Definition System
Replacement System for Eflow
PC/MCT PC/MCT Tester
PCMCT hardware
interface/controller cards
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High voltage pin electronics
cards for
MCT2010/2020 testers
MIDAS Material Input and Data
Analysis System
JSS - Job Scheduling Systems
CWIP Combined Work In Process
Extract
ELVIS Electronic Logbook System
INCYTE Shop Floor/Equipment Tracking
System
TRSS Test Results Support System
TSO-IS Test Operator Interface
MRL MCT Execution libraries
WGTMAIN Auto-bench test equipment
operating system
Theta JC Software Thermal Data Collection
Software
MCT Program Writer Automated generation of test
programs
DC Bench Interactive Characterization
Software
TSSI Test vector
generation/translation software
Test for Strip for methodology Software/hardware
Decision Support Systems
Cost of Scrap Corporation-wide Scrap
reporting system
Delivery Performance Corporation-wide delivery
performance reporting system.
Cycle time Reporting Corporation-wide cycle time
reporting system
DASD Decision Support Database
DB Info Pull data from PDS/CRS Std Cost
System
HRDSS Human Resource Decision Support
System for Training history
Quality Systems
AQUARIUS Product Quality assurance and
Failure Analysis Tracking and
Reporting System.
Lot Trace-ability Log Genealogy reporting system,
Customer problem analysis.
QUIC Mainframe based on quality
reporting system, to eventually
be replaced by AQUARIUS.
ERDM Product Reliability Tracking and
Reporting System.
CARDS Cebu Advance Reliability
Database
Technical Document Tracking Data Sheet development,
tracking and display
QAAS PPM reporting for customer.
Soon to be replaced by QAS
MIDAS Material Information Data
Analysis System. Raw materials
vendor listing for purchaser
reference and ISO compliance
Finance Systems
Commercial Invoice System Inter-company invoicing system.
Fixed Asset System Fixed Asset Tracking System.
IAS Worldwide inventory analysis
system.
LOTS Back-end shelf inventory
tracking.
S337 Product Costing
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SSIP - Success Sharing Success Sharing Tracking System
Customer Credit Customer Credit System
Timecard System Employee time tracking system.
Travel Process expense reports and
relocation.
Transfer Reporting System - TRS Costs of inventory moving
through WIP.
Interrogator Management reporting tool used
for financial analysis.
Inbound/Outbound Record in/out interco
transactions
SPG CLD Cost less die measurement
Workstream Costing Workstream costing
Wafer Sort Costing Wafer Sort costing
Accounts Trade Payable Record non-interco purchases
Human Resources
Career Opportunity Posting Internal employment opportunity
System - COPS tracking and notification
system.
Training Audit System TAS Training tracking system.
Salary Planning System Salary Planning System
Occupational Health System Health and Safety System
HRDS Employee training records for
human resource development
QOCS Qualified Operator
Certification system for
Manufacturing specialist skills
Business and Production
Planning
Product Definition System Defines characteristics of
product including high level of
routing.
Route Definition System Maps Shop Floor Control routing to
financial routing.
Semiconductor Materials System Stores inventory and material
control.
GILS Global Integrated Logistics
System
ASPC Factory production scheduling
TPF Transfer Price File
Subcontractor Database Tracking approved
subcontractors
APS Auto-purchasing system for PO
generation, Stores receiving &
payment reconciliation
ACAPS Test Auto capacity planning
system
Sales and Marketing
EXPERTS Bookings, Billing and Backlog
reporting system.
ACCORD Quoting System.
SWISS Order Entry and Tracking
CFAP EDI Customer Forecast to
Backlog
Contract Module Contract negotiation and
tracking
Channel Reservation System Product reservation and
allocation system
CSPEC Customer Specifications
MPL Price Management
Sales Commission System Calculated and tracks sales
commissions.
PCN/PDAA Process Change Note and Produce
Discontinuance Administration
CMR System Customer Material Returns
Worldwide WEB Presence Worldwide WEB Presence
Product Line
Alf
Backup (DCL Code)
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Build-Barcode
COMPARE
Die Trace Lot Tracability on Finished
Goods
Dracula Verification, Fracture
and Plotting Tools
Dracula Yield Modules
EBS Electronic Build Sheet System
ICED CAD Software for Mask Making
JTS Job Transfer System
Jughead
Mask-Req
MDP
Minimos 5
Naspice Simulator
National Lint
Newton
Newton Timing Analyzer
NSSC - FSC Build Diagram
NSC Layde Post Processing Tool
for Layout
PCD Bulletin Board Customer Status of Change
Notices
PlotGDS
Retgen
Reticle-Build
Silvar Lisco SELECT
SPAM Standard Cost Analysis
Vista
Miscellaneous Systems
PATS New Product ROI
DOC Access to Corporate
Specifications
Specwriter Customer Drawing - Work
Instructions
VM/FOCUS Reporting Ad-Hoc Reporting Capability
CALLUP (Web Based) Employee Directory
HelpDesk Problem/Resolution tracking
developed by Rainer
EP System Dependencies
LOTS & LOTS Interfaces Auto lot start, Shelf Inventory
module
Capacity Planning Module OBP/12 Qtr/Periodic capacity
request and frames forecast
Process Traveler Maintain marking engine and
packing template
GL-90 Global General Ledger Finance G/L
General Ledger Coop Uploads JV's into Global G/L
System
Activity Based Costing System Overhead Allocation & CLD
Activity Based Forecasting Financial forecast model,
System overhead allocation, CLD
Automatic Costing System Product costing, inventory
evaluation
Sub-contractor Costing System Product costing, inventory
evaluation
S333 Standards Revision Annual standards revision
Financial Reporting system Balance Sheet, P&L
Material Usage Module Allocation of material costs to
CLD
LOTS Costing Reports Shelf inventory report
REPS Equipment Performance Reporting
System
Employee Attendance System Tracks employee attendance
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NATIONAL SEMICONDUCTOR CORPORATION
SHARED SERVICES AGREEMENT
This Transition Services Agreement, made this 11th day of March, 1997 by
and between NATIONAL SEMICONDUCTOR CORPORATION ("National") and FAIRCHILD
SEMICONDUCTOR CORPORATION ("Fairchild").
WHEREAS, National owns and operates a semiconductor manufacturing facility
on Western Avenue in South Portland, Maine (the "South Portland Facility"); and
WHEREAS, the various components of the South Portland Facility have been
operated as a single integrated facility; and
WHEREAS, the South Portland Facility is now to be divided into two
separately operated managed facilities, to be known as the Fairchild Site and
the National Site, with the Fairchild Site to be transferred to Fairchild; and
WHEREAS, there are certain services which will continue to be provided by
Fairchild to National after division of the facilities.
NOW, THEREFORE, in consideration of $1.00 and other valuable consideration
and in consideration of the mutual covenants herein contained, the parties do
hereby agree as follows:
1. Services. Commencing on the date hereof (the "Effective Date"),
Fairchild shall provide National with certain site support, human resources, and
information services (collectively, the "Services") upon the terms and
conditions set forth in Exhibits A, B, C, D and E attached hereto. All such
Services to be provided by Fairchild to National shall
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<PAGE>
be provided at comparable quality levels of performance and standards of care
consistent with the standards historically experienced by National at the South
Portland Facility.
2. Cost. Whenever a Service is to be provided at Fairchild's cost of
providing such Service, all direct costs of providing that Service which
standard cost accounting practices require to be included and all depreciation
costs shall be included in determining the cost. Such costs shall be allocated
in accordance with Exhibits A, B, C, D and E attached hereto. Additional capital
and overhead costs not directly associated with the applicable Service shall not
be included in the allocated costs. If the cost of providing a Service to the
recipient cannot be separately determined, then the total cost to the provider
supplying the Service shall be allocated between the provider and recipient
based on usage. Fairchild shall render to National a monthly statement for
amounts due for Services rendered under this Agreement for the previous month.
Each party shall keep complete and accurate books and records of account
relating to the cost of shared services pursuant to this Agreement and make such
books and records available to the other party for inspection upon reasonable
request.
3. Termination. The term of the Services provided hereunder shall be as
set forth in the Exhibits attached hereto. Any Service provided by Fairchild to
National pursuant to this Agreement which is to terminate on a specified date as
set forth herein, may be earlier terminated by National on 90 days' prior
written notice to Fairchild, and in such event National shall no longer be
obligated to pay the requisite fees attributable to such canceled service;
provided, however, that all fees shall be paid through the effective date of
such termination, with monthly fees being prorated through the date of
termination. Any service provided by one party to the other hereunder which is
terminable
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<PAGE>
by mutual agreement, may be terminated by either party upon one year's written
notice to the other, unless otherwise provided herein.
4. Confidentiality. (a) All records, data files (and the data contained
therein), input materials, reports and other materials (collectively the "Data")
received, computed, developed, processed or stored by Fairchild for National
shall be and remain the exclusive property of National, and Fairchild shall not
possess any interest, title, lien or right in connection with such Data.
Fairchild shall safeguard National's Data to the same extent it protects its own
Data. National Data shall not be utilized by Fairchild for any purposes other
than the Services described herein nor shall it be disclosed, sold, assigned,
leased or otherwise disposed of to third parties by Fairchild or commercially
exploited by or on behalf of Fairchild, its employees or agents.
(b) Upon termination of any Service provided hereunder by Fairchild,
Fairchild shall immediately deliver to National all the Data applicable to the
terminated Service, including all copies thereof held by Fairchild. During the
term of the provision of any service hereunder, Fairchild shall keep, consistent
with National's current procedures and schedules for preparing Data backups, in
a separate and safe place, at least one additional copy of all Data required to
be maintained including additional tapes or discs necessary to reproduce such
Data. Fairchild shall use commercially reasonable care to minimize the
likelihood of any damage, loss of Data, delays and errors resulting from an
uncontrollable event and shall use their reasonable best efforts to mitigate the
effect of any such occurrence on the other party.
5. Force Majeure. Except for National's duty to make timely payment for
services rendered by Fairchild hereunder, a party shall not be liable for a
failure or delay in
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the performance of any of its obligations under this Agreement or such failure
or delay as the result of fire, flood, or other national disaster, act of God,
war, embargo, riot, labor dispute or the intervention of any governmental
authority, provided that the party failing in or delaying its performance
immediately notifies the other party of its inability to perform and states the
reason for such inability.
6. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one in the same Agreement.
7. Entire Agreement. This Agreement is intended to be a complete and
integrated Agreement with respect to the subject matter hereof, superseding all
prior agreements and understandings with respect thereto and may not be amended
or modified except by an instrument in writing signed by the parties hereto.
8. Assignment; Binding Agreement. Neither party may assign or delegate
this Agreement or the rights and obligations created hereunder without the prior
written consent of the other whether by way of transfer, merger with or into
such party, consolidation, reorganization or otherwise. Any purported
assignment without such consent shall be void and constitute and breach of this
Agreement. Subject to the foregoing, all of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.
9. No Waiver. No failure or delay on the part of either party in the
exercise of any power, right or privilege arising hereunder shall operate as a
waiver thereof, nor
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<PAGE>
shall any single or partial exercise of any power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
10. Severability. If any provision of this Agreement is for any reason
found to be ineffective, unenforceable or illegal, such condition shall not
affect the validity or enforceability of any of the remaining portions hereof;
provided, further that the parties shall negotiate in good faith to replace any
ineffective, unenforceable or illegal provision with an effective replacement as
soon as practical.
11. No Joint Venture. Nothing contained herein or in the pursuance of
this Agreement shall constitute the parties as entering into a joint venture or
partnership or it shall constitute either party the agent for the other for any
purpose or in any sense whatsoever.
12. Choice of Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Maine, without reference to the
conflict of laws provisions thereof.
13. Limitation of Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE
OTHER PARTY'S PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, OR THE
FURNISHING, PERFORMANCE OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT HERETO,
WHETHER DUE TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE OR OTHERWISE.
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<PAGE>
14. Headings. The headings and subheadings contained herein are for
information purposes only and shall have no effect upon the intended purpose or
interpretation of the provisions of this Agreement.
15. Publicity. Neither party shall publicize or otherwise disclose the
terms of this Agreement without the prior written approval of the other party.
16. Notices. All notices, requests, demand and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted, if transmitted by telecopy, electronic or digital transmission
methods; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery services (e.g. Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case, notice shall be sent to
If to National, addressed to:
2900 Semiconductor Drive, M/S. 16-135
Santa Clara, California 95052-8090
Attention: General Counsel
If to Fairchild, addressed to:
333 Western Avenue, M/S 01-00
South Portland, ME 04106
Attention: General Counsel
Or to such other place and with such other copies as such party may
designate as to itself by written notice to the others.
IN WITNESS WHEREOF, the parties hereto have had this Agreement executed by
their respective authorized officers as of the date first written above.
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NATIONAL SEMICONDUCTOR
CORPORATION
By:
---------------------------------
Its:
---------------------------------
FAIRCHILD SEMICONDUCTOR
By:
---------------------------------
Its:
---------------------------------
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<PAGE>
EXHIBIT A
SITE SUPPORT SHARED SERVICES
A. Machine Shop; Quartz Shop; Electronics Shop
1. Description of Services. Fairchild shall provide National with
(a) general machine shop services, including repair of tools and other equipment
and fabrication of equipment components, (b) general repair services for
quartzware, and (c) general electronics repair services. Such services shall be
provided by Fairchild to National on an as needed basis at the request of
National; provided, however, that Fairchild will have no obligation to purchase
equipment or tooling or hire additional personnel to support National and
provided further that National shall have no obligation to use such Fairchild
services.
2. Cost.
a. Non-emergency Services. Fairchild will prepare a bid for the services
to be rendered. If it accepts the bid, National will issue a Purchase
Order.
b. Emergency Services. Fairchild will charge National for time and
materials. Time rates will be published and updated from time to time
by Fairchild. National may, if it chooses, issue a blanket Purchase
Order against which to charge emergency services.
3. Duration. Until terminated by mutual agreement of the parties.
8
<PAGE>
B. Materials and Logistics: Materials and Logistics services required by
National shall be provided by Fairchild or handled by National, as set forth
below.1.
Description of Services.
a. SMS System Set Up: Fairchild will assign stock numbers, determine
primary and secondary logical warehouse locations and issue management
reports for National. National shall be responsible for system
modifications and issuance of new stock numbers.
b. Stock Room Set Up: Fairchild shall be responsible for receiving
(until National's new loading dock is operational) and putting away of
materials and set up of bin/shelf locations in temporary locations
until National has established permanent locations. National shall be
responsible for set up of physical locations, including bin/shelves,
and moving materials from temporary to permanent locations for
National's use.
c. Stock Room Personnel Support: Fairchild shall be responsible for
material planning for chemicals, gases and silicon, based on
requirements provided by National. National shall be responsible for
material planning for quartz, spares, consumables and non-consumables,
for storekeepers in National stock rooms and for supervision.
d. Materials Management (Planning, Expediting, Scheduling): Fairchild
shall be responsible for chemicals, gases and silicon. National shall
be responsible for quartz, spares, consumables and nonconsumables.
e. Shipping/Receiving/Traffic: Fairchild shall continue its
shipping/receiving/traffic control function at the existing loading
dock.
9
<PAGE>
National shall be responsible for staffing the new loading dock
adjacent to Building 18 for handling its materials; Fairchild shall be
responsible for staffing said new loading dock for handling Fairchild
materials.
2. Cost. All services provided by Fairchild to National hereunder shall
be at Fairchild's cost.
3. Duration. Services to be provided by Fairchild through August 31, 1997.
C. Emergency Response Team.
Each party will provide its own emergency response team.
D. Procurement.
1. Description of Services. Fairchild shall provide National with
purchasing implementation services for all indirect/direct materials
(i.e. raw silicon, chemicals, gas, resistors, targets, quartz,
consumable/non-consumables, stores).
2. Cost. Such services shall be provided at Fairchild's cost.
3. Duration. Services to be provided by Fairchild through August 31,
1997.
E. Parts Cleaning
1. Description of Services. Fairchild shall provide National with
reasonable access to parts cleaning operations and equipment. National will
provide the labor to clean National's parts.
2. Cost. Such services shall be rendered at an hourly rate to be
calculated based on historical data including all Fairchild costs and direct
overhead to run each parts cleaning area.
10
<PAGE>
3. Duration. Such services will be provided through May 31, 1997;
provided that upon 90 days' prior written notice from National, such services
may be extended through August 31, 1997.
11
<PAGE>
EXHIBIT B
HUMAN RESOURCES SHARED SERVICES
A. Employee Relations
1. Description of Services. Fairchild will provide non 200 mm project
National groups on site with employee relations services (HR Business Partner
Support).
2. Cost. (a) For routine employee relations support Fairchild will
allocate to the served National groups a share of Fairchild's total cost for
such services based on head count ratio.
(b) For non-routine employee relations support such as, but not limited
to, layoffs, restructuring and business moves, Fairchild will charge to National
groups requiring such support the incremental costs for such services. This
shall be in addition to the charges to National under (a) above.
3. Duration. Through December 31, 1996. Thereafter, all National
Employee Relations services for the 200 mm facility will be provided by
National.
B. Payroll.
No shared services.
C. Human Resource Information Services (HRIS).
1. Description of Services. Fairchild will continue to generate reports
from common systems for National.
2. Cost. Services to be provided at Fairchild's cost allocated by site
head count.
12
<PAGE>
3. Duration. Such services shall continue until such time as National
has its own system operational or until such time as Fairchild does not have
access to National's HRIS system, whichever occurs first.
D. Service Center.
1. Description of Services. Fairchild will continue to store and protect
records and continue to offer benefits information and sign up and orientation
support for National.
2. Cost. Services to be provided at Fairchild's cost allocated by site
head count.
3. Duration. This service shall continue until National is ready to
support National employees on the South Portland site from Santa Clara,
California, but no later than May 31, 1997.
E. Occupational Health Services.
1. Description of Services. Fairchild will provide National with
occupational health services at the Fairchild main plant. Fairchild will also
provide training assistance to National if required to any occupational health
nurse hired by National. National will indemnify, defend and hold harmless
Fairchild from and against any claims, costs or liabilities, including
reasonable attorneys' fees, arising out of or relating to use by National
employees of Fairchild's occupational health services.
2. Cost. To be provided at Fairchild's cost allocated by employee head
count.
3. Duration. Through May 31, 1997.
13
<PAGE>
F. Employment Services.
1. Description of Services. Fairchild shall provide National with
recruiting, interviewing, sourcing, hiring and other related services as
required by National.
2. Cost. Services to be provided at Fairchild's cost allocated by site
head count.
3. Duration. Through May 31, 1997.
G. Cafeteria.
1. Description of Services. There will be a single vendor for cafeteria
services for both sites. Fairchild will negotiate and contract with said
vendor; provided that such vendor shall be satisfactory to National in its
reasonable judgment. The cafeteria on the Fairchild site will be used by
Fairchild employees. The cafeteria in Building 10 will be used by National
employees and Building 10 tenants. The kitchen in the Building 10 cafeteria
will support both cafeterias; provided that National may give 90 days' notice to
terminate such arrangement.
2. Cost. Each building owner shall be responsible for all costs of
maintaining and operating its own cafeteria.
3. Duration. Until terminated by mutual agreement of the parties.
14
<PAGE>
H. Site University and Organizational Development.
1. Description of Services. (a) Fairchild will provide educational
registrar, enrollment and administrative services in connection with employee
educational seminars and other continuing educational matters. Fairchild will
also search for and screen vendors to provide such educational services.
Certain proprietary classes will be open only to one Company.
(b) Fairchild will continue to administer the National Technology
University Program.
2. Cost. (a) National participation will be on a pay-as-you-go plan.
Class costs will be charged at cost plus 45% and laboratory fees will be an
additional charge. (b) National Technology University program classes will be
billed at cost plus $400.00 per course per student.
3. Duration. Until terminated by mutual agreement of the parties.
I. Communication and External Relations.
1. Description of Services. (a) Basic N! NEWS subscription services will
continue to be shared by the parties as follows:
(i) National and Fairchild will cooperate in providing N! News
services to both sites
(ii) Each company will separately contract with Target Vision for base
services
(iii) A common contractor mutually agreeable to the parties will
provide on site company specific programming, and each of
National and Fairchild will be invoiced separately for services
rendered by such contractor
15
<PAGE>
(iv) The existing N! News equipment in the broadcast center will
remain the property of Fairchild, but be used by both companies
(v) The monitors and cabling to such equipment will be owned by the
owner of the building in which said monitors and cabling are
located
(vi) Fairchild will be able to use National monitors in space it
leases from National.
2. Cost. (a) N! News costs shall be shared equally between National and
Fairchild. This will include costs to produce shared programming, facilities
and equipment depreciation, new equipment that is to be shared by National and
Fairchild, maintenance and other expenses associated with N! News. Each company
may at its own cost purchase equipment to be used only by it.
(b) Such services shall be provided at Fairchild's cost allocated by total
site head count.
3. Duration. (a) Basic N! NEWS shall continue until mutual agreement of
the parties.
(b) Public relation services rendered by Fairchild shall terminate on
May 31, 1997.
J. Credit Union
1. Description of Services. Subject to any applicable regulatory
restrictions, Fairchild and National will cooperate in using their best efforts
to establish the current credit union on site for use by employees of both
companies. This will include a liaison with credit union management,
restructuring of the Board of Directors to fairly represent
16
<PAGE>
employees of both companies and determining an on-site location accessible by
employees from both companies.
2. Cost. Any cost not covered by the credit union or normally covered by
the employer will be shared by National and Fairchild based on a head count
ratio.
3. Duration. Until terminated by mutual agreement of the parties.
17
<PAGE>
EXHIBIT C
FINANCE
1. Description of Service. Fairchild will provide payroll (weekly
processing of regular pay), accounts payable (process invoices, investigate
issues), and general ledger (maintenance and badge processing).
2. Cost. To be provided at Fairchild's cost.
3. Duration. Such services shall be provided through August 31, 1997.
18
<PAGE>
EXHIBIT D
QUALITY ASSURANCE SERVICES
A. Document Control
1. Description of Service. Fairchild will render document control
services to National to maintain the Document Control System ("DCS") integrity,
maintain user accounts, maintain compliance to site and corporate requirements,
maintain route and template definitions, assist users of DCS, review documents
for format and integrity and prepare document control reports.
2. Cost. These services will be billed at Fairchild's cost.
3. Duration. This service will be provided through August 31, 1997;
provided that upon 90 days' prior notice by National, it may be extended through
November 30, 1997.
B. Incoming Quality Assurance
1. Description of Services. Fairchild will provide incoming quality
assurance services to National for direct manufacturing materials, including
maintaining compliance to site and corporate specifications, filing statistical
process control data, disposition of discrepant material, training receiving
personnel, resolving discrepant material reports with suppliers, maintaining
certificate of conformance files, monitoring shipment quality and preparing IQA
reports.
2. Cost. This service will be provided at Fairchild's cost.
3. Duration. This service will be provided through August 31, 1997;
provided, however, that upon 90 days' written notice by National the services
may be extended through November 30, 1997.
19
<PAGE>
C. Failure Analysis and Calibration Labs
1. Description of Services. These labs will continue to be located in
Building 10 on the National site, but be owned, staffed and operated by
Fairchild personnel. Fairchild shall provide laboratory services to National as
agreed by National and Fairchild. Upon termination of its lease of Building 10,
Fairchild may remove all of its laboratory equipment.
2. Cost Allocation. Services shall be provided at Fairchild's cost.
3. Duration. This service will continue through December, 1997.
20
<PAGE>
EXHIBIT E
INFORMATION SERVICES
A. VAX Data Center
1. Description of Service.
a. Fairchild will provide National with the ability to run its Workstream
production environment on VAX computers within the Fairchild data
center through November 30, 1997. Fairchild will provide operational
support for Workstream; National agrees to accept set up,
configuration and access restrictions which Fairchild feels necessary
to guaranty the integrity of the Fairchild production environment.
b. National agrees to establish a Workstream development, test and
experiment computing environment that is completely separate from the
Fairchild system. National will provide and manage such systems, and
Fairchild will provide operational support for same.
2. Cost.
a. National will pay for the services described in paragraph 1.a. above
on a "pay for use" basis, with CPU and disc space usage charged at the
current rate structure. If, due to National's use, Fairchild needs to
purchase additional computer capacity, National agrees to reimburse
Fairchild for the cost of same.
b. The Fairchild services to be rendered pursuant to paragraph 1.b. above
will be charged to National on an actual cost basis.
21
<PAGE>
c. National also agrees to pay a reasonable share of corporate computer
integrated manufacturing costs allocated to Fairchild. Commencing in
period five of National's fiscal year '97, Workstream depreciation and
maintenance, SAS license maintenance and similar costs will be
allocated to National at 10% of the actual cost to Fairchild.
3. Duration.
a. The services described in paragraphs 1.a. and 1.b. above shall be
rendered by Fairchild through November 30, 1997.
b. The costs described in paragraph 2.c. above shall be charged to
National through May 31, 1997.
B. Electronic Mail
1. Description of Services. Fairchild agrees to migrate and support all
National PROFS users from TEVM2 to the VMS-based POP server solution Fairchild
is implementing.
2. Cost. National will be charged a proportional (based on number of
users) share of the costs involved in the foregoing implementation and ongoing
support. E-mail usage will be charged on a "pay for use" basis.
3. Duration. These services will be rendered through August 31, 1997.
22
<PAGE>
C. PC Support
1. Description of Services. Fairchild will provide PC desktop and Novell
support. This support will take the form of the current Vanstar contractor
already funded by National as well as one additional contractor that will be
hired by Fairchild.
2. Cost. Fairchild and National shall split PC software licenses
proportionally on a Novell user account basis. Vanstar contractors will be
billed to National on an actual cost basis.
3. Duration. The foregoing services will be rendered through February of
1997. At that time, the Vanstar contractors working with National will be
transferred to and will contract directly with National.
D. Wide Area Network (WAN) Support
1. Description of Services. National agrees to cause its corporate
headquarters information services to provide National with a BCN router for
National's use no later than May 31, 1997. There will be no Fairchild support.
2. Cost. Prior to National being provided with a separate BCN router,
Fairchild will charge National 15% of all corporate information service
allocations to Fairchild. As soon as National is provided with a separate BCN
router, it will pay directly to National corporate all WAN charges.
3. Duration. National will have an independent BCN router and be paying
all charges directly to corporate headquarters no later than May 31, 1997.
23
<PAGE>
E. Local Area Network (LAN) Support
1. Description of Services.
a. Fairchild will provide LAN support to Building 10, the McBride
building and the Boulos buildings. Building 10 network wiring and
network closet patch panels will remain part of Building 10 and,
therefore, be owned by National. All other network hardware located
in Building 10 will be divided between Fairchild and National based on
the current user ratio between National and Fairchild. Fairchild will
also provide support and migration assistance to National in
connection with establishing National's independent LAN.
b. A Building 18 dedicated LAN is to be installed by National no later
than February, 1997 and will be tied into the National (Maine) BCN
router. All installation work required in connection with such
dedicated LAN will be done by National personnel.
2. Costs. All support and migration assistance from Fairchild will be
charged to National on an actual cost basis.
3. Duration. The LAN support to be rendered by Fairchild pursuant to
paragraph 1.a. above will continue through May 31, 1997. After that date, all
National LAN requirements are to be handled by National.
F. Shop Floor Control
1. Description of Services. Fairchild will continue to provide
operational support for Workstream until the VAX data center separation is
complete (no later than November 30, 1997, as provided above). Fairchild will
assist in the transition of
24
<PAGE>
operational support to National and will provide very limited assistance (a
maximum of 36 hours per month) in connection with Workstream modeling and
implementation support.
2. Costs. All services to be charged at Fairchild's actual cost.
3. Duration. Services to be rendered through November 30, 1997.
G. Business Systems
1. Description of Services. Fairchild will continue to provide limited
support in accordance with current practices for individual business systems
until Fairchild implements a replacement solution for Fairchild or the end of
May, 1998, whichever occurs first.
2. Cost. All services rendered by Fairchild shall be charged to National
at cost.
3. Duration. Services to be rendered by Fairchild until Fairchild
implements a replacement solution or the end of May, 1998, whichever occurs
first.
H. Telephones
1. Description of Services. Fairchild will continue the existing phone
configuration through August 31, 1997 and will support National's migration to
National purchased phone switches. Additionally, Fairchild agrees to support
the first 50 Building 18 phones until a Building 18 phone switch is installed.
National agrees to install such switch in Building 18 no later than the end of
February, 1997.
2. Cost. All services to be billed to National at Fairchild's cost.
3. Duration. With respect to existing phones, through August 31, 1997.
With respect to Building 18 phones, through the end of February, 1997.
25
<PAGE>
I. Dial In Services.
1. Description of Services. National and Fairchild agree to share all
current dial in services and capabilities until National provides its own
capability.
2. Cost. No charge.
3. Duration. Through May 31, 1997, after which National will provide its
own capability.
J. Video Conference Services.
1. Description of Services. National and Fairchild will continue to
share outsourced administration of video conference facilities.
2. Cost. All third-party costs shall be shared equally by the parties;
facility and hardware costs shall be borne by National and Fairchild for their
respective buildings. Additionally, National and Fairchild may agree to allow
use by the other of their video conference facilities at an hourly rate to be
negotiated.
3. Duration. This arrangement will continue until terminated by one of
the parties on 90 days' written notice to the other.
26
<PAGE>
EXHIBIT 10.10
================================================================================
CREDIT AGREEMENT
among
FSC SEMICONDUCTOR CORPORATION,
FAIRCHILD SEMICONDUCTOR CORPORATION,
VARIOUS BANKS,
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT,
CREDIT SUISSE FIRST BOSTON,
as SYNDICATION AGENT,
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as DOCUMENTATION AGENT
----------------------------------
Dated as of March 11, 1997
----------------------------------
$195,000,000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit.................................... 1
1.01 The Commitments............................................... 1
1.02 Minimum Amount of Each Borrowing.............................. 4
1.03 Notice of Borrowing........................................... 4
1.04 Disbursement of Funds......................................... 5
1.05 Notes......................................................... 6
1.06 Conversions................................................... 8
1.07 Pro Rata Borrowings........................................... 8
1.08 Interest...................................................... 9
1.09 Interest Periods.............................................. 10
1.10 Increased Costs, Illegality, etc.............................. 11
1.11 Compensation.................................................. 13
1.12 Change of Lending Office...................................... 14
1.13 Replacement of Banks.......................................... 14
SECTION 2. Letters of Credit............................................. 16
2.01 Letters of Credit............................................. 16
2.02 Letter of Credit Requests..................................... 17
2.03 Letter of Credit Participations............................... 18
2.04 Agreement to Repay Letter of Credit Drawings.................. 20
2.05 Increased Costs............................................... 21
SECTION 3. Commitment Commission; Fees; Reductions of Commitment......... 22
3.01 Fees.......................................................... 22
3.02 Voluntary Termination of Unutilized Commitments............... 23
3.03 Mandatory Reduction of Commitments............................ 24
SECTION 4. Prepayments; Payments; Taxes.................................. 25
4.01 Voluntary Prepayments......................................... 25
4.02 Mandatory Repayments and Commitment Reductions................ 26
4.03 Method and Place of Payment................................... 35
4.04 Net Payments; Taxes........................................... 35
(i)
<PAGE>
Page
----
SECTION 5. Conditions Precedent to Loans................................. 37
5.01 Execution of Agreement; Notes................................. 37
5.02 Fees, etc..................................................... 38
5.03 Opinions of Counsel........................................... 38
5.04 Corporate Documents; Proceedings; etc......................... 38
5.05 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Debt Agreements; Acquisition
Documents; Tax Sharing Agreements........................... 38
5.06 Consummation of Recapitalization Transaction.................. 39
5.07 Senior Subordinated Notes..................................... 41
5.08 Repayment of Purchase Price Note.............................. 41
5.09 Indebtedness.................................................. 41
5.10 Subsidiaries Guaranty......................................... 42
5.11 Pledge Agreement.............................................. 42
5.12 Security Agreement............................................ 42
5.13 Mortgages; Title Insurance; Surveys; etc...................... 43
5.14 Consent Letter................................................ 44
5.15 Adverse Change, etc........................................... 44
5.16 Litigation.................................................... 44
5.17 Solvency Certificate; Environmental Analyses; Insurance....... 45
5.18 Pro Forma Balance Sheet; Financial Statements;
Projections................................................. 45
SECTION 6. Conditions Precedent to All Credit Events..................... 45
6.01 No Default; Representations and Warranties.................... 45
6.02 Notice of Borrowing; Letter of Credit Request................. 46
SECTION 7. Representations, Warranties and Agreements.................... 46
7.01 Corporate Status.............................................. 46
7.02 Corporate Power and Authority................................. 47
7.03 No Violation.................................................. 47
7.04 Governmental Approvals........................................ 47
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc............................... 48
7.06 Litigation.................................................... 49
7.07 True and Complete Disclosure.................................. 49
7.08 Use of Proceeds; Margin Regulations........................... 50
7.09 Tax Returns and Payments...................................... 50
7.10 Compliance with ERISA......................................... 50
7.11 The Security Documents........................................ 52
(ii)
<PAGE>
Page
----
7.12 Representations and Warranties in Documents................... 53
7.13 Properties.................................................... 53
7.14 Capitalization................................................ 54
7.15 Subsidiaries.................................................. 54
7.16 Compliance with Statutes, etc................................. 54
7.17 Investment Company Act........................................ 55
7.18 Public Utility Holding Company Act............................ 55
7.19 Environmental Matters......................................... 55
7.20 Labor Relations............................................... 56
7.21 Patents, Licenses, Franchises and Formulas.................... 56
7.22 Indebtedness.................................................. 56
7.23 Transaction................................................... 56
7.24 Special Purpose Corporations.................................. 57
SECTION 8. Affirmative Covenants......................................... 57
8.01 Information Covenants......................................... 57
8.02 Books, Records and Inspections................................ 61
8.03 Maintenance of Property; Insurance............................ 62
8.04 Corporate Franchises.......................................... 63
8.05 Compliance with Statutes, etc................................. 63
8.06 Compliance with Environmental Laws............................ 63
8.07 ERISA......................................................... 64
8.08 End of Fiscal Years; Fiscal Quarters.......................... 66
8.09 Performance of Obligations.................................... 66
8.10 Payment of Taxes.............................................. 66
8.11 Ownership of Subsidiaries..................................... 66
8.12 Additional Security; Further Assurances; Surveys.............. 66
8.13 Interest Rate Protection...................................... 68
8.14 Foreign Subsidiaries Security................................. 69
SECTION 9. Negative Covenants............................................ 70
9.01 Liens......................................................... 70
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc........ 73
9.03 Dividends..................................................... 74
9.04 Indebtedness.................................................. 75
9.05 Advances, Investments and Loans............................... 77
9.06 Transactions with Affiliates.................................. 79
9.07 Capital Expenditures.......................................... 80
9.08 Consolidated Interest Coverage Ratio.......................... 81
(iii)
<PAGE>
Page
----
9.09 Consolidated Fixed Charge Coverage Ratio...................... 81
9.10 Maximum Leverage Ratio........................................ 82
9.11 Limitation on Modifications of Indebtedness;
Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc................... 82
9.12 Limitation on Certain Restrictions on Subsidiaries............ 83
9.13 Limitation on Issuance of Capital Stock....................... 84
9.14 Limitation on Creation of Subsidiaries........................ 84
9.15 Business...................................................... 84
9.16 Designated Senior Indebtedness................................ 85
SECTION 10. Events of Default............................................ 85
10.01 Payments..................................................... 85
10.02 Representations, etc......................................... 85
10.03 Covenants.................................................... 85
10.04 Default Under Other Agreements............................... 85
10.05 Bankruptcy, etc.............................................. 86
10.06 ERISA........................................................ 86
10.07 Security Documents........................................... 87
10.08 Guaranty..................................................... 88
10.09 Judgments.................................................... 88
10.10 Change of Control............................................ 88
SECTION 11. Definitions and Accounting Terms............................. 89
11.01 Defined Terms................................................ 89
SECTION 12. The Agents...................................................120
12.01 Appointment..................................................120
12.02 Nature of Duties.............................................121
12.03 Lack of Reliance on the Agents...............................121
12.04 Certain Rights of the Agents.................................121
12.05 Reliance.....................................................122
12.06 Indemnification..............................................122
12.07 Each Agent in its Individual Capacity........................122
12.08 Holders......................................................122
12.09 Resignation by the Agents....................................123
SECTION 13. Miscellaneous................................................123
13.01 Payment of Expenses, etc.....................................123
(iv)
<PAGE>
Page
----
13.02 Right of Setoff..............................................125
13.03 Notices......................................................125
13.04 Benefit of Agreement.........................................125
13.05 No Waiver; Remedies Cumulative...............................127
13.06 Payments Pro Rata............................................128
13.07 Calculations; Computations...................................128
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL.................................129
13.09 Counterparts.................................................130
13.10 Effectiveness................................................130
13.11 Headings Descriptive.........................................131
13.12 Amendment or Waiver; etc.....................................131
13.13 Survival.....................................................133
13.14 Domicile of Loans............................................133
13.15 Limitation on Additional Amounts, Etc........................133
13.16 Confidentiality..............................................134
13.17 Register.....................................................134
13.18 Certain Prior Documents......................................135
SECTION 14. Holdings Guaranty............................................135
14.01 The Holdings Guaranty........................................135
14.02 Bankruptcy...................................................136
14.03 Nature of Liability..........................................136
14.04 Independent Obligation.......................................136
14.05 Authorization................................................137
14.06 Reliance.....................................................138
14.07 Subordination................................................138
14.08 Waiver.......................................................138
14.09 Maximum Liability............................................139
(v)
<PAGE>
SCHEDULE I Commitments (Sections 3.02, 4.01, 11.01 ["Bank"; "Revolving
Loan Commitment"; "Tranche A Term Loan Commitment";
"Tranche B Term Loan Commitment"], 13.04(b))
SCHEDULE II Bank Addresses (Section 13.03)
SCHEDULE III Real Property (Sections 5.13(a), 7.11(c), 7.13)
SCHEDULE IV Existing Liens (Section 9.01(iii))
SCHEDULE V Existing Indebtedness (Sections 5.09, 7.22,
9.04(iii))
SCHEDULE VI Insurance (Section 8.03(a))
SCHEDULE VII ERISA (Section 7.10)
SCHEDULE VIII Subsidiaries (Sections 7.15, 11.01
["Subsidiary Assignor"; "Subsidiary Guarantor"])
SCHEDULE IX Labor Relations (Section 7.20)
SCHEDULE X Projections (Sections 7.05(d), 7.22)
SCHEDULE XI Securities (Section 7.14)
SCHEDULE XII Organization Chart (Section 7.15)
EXHIBIT A Notice of Borrowing (Section 1.03(a))
EXHIBIT B-1 Tranche A Term Note (Section 1.05(a))
EXHIBIT B-2 Tranche B Term Note (Section 1.05(a))
EXHIBIT B-3 Revolving Note (Section 1.05(a))
EXHIBIT B-4 Swingline Note (Section 1.05(a))
EXHIBIT C Letter of Credit Request (Section 2.02(a))
EXHIBIT D Section 4.04(b)(ii) Certificate (Section 4.04(b)(ii))
EXHIBIT E Opinion of Dechert Price & Rhoads (Section 5.03)
EXHIBIT F Officers' Certificate (Section 5.04(a))
EXHIBIT G Subsidiaries Guaranty (Section 5.10)
EXHIBIT H Pledge Agreement (Section 5.11)
EXHIBIT I Security Agreement (Section 5.12)
EXHIBIT J Consent Letter (Section 5.14)
EXHIBIT K Solvency Certificate (Section 5.17)
EXHIBIT L Assignment and Assumption Agreement (Sections 1.13,
13.04(b), 13.17 ["Assignment and Assumption
Agreement"])
EXHIBIT M Subordination Provisions
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of March 11, 1997, among FSC
SEMICONDUCTOR CORPORATION, a Delaware corporation ("Holdings"), FAIRCHILD
SEMICONDUCTOR CORPORATION, a Delaware corporation (the "Borrower"), the Banks
party hereto from time to time, BANKERS TRUST COMPANY, as Administrative Agent
(in such capacity, the "Administrative Agent"), CREDIT SUISSE FIRST BOSTON, as
Syndication Agent (in such capacity, the "Syndication Agent"), and CANADIAN
IMPERIAL BANK OF COMMERCE, as Documentation Agent (in such capacity, the
"Documentation Agent" and, together with the Syndication Agent and the
Administrative Agent, each an "Agent" and collectively the "Agents") (all
capitalized terms used herein and defined in Section 11 are used herein as
therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the respective
credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Bank with a Tranche A Term Loan Commitment
severally agrees to make, on the Initial Borrowing Date, a term loan (each, a
"Tranche A Term Loan" and, collectively, the "Tranche A Term Loans") to the
Borrower, which Tranche A Term Loans (i) shall be made and initially maintained
as a single Borrowing of Base Rate Loans (subject to the option to convert such
Tranche A Term Loans pursuant to Section 1.06) and (ii) shall be made by each
Bank in that initial aggregate principal amount as is equal to the Tranche A
Term Loan Commitment of such Bank on such date (before giving effect to any
reductions thereto on such date pursuant to Section 3.03(b)(i) but after giving
effect to any reductions thereto on or prior to such date pursuant to Section
3.03(b)(ii)). Once repaid, Tranche A Term Loans incurred hereunder may not be
reborrowed.
(b) Subject to and upon the terms and conditions set forth herein,
each Bank with a Tranche B Term Loan Commitment severally agrees to make, on the
Initial Borrowing Date, a term loan (each, a "Tranche B Term Loan" and,
collectively, the "Tranche B Term Loans") to the Borrower, which Tranche B Term
Loans (i) shall be made and initially maintained as a single Borrowing of Base
Rate Loans (subject to the option to convert such Tranche B Term Loans pursuant
to Section 1.06) and (ii) shall be made by
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each Bank in that initial aggregate principal amount as is equal to the Tranche
B Term Loan Commitment of such Bank on such date (before giving effect to any
reductions thereto on such date pursuant to Section 3.03(c)(i) but after giving
effect to any reductions thereto on or prior to such date pursuant to Section
3.03(c)(ii)). Once repaid, Tranche B Term Loans incurred hereunder may not be
reborrowed.
(c) Subject to and upon the terms and conditions set forth herein,
each Bank with a Revolving Loan Commitment severally agrees, at any time and
from time to time after the Initial Borrowing Date and prior to the Revolving
Loan Maturity Date, to make a revolving loan or revolving loans (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate
Loans or Eurodollar Loans, provided that (A) except as otherwise specifically
provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing
shall at all times be of the same Type and (B) no Revolving Loans maintained as
Eurodollar Loans may be incurred prior to the earlier of (1) the 14th day after
the Initial Borrowing Date and (2) the Syndication Date, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed for
any Bank at any time outstanding that aggregate principal amount which, when
added to the product of (x) such Bank's Adjusted Percentage and (y) the sum of
(I) the aggregate amount of all Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at such time
and (II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Bank at such time and
(iv) shall not exceed for all Banks at any time outstanding that aggregate
principal amount which, when added to (x) the amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time and (y) the aggregate principal amount of all
Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) then outstanding, equals the Total Revolving Loan Commitment at
such time.
(d) Subject to and upon the terms and conditions herein set forth,
the Swingline Bank in its individual capacity agrees to make at any time and
from time to time on and after the Initial Borrowing Date and prior to the
Swingline Expiry Date, a revolving loan or revolving loans (each, a "Swingline
Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline
Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid
and reborrowed in accordance with the provisions hereof, (iii) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks
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then outstanding and the Letter of Credit Outstandings at such time, an amount
equal to the Adjusted Total Revolving Loan Commitment at such time (after giving
effect to any reductions to the Adjusted Total Revolving Loan Commitment on such
date), (iv) shall not exceed at any time outstanding the Maximum Swingline
Amount and (v) shall not be extended if the Swingline Bank receives a written
notice from any Agent or the Required Banks that has not been rescinded that
there is a Default or an Event of Default in existence hereunder.
(e) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the other Banks that its outstanding Swingline Loans
shall be funded with a Borrowing of Revolving Loans (provided that such notice
shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 10.05 or upon the exercise of any
of the remedies provided in the last paragraph of Section 10), in which case a
Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing,
a "Mandatory Borrowing") shall be made on the immediately succeeding Business
Day by all Banks with a Revolving Loan Commitment (without giving effect to any
reductions thereto pursuant to the last paragraph of Section 10) pro rata based
on each Bank's Adjusted Percentage (determined before giving effect to any
termination of the Revolving Loan Commitments pursuant to the last paragraph of
Section 10) and the proceeds thereof shall be applied directly to the Swingline
Bank to repay the Swingline Bank for such outstanding Swingline Loans. Each such
Bank hereby irrevocably agrees to make Revolving Loans upon one Business Day's
notice 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 Bank notwithstanding (i) the amount of the Mandatory Borrowing may not
comply with the minimum amount for Borrowings otherwise required hereunder, (ii)
whether any conditions specified in Section 6 are then satisfied, (iii) whether
a Default or an Event of Default then exists, (iv) the date of such Mandatory
Borrowing and (v) the amount of the Total Revolving Loan Commitment or the
Adjusted Total Revolving Loan Commitment at such time. 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
proceeding under the Bankruptcy Code with respect to the Borrower), then each
such Bank hereby agrees that it shall forthwith purchase (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such purchase)
from the Swingline Bank such participations in the outstanding Swingline Loans
as shall be necessary to cause such Banks to share in such Swingline Loans
ratably based upon their respective Adjusted Percentages (determined before
giving effect to any termination of the Revolving Loan Commitments pursuant to
the last paragraph of Section 10), provided that (x) all interest payable on the
Swingline Loans shall be for the account of the Swingline Bank until the date as
of which the respective participation is required to be purchased and, to the
extent attributable to the purchased participation, shall be payable
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to the participant from and after such date and (y) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Bank
shall be required to pay the Swingline Bank interest on the principal amount of
participation purchased for each day from and including the day upon which the
Mandatory Borrowing would otherwise have occurred to but excluding the date of
payment for such participation, at the overnight Federal Funds Rate for the
first three days and at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of any Tranche of Term Loans shall not be less than
$5,000,000. The aggregate principal amount of each Borrowing of Revolving Loans
shall be not less than (x) in the case of a Borrowing of Eurodollar Loans,
$5,000,000 and (y) in the case of a Borrowing of Base Rate Loans, $1,000,000,
provided that Mandatory Borrowings shall be made in the amounts required by
Section 1.01(e). The aggregate principal amount of each Borrowing of Swingline
Loans shall not be less than $250,000 and, if greater, shall be in an integral
multiple of $100,000. More than one Borrowing may occur on the same date, but at
no time shall there be outstanding more than twelve Borrowings of Eurodollar
Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make
a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Administrative Agent at its Notice Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Base Rate Loan and at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of
each Eurodollar Loan to be made hereunder, provided that any such notice shall
be deemed to have been given on a certain day only if given before 11:00 A.M.
(New York time) in the case of a Borrowing of Eurodollar Loans and 12:00 Noon
(New York time) in the case of a Borrowing of Base Rate Loans on such day. Each
such written notice or written confirmation of telephonic notice (each a "Notice
of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be
irrevocable and shall be given by the Borrower in the form of Exhibit A,
appropriately completed to specify the aggregate principal amount of the Loans
to be made pursuant to such Borrowing, the date of such Borrowing (which shall
be a Business Day), whether the Loans being made pursuant to such Borrowing
shall constitute Tranche A Term Loans, Tranche B Term Loans or Revolving Loans
and whether the Loans being made pursuant to such Borrowing are to be initially
maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
initial Interest Period to be applicable thereto. The Administrative Agent shall
promptly give each Bank which is required to make Loans of the Tranche specified
in the respective Notice of Borrowing, notice of such proposed Borrowing, of
such Bank's proportionate share thereof and of the other matters required by the
immediately preceding sentence to be specified in the Notice of Borrowing.
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(b)(i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Bank not later than 12:00
Noon (New York time) on the date that a Swingline Loan is to be made, written
notice or telephonic notice promptly confirmed in writing of each Swingline Loan
to be made hereunder. Each such notice shall be irrevocable and specify in each
case (A) the date of Borrowing (which shall be a Business Day) and (B) the
aggregate principal amount of the Swingline Loans to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(e).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Bank, as the case may be, may act without
liability upon the basis of telephonic notice of such Borrowing, believed by the
Administrative Agent or the Swingline Bank, as the case may be, in good faith to
be from the Chairman of the Board, the President, the Treasurer, any Assistant
Treasurer or any Controller of the Borrower (or any other officer of the
Borrower designated in writing to the Administrative Agent and the Swingline
Bank by the Chairman of the Board, the President or the Treasurer as being
authorized to give such notices under this Agreement) prior to receipt of
written confirmation. In each such case, the Borrower hereby waives the right to
dispute the Administrative Agent's and the Swingline Bank's record of the terms
of such telephonic notice of such Borrowing of Loans.
1.04 Disbursement of Funds. Except as otherwise specifically
provided in the immediately succeeding sentence, no later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing (or (x) in the case
of Swingline Loans, not later than 2:00 P.M. (New York time) on the date
specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory
Borrowings, not later than 12:00 Noon (New York time) on the date specified in
Section 1.01(e)), each Bank with a Commitment of the respective Tranche will
make available its pro rata portion of each such Borrowing requested to be made
on such date (or in the case of Swingline Loans, the Swingline Bank shall make
available the full amount thereof). All such amounts shall be made available in
Dollars and in immediately available funds at the Payment Office of the
Administrative Agent, and the Administrative Agent will make available to the
Borrower at the Payment Office the aggregate of the amounts so made available by
the Banks (for Loans other than Swingline Loans, prior to 1:00 P.M. (New York
time) on such day, to the extent of funds actually received by the
Administrative Agent prior to 12:00 Noon (New York time) on such day). Unless
the Administrative Agent shall have been notified by any Bank prior to the date
of Borrowing that such Bank does not intend to make available to the
Administrative Agent
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such Bank's portion of any Borrowing to be made on such date, the Administrative
Agent may assume that such Bank has made such amount available to the
Administrative Agent on such date of Borrowing and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the
Administrative Agent by such Bank, the Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower and
the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to recover
on demand from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower until the
date such corresponding amount is recovered by the Administrative Agent, at a
rate per annum equal to (i) if recovered from such Bank, at the overnight
Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section 1.08.
Nothing in this Section 1.04 shall be deemed to relieve any Bank from its
obligation to make Loans hereunder or to prejudice any rights which the Borrower
may have against any Bank as a result of any failure by such Bank to make Loans
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made by each Bank shall be evidenced (i) if Tranche A
Term Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-1 with blanks appropriately completed in
conformity herewith (each, a "Tranche A Term Note" and, collectively, the
"Tranche A Term Notes"), (ii) if Tranche B Term Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-2
with blanks appropriately completed in conformity herewith (each, a "Tranche B
Term Note" and, collectively, the "Tranche B Term Notes"), (iii) if Revolving
Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-3, with blanks appropriately completed in
conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving
Notes") and (iv) if Swingline Loans, by a promissory note duly executed and
delivered by the Borrower substantially in the form of Exhibit B-4, with blanks
appropriately completed in conformity herewith (the "Swingline Note").
(b) The Tranche A Term Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be dated
the Initial Borrowing Date (or, in the case of Tranche A Term Notes issued after
the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be
in a stated principal amount equal to the Tranche A Term Loan made by such Bank
on the Initial Borrowing Date (or, in the case of Tranche A Term Notes issued
after the Initial Borrowing Date, be in a stated principal
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amount equal to the outstanding principal amount of the Tranche A Term Loan of
such Bank on the date of the issuance thereof) and be payable in the principal
amount of Tranche A Term Loans evidenced thereby, (iv) mature on the Tranche A
Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause
of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby, (vi) be subject to voluntary prepayment and
mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled
to the benefits of this Agreement and the other Credit Documents.
(c) The Tranche B Term Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be dated
the Initial Borrowing Date (or, in the case of Tranche B Term Notes issued after
the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be
in a stated principal amount equal to the Tranche B Term Loan made by such Bank
on the Initial Borrowing Date (or, in the case of Tranche B Term Notes issued
after the Initial Borrowing Date, be in a stated principal amount equal to the
outstanding principal amount of the Tranche B Term Loan of such Bank on the date
of the issuance thereof) and be payable in the principal amount of Tranche B
Term Loans evidenced thereby, (iv) mature on the Tranche B Term Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(d) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date (or, in the case of Revolving Notes issued after the Initial
Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated
principal amount equal to the Revolving Loan Commitment of such Bank and be
payable in the principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment and mandatory repayment as provided in Sections 4.01 and
4.02 and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
(e) The Swingline Note issued to the Swingline Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of the Swingline Bank and
be dated the Initial Borrowing Date (or, in the case of any Swingline Note
issued after the Initial Borrowing Date, be dated the date of the issuance
thereof), (iii) be in a stated principal amount equal to the Maximum Swingline
Amount and be payable in the principal amount of the outstanding Swingline Loans
evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date,
(v) bear interest as provided in the appropriate clause of Section
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1.08 in respect of the Base Rate Loans evidenced thereby and (vi) be entitled to
the benefits of this Agreement and the other Credit Documents.
(f) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation or endorsement shall not affect the Borrower's
obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert, on
any Business Day occurring on or after the earlier of (1) the 14th day after the
Initial Borrowing Date and (2) the Syndication Date, all or a portion equal to
at least (x) in the case of a conversion of Term Loans, $5,000,000 and (y) in
the case of a conversion of Revolving Loans, $5,000,000 (or $1,000,000 if in the
case of a conversion into Base Rate Loans), of the outstanding principal amount
of Loans made pursuant to one or more Borrowings (so long as of the same
Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of
another Type of Loan, provided that (i) if for any reason whatsoever any
Euro-dollar Loans are converted into Base Rate Loans on a day which is not the
last day of an Interest Period applicable to the Loans being converted, the
Borrower shall pay all amounts owing in connection therewith as required by
Section 1.11, (ii) no partial conversion of Eurodollar Loans shall reduce the
outstanding principal amount of such Eurodollar Loans made pursuant to a single
Borrowing to less than $5,000,000, (iii) unless the Required Banks otherwise
specifically agree in writing, Base Rate Loans may only be converted into
Eurodollar Loans if no Default or Event of Default is in existence on the date
of the conversion, (iv) no conversion pursuant to this Section 1.06 shall result
in a greater number of Eurodollar Borrowings than is permitted under Section
1.02 and (v) Swingline Loans may not be converted pursuant to this Section 1.06.
Each such conversion shall be effected by the Borrower by giving the
Administrative Agent at its Notice Office prior to 12:00 Noon (New York time) at
least (x) in the case of a conversion to Eurodollar Loans, three Business Days'
prior notice and (y) in the case of a conversion to Base Rate Loans, one
Business Day's prior notice (each a "Notice of Conversion") specifying the Loans
to be so converted, the Borrowing(s) pursuant to which such Loans were made and,
if to be converted into Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall give each Bank prompt notice
of any such proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans under this Agreement shall be incurred
from the Banks pro rata on the basis of their Tranche A Term Loan Commitments,
Tranche B Term Loan Commitments or Revolving Loan Commitments, as the case may
be, provided that all Borrowings of Revolving Loans made pursuant to a Mandatory
Borrowing shall be
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incurred from the Banks pro rata on the basis of their Adjusted Percentages. It
is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder, regardless of
the failure of any other Bank to make its Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Base Rate Loan from the date the proceeds
thereof are made available to the Borrower until the earlier of (i) the maturity
(whether by acceleration or otherwise) of such Base Rate Loan and (ii) the
conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06,
at a rate per annum which shall be equal to the sum of the Applicable Margin
plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower until the earlier of (i) the maturity (whether by
acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of
such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06 or 1.09, as
applicable, at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the sum of the Applicable Margin plus the
Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans
of the respective Tranche of Loans from time to time and (y) the rate which is
2% in excess of the rate then borne by such Loans, in each case with such
interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Banks thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
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1.09 Interest Periods. At the time it gives any Notice of Borrowing
or Notice of Conversion in respect of the making of, or conversion into, any
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or on the third Business Day prior to the expiration of an Interest Period
applicable to such Eurodollar Loan (in the case of any subsequent Interest
Period), the Borrower shall have the right to elect, by giving the
Administrative Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be a one, two, three or six month period, provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the
date of any conversion thereto from a Loan of a different Type) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on
a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if any Interest Period
for a Eurodollar Loan would otherwise expire on a day which is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(v) unless the Required Banks otherwise specifically agree in
writing, no Interest Period may be selected at any time when a Default or
Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of any Tranche
of Loans shall be selected which extends beyond the respective Maturity
Date for such Tranche of Loans; and
(vii) no Interest Period in respect of any Borrowing of Tranche A
Term Loans or Tranche B Term Loans, as the case may be, shall be selected
which extends beyond any date upon which a mandatory repayment of such
Tranche of Term
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Loans will be required to be made under Section 4.02(b) or (c), as the
case may be, if the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, which have Interest Periods
which will expire after such date will be in excess of the aggregate
principal amount of Tranche A Term Loans or Tranche B Term Loans, as the
case may be, then outstanding less the aggregate amount of such required
prepayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that any
Bank shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition
of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payment to any Bank of the principal of or interest on such
Eurodollar Loan or any other amounts payable hereunder (except for changes
in the rate of tax on, or determined by reference to, the net income or
profits of such Bank, or any franchise tax based on the net income or
profits of such Bank, in either case pursuant to the laws of the United
States of America, the jurisdiction in which it is organized or in which
its principal office or applicable lending office is located or any
subdivision thereof or therein), but without duplication of any amounts
payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change
in official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Eurodollar Rate
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and/or (y) other circumstances since the date of this Agreement affecting
such Bank or the interbank Eurodollar market or the position of such Bank
in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, and/or (y) impossible by compliance by any Bank in
good faith with any governmental request (whether or not having force of
law) or (z) impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the
interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and, except in the case of clause (i) above, to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the
case of clause (i) above, Eurodollar Loans shall no longer be available until
such time as the Administrative Agent notifies the Borrower and the Banks that
the circumstances giving rise to such notice by the Administrative Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above, the Borrower shall, subject to the provisions
of Section 13.15 (to the extent applicable) pay to such Bank, upon written
demand therefor, such additional amounts (in the form of an increased rate of,
or a different method of calculating, interest or otherwise as such Bank in its
reasonable discretion shall determine) as shall be required to compensate such
Bank for such increased costs or reductions in amounts received or receivable
hereunder (a written notice as to the additional amounts owed to such Bank,
showing in reasonable detail the basis for and the calculation thereof,
submitted to the Borrower by such Bank in good faith shall, absent manifest
error, be final and conclusive and binding on all the parties hereto) and (z) in
the case of clause (iii) above, the Borrower shall take one of the actions
specified in Section 1.10(b) as promptly as possible and, in any event, within
the time period required by law. Each of the Administrative Agent and each Bank
agrees that if it gives notice to the Borrower of any of the events described in
clause (i) or (iii) above, it shall promptly notify the Borrower and, in the
case of any such Bank, the Administrative Agent, if such event ceases to exist.
If any such event described in clause (iii) above ceases to exist as to a Bank,
the obligations of such Bank to make Eurodollar Loans and to convert Base Rate
Loans into Eurodollar Loans on the terms and conditions contained herein shall
be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the
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affected Eurodollar Loan is then being made initially or pursuant to a
conversion, cancel the respective Borrowing by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that the Borrower was
notified by the affected Bank or the Administrative Agent pursuant to Section
1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding,
upon at least one Business Day's written notice to the Administrative Agent,
require the affected Bank to convert such Eurodollar Loan into a Base Rate Loan,
provided that, if more than one Bank is affected at any time, then all affected
Banks must be treated the same pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, in each case introduced or changed after the date
hereof, will have the effect of increasing the amount of capital required or
expected to be maintained by such Bank or any corporation controlling such Bank
based on the existence of such Bank's Commitments hereunder or its obligations
hereunder, then the Borrower shall, subject to the provisions of Section 13.15
(to the extent applicable), pay to such Bank, upon its written demand therefor,
such additional amounts as shall be required to compensate such Bank or such
other corporation for the increased cost to such Bank or such other corporation
or the reduction in the rate of return to such Bank or such other corporation as
a result of such increase of capital. In determining such additional amounts,
each Bank will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, provided that such Bank's
determination of compensation owing under this Section 1.10(c) shall, absent
manifest error, be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show in reasonable detail the basis for and
calculation of such additional amounts.
1.11 Compensation. The Borrower shall, subject to the provisions of
Section 13.15 (to the extent applicable), compensate each Bank, upon its written
request (which request shall set forth in reasonable detail the basis for
requesting and the calculation of such compensation), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Bank to fund its Eurodollar Loans but excluding any
loss of anticipated profit) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a Borrowing of,
or conversion from or into, Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii)
if any repayment
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(including any repayment made pursuant to Section 4.02 or a result of an
acceleration of the Loans pursuant to Section 10) or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period with respect thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by the Borrower to
repay its Loans when required by the terms of this Agreement or any Note held by
such Bank or (y) any election made pursuant to Section 1.10(b).
1.12 Change of Lending Office. Each Bank agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such Bank,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Loans or Letters of Credit affected by such event, provided that such
designation is made on such terms that such Bank and its lending office suffer
no economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
in this Section 1.12 shall affect or postpone any of the obligations of the
Borrower or the right of any Bank provided in Sections 1.10, 2.05 and 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank
or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Borrower increased costs
in excess of those being generally charged by the other Banks, or (z) as
provided in Section 13.12(b) in the case of certain refusals by a Bank to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks, the
Borrower shall have the right, if no Default or Event of Default will exist
immediately after giving effect to the respective replacement, to either replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to the
Administrative Agent or, at the option of the Borrower, to replace only (a) the
Revolving Loan Commitment (and outstandings pursuant thereto) of the Replaced
Bank with an identical Revolving Loan Commitment provided by the Replacement
Bank or (b) in the case of a replacement as provided in Section 13.12(b) where
the consent of the respective Bank is required with respect to less than all
Tranches of its Loans or Commitments, the Commitments and/or outstanding Term
Loans of such Bank in respect of each Tranche where the consent of such Bank
would otherwise be individually required, with identical Commitments and/or
Loans of the respective Tranche provided by the Replacement Bank, provided that
(i) at the time of any replacement pursuant to this Section 1.13, the
Replacement Bank shall enter into one or
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more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with
all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement
Bank) pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans (or, in the case of the replacement of only
(a) the Revolving Loan Commitment, the Revolving Loan Commitment and outstanding
Revolving Loans or (b) the outstanding Term Loans of one or more Tranches, the
outstanding Term Loans of the respective Tranche or Tranches) of, and in each
case (except for the replacement of only the outstanding Term Loans of one or
more Tranches of the respective Bank) participations in Letters of Credit by,
the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced
Bank in respect thereof an amount equal to the sum (without duplication) of (A)
an amount equal to the principal of, and all accrued interest on, all
outstanding Loans (or, in the case of the replacement of only (I) the Revolving
Loan Commitment, the outstanding Revolving Loans or (II) the Term Loans of one
or more Tranches, the outstanding Term Loans of such Tranche or Tranches) of the
Replaced Bank, (B) except in the case of the replacement of only the outstanding
Term Loans of one or more Tranches of a Replaced Bank, an amount equal to all
Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced
Bank, together with all then unpaid interest with respect thereto at such time
and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to
the Replaced Bank (but only with respect to the relevant Tranche, in the case of
the replacement of less than all Tranches of Loans then held by the respective
Replaced Bank) pursuant to Section 3.01 and (y) except in the case of the
replacement of only the outstanding Term Loans of one or more Tranches of a
Replaced Bank, the respective Issuing Bank an amount equal to such Replaced
Bank's Adjusted Percentage (for this purpose, determined as if the adjustment
described in clause (y) of the immediately succeeding sentence had been made
with respect to such Replaced Bank) of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore funded
by such Replaced Bank, and (ii) all obligations of the Borrower owing to the
Replaced Bank (other than those (a) specifically described in clause (i) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid or (b) relating to any Tranche of Loans and/or Commitments of the
respective Replaced Bank which will remain outstanding after giving effect to
the respective replacement) shall be paid in full to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreements, the payment of amounts referred to in
clauses (i) and (ii) above and, if so requested by the Replacement Bank,
delivery to the Replacement Bank of the appropriate Note or Notes executed by
the Borrower, (x) the Replacement Bank shall become a Bank hereunder and, unless
the respective Replaced Bank continues to have outstanding Term Loans or a
Revolving Loan Commitment hereunder, the Replaced Bank shall cease to constitute
a Bank hereunder, except with respect to indemnification provisions under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01
and 13.06), which shall survive as to such Replaced Bank and (y) in the case of
a replacement of a Defaulting Bank with a Non-Defaulting Bank, the Adjusted
Percentages
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of the Banks shall be automatically adjusted at such time to give effect to such
replacement (and to give effect to the replacement of a Defaulting Bank with one
or more Non-Defaulting Banks).
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that any Issuing Bank
issue, at any time and from time to time on and after the Initial Borrowing Date
and prior to the Revolving Loan Maturity Date, (x) for the account of the
Borrower and for the benefit of any holder (or any trustee, agent or other
similar representative for any such holders) of L/C Supportable Indebtedness of
the Borrower or any of its Subsidiaries, an irrevocable sight standby letter of
credit, in a form customarily used by such Issuing Bank or in such other form as
has been approved by such Issuing Bank (each such standby letter of credit, a
"Standby Letter of Credit") in support of such L/C Supportable Indebtedness and
(y) for the account of the Borrower and for the benefit of sellers of goods or
materials to the Borrower or any of its Subsidiaries, an irrevocable sight
commercial letter of credit in a form customarily used by such Issuing Bank or
in such other form as has been approved by such Issuing Bank (each such
commercial letter of credit, a "Trade Letter of Credit", and each such Trade
Letter of Credit and each Standby Letter of Credit, a "Letter of Credit") in
support of commercial transactions of the Borrower and its Subsidiaries.
(b) Subject to the terms and conditions contained herein, the
Administrative Agent hereby agrees that it will (and at the Borrower's request
each other Issuing Bank may, at its option, agree that it will), at any time and
from time to time on or after the Initial Borrowing Date and prior to the
Revolving Loan Maturity Date, following its receipt of the respective Letter of
Credit Request, issue for the account of the Borrower one or more Letters of
Credit (x) in the case of Standby Letters of Credit, in support of such L/C
Supportable Indebtedness of the Borrower or any of its Subsidiaries as is
permitted to remain outstanding without giving rise to a Default or Event of
Default hereunder and (y) in the case of Trade Letters of Credit, in support of
sellers of goods or materials as referenced in Section 2.01(a), provided that
the respective Issuing Bank shall be under no obligation to issue any Letter of
Credit of the types described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Bank or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over such Issuing Bank shall prohibit, or request that such
Issuing Bank refrain from, the issuance of letters of credit
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generally or such Letter of Credit in particular or shall impose upon such
Issuing Bank with respect to such Letter of Credit any restriction or
reserve or capital requirement (for which such Issuing Bank is not
otherwise compensated) not in effect on the date hereof, or any
unreimbursed loss, cost or expense which was not applicable, in effect or
known to such Issuing Bank as of the date hereof and which such Issuing
Bank in good faith deems material to it; or
(ii) such Issuing Bank shall have received notice from any Bank prior
to the issuance of such Letter of Credit of the type described in the
second sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time would
exceed either (x) $25,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Banks and then outstanding
and Swingline Loans then outstanding, an amount equal to the Adjusted Total
Revolving Loan Commitment at such time, (ii) each Letter of Credit shall be
denominated in Dollars, (iii) each Letter of Credit shall by its terms terminate
(x) in the case of Standby Letters of Credit, on or before the earlier of (A)
the date which occurs 12 months after the date of the issuance thereof (although
any such Standby Letter of Credit may be automatically extendable for successive
periods of up to 12 months, but not beyond the tenth Business Day prior to the
Revolving Loan Maturity Date, on terms acceptable to the Issuing Bank thereof)
and (B) the tenth Business Day prior to the Revolving Loan Maturity Date, and
(y) in the case of Trade Letters of Credit, on or before the earlier of (A) the
date which occurs 180 days after the date of issuance thereof and (B) the date
which is 30 days prior to the Revolving Loan Maturity Date and (iv) the Stated
Amount of each Letter of Credit upon issuance shall be not less than $100,000 or
such lesser amount as is acceptable to the respective Issuing Bank.
2.02 Letter of Credit Requests. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, the Borrower shall give the
Administrative Agent and the respective Issuing Bank at least five Business
Days' (or such shorter period as is acceptable to the respective Issuing Bank)
written notice thereof. Each notice shall be in the form of Exhibit C (each a
"Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to
be a representation and warranty by the Borrower that such Letter of Credit may
be issued in accordance with, and will not violate the requirements of, Section
2.01(c). Unless the respective Issuing Bank has received notice from any Bank
before it issues a Letter of Credit that one or more of the conditions specified
in Section 5 or Section 6, as applicable,
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are not then satisfied, or that the issuance of such Letter of Credit would
violate Section 2.01(c), then such Issuing Bank shall issue the requested Letter
of Credit for the account of the Borrower in accordance with such Issuing Bank's
usual and customary practices. Upon the issuance of or amendment to any Standby
Letter of Credit, such Issuing Bank shall promptly notify each Bank of such
issuance or amendment and such notice shall be accompanied by a copy of the
issued Standby Letter of Credit or amendment, as the case may be. For Trade
Letters of Credit on which the Issuing Bank is other than the Administrative
Agent, the Issuing Bank will send to the Administrative Agent by facsimile
transmission, promptly on the first Business Day of each week, the daily
aggregate Stated Amount of Trade Letters of Credit issued by such Issuing Bank
and outstanding during the preceding week. The Administrative Agent shall
deliver to each Bank, after each calendar month end and upon each payment of the
Letter of Credit Fee, a report setting forth for the relevant period the daily
aggregate Stated Amount of all outstanding Trade Letters of Credit during such
period.
2.03 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be
deemed to have sold and transferred to each Bank with a Revolving Loan
Commitment, other than such Issuing Bank (each such Bank, in its capacity under
this Section 2.03, a "Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Participant's Adjusted Percentage, in such Letter of Credit,
each drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any security therefor or guaranty pertaining
thereto. Upon any change in the Revolving Loan Commitments or Adjusted
Percentages of the Banks pursuant to Section 1.13 or 13.04 or as a result of a
Bank Default, it is hereby agreed that, with respect to all outstanding Letters
of Credit and Unpaid Drawings, there shall be an automatic adjustment to the
participations pursuant to this Section 2.03 to reflect the new Adjusted
Percentages of the assignor and assignee Bank or of all Banks with Revolving
Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, such
Issuing Bank shall have no obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit. Any action taken or omitted to be
taken by any Issuing Bank under or in connection with any Letter of Credit if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create for such Issuing Bank any resulting liability to the Borrower or any
Bank.
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(c) In the event that any Issuing Bank makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Bank pursuant to Section 2.04(a), such Issuing Bank shall
promptly notify the Administrative Agent, which shall promptly notify each
Participant, of such failure, and each Participant shall promptly and
unconditionally pay to such Issuing Bank the amount of such Participant's
Adjusted Percentage of such unreimbursed payment in Dollars and in same day
funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to such Issuing Bank in
Dollars such Participant's Adjusted Percentage of the amount of such payment on
such Business Day in same day funds. If and to the extent such Participant shall
not have so made its Adjusted Percentage of the amount of such payment available
to such Issuing Bank, such Participant agrees to pay to such Issuing Bank,
forthwith on demand such amount, together with interest thereon, for each day
from such date until the date such amount is paid to such Issuing Bank at the
overnight Federal Funds Rate. The failure of any Participant to make available
to such Issuing Bank its Adjusted Percentage of any payment under any Letter of
Credit shall not relieve any other Participant of its obligation hereunder to
make available to such Issuing Bank its Adjusted Percentage of any Letter of
Credit on the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to such
Issuing Bank such other Participant's Adjusted Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which it has received any payments from the Participants
pursuant to clause (c) above, such Issuing Bank shall forward such payment to
the Administrative Agent, which in turn shall distribute to each Participant
which has paid its Adjusted Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount originally funded by such Participant to the aggregate amount
funded by all Participants) of the principal amount of such reimbursement
obligation and interest thereon accruing after the purchase of the respective
participations.
(e) Upon the request of any Participant, each Issuing Bank shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to each
Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable
and not subject to any qualification or exception whatsoever and shall be made
in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
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(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Issuing Bank, any Participant, or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse the respective Issuing Bank, by making payment to the
Administrative Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by it under any Letter of Credit (each such
amount, so paid until reimbursed, an "Unpaid Drawing"), no later than three
Business Days after the date of such payment or disbursement, with interest on
the amount so paid or disbursed by such Issuing Bank, to the extent not
reimbursed prior to 12:00 Noon (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but excluding the
date such Issuing Bank was reimbursed by the Borrower therefor at a rate per
annum which shall be the Base Rate in effect from time to time plus the
Applicable Margin for Revolving Loans maintained as Base Rate Loans, provided,
however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New
York time) on the fifth Business Day following such payment or disbursement,
interest shall thereafter accrue on the amounts so paid or disbursed by such
Issuing Bank (and until reimbursed by the Borrower) at a rate per annum which
shall be the Base Rate in effect from time to time plus the Applicable Margin
for Revolving Loans maintained as Base Rate Loans plus 2%, in each such case,
with interest to be payable on demand. The respective Issuing Bank shall give
the Borrower prompt notice of each Drawing under any Letter of Credit, provided
that the
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failure to give any such notice shall in no way affect, impair or diminish the
Borrower's obligations hereunder.
(b) The obligations of the Borrower under this Section 2.04 to
reimburse the respective Issuing Bank with respect to drawings on Letters of
Credit (each, a "Drawing") (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower may have or
have had against any Bank (including in its capacity as issuer of the Letter of
Credit or as Participant), or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing, the respective Issuing Bank's only
obligation to the Borrower being to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Issuing Bank any
resulting liability to the Borrower.
2.05 Increased Costs. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Issuing Bank or
any Participant with any request or directive by any such authority (whether or
not having the force of law), or any change in generally accepted accounting
principles, shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of credit
issued by any Issuing Bank or participated in by any Participant, or (ii) impose
on any Issuing Bank or any Participant any other conditions relating, directly
or indirectly, to this Agreement or any Letter of Credit; and the result of any
of the foregoing is to increase the cost to any Issuing Bank or any Participant
of issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by any Issuing Bank or any Participant
hereunder or reduce the rate of return on its capital with respect to Letters of
Credit (except for changes in the rate of tax on, or determined by reference to,
the net income or profits of such Issuing Bank or such Participant, or any
franchise tax based on the net income or profits of such Bank or Participant, in
either case pursuant to the laws of the United States of America, the
jurisdiction in which it is organized or in which its principal office or
applicable lending office is located or any subdivision thereof or therein), but
without duplication of any amounts payable in respect of Taxes pursuant to
Section 4.04(a), then, upon demand to the Borrower by such Issuing Bank or any
Participant (a copy of which demand shall be sent by such Issuing Bank or such
Participant to the Administrative Agent) and subject to the provisions of
Section 13.15 (to the extent applicable), the Borrower shall pay to such Issuing
Bank or such Participant such additional amount or amounts as will compensate
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such Bank for such increased cost or reduction in the amount receivable or
reduction on the rate of return on its capital. Any Issuing Bank or any
Participant, upon determining that any additional amounts will be payable
pursuant to this Section 2.05, will give prompt written notice thereof to the
Borrower, which notice shall include a certificate submitted to the Borrower by
such Issuing Bank or such Participant (a copy of which certificate shall be sent
by such Issuing Bank or such Participant to the Administrative Agent), setting
forth in reasonable detail the basis for and the calculation of such additional
amount or amounts necessary to compensate such Issuing Bank or such Participant.
The certificate required to be delivered pursuant to this Section 2.05 shall, if
delivered in good faith and absent manifest error, be final and conclusive and
binding on the Borrower.
SECTION 3. Commitment Commission; Fees; Reductions of Commitment.
3.01 Fees. (a) The Borrower agrees to pay the Administrative Agent
for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a
commitment commission (the "Commitment Commission") for the period from the
Effective Date to and including the Revolving Loan Maturity Date (or such
earlier date as the Total Revolving Loan Commitment shall have been terminated),
computed at a rate for each day equal to 1/2 of 1% per annum on the daily
average Unutilized Revolving Loan Commitment of such Non-Defaulting Bank.
Accrued Commitment Commission shall be due and payable quarterly in arrears on
each Quarterly Payment Date and on the Revolving Loan Maturity Date or such
earlier date upon which the Total Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Bank with a Revolving Loan Commitment (based
on their respective Adjusted Percentages) a fee in respect of each Letter of
Credit issued hereunder (the "Letter of Credit Fee"), for the period from and
including the date of issuance of such Letter of Credit to and including the
termination of such Letter of Credit, computed at a rate per annum equal to the
Applicable Margin then in effect for Revolving Loans maintained as Eurodollar
Loans on the daily average Stated Amount of such Letter of Credit. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and upon the first day on or after the termination of the
Total Revolving Loan Commitment upon which no Letters of Credit remain
outstanding.
(c) The Borrower agrees to pay to the respective Issuing Bank, for
its own account, a facing fee in respect of each Letter of Credit issued for its
account hereunder (the "Facing Fee") for the period from and including the date
of issuance of such Letter of Credit to and including the termination of such
Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily
average Stated Amount of such Letter of Credit; provided that in no event shall
the annual Facing Fee with respect to any Letter of Credit be less than $500, it
being agreed that, on the date of issuance of any Letter of Credit and
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on each anniversary thereof prior to the termination of such Letter of Credit,
$500 will be paid toward the next year's Facing Fees for such Letter of Credit,
which amount shall be credited in direct order to the Facing Fees which would
otherwise be payable with respect to such Letter of Credit in the succeeding
annual period. Accrued Facing Fees shall be due and payable quarterly in arrears
on each Quarterly Payment Date and on the date upon which the Total Revolving
Loan Commitment has been terminated and such Letter of Credit has been
terminated in accordance with its terms.
(d) The Borrower shall pay, upon each drawing under, issuance of, or
amendment to, any Letter of Credit, such amount as shall at the time of such
event be the administrative charge which the respective Issuing Bank is
generally imposing in connection with such occurrence with respect to letters of
credit.
(e) The Borrower shall pay to each of the Agents, for their own
account, such other fees as have been agreed to in writing by the Borrower and
the Agents.
3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at
least one Business Day's prior notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each of
the Banks), the Borrower shall have the right, at any time or from time to time,
without premium or penalty, to terminate the Total Unutilized Revolving Loan
Commitment, in whole or in part, in integral multiples of $1,000,000 in the case
of partial reductions to the Total Revolving Loan Commitment, provided that (i)
each such reduction shall apply proportionately to permanently reduce the
Revolving Loan Commitment of each Bank with such a Commitment and (ii) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case be
in an amount which would cause the Revolving Loan Commitment of any Bank to be
reduced (as required by preceding clause (i)) by an amount which exceeds the
remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as in
effect immediately before giving effect to such reduction minus (y) such Bank's
Adjusted Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
(b) In the event of certain refusals by a Bank as provided in
Section 13.12(b) to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the Borrower may, subject to the requirements of said Section
13.12(b) and upon five Business Days' written notice to the Administrative Agent
at its Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Banks), terminate all of the Revolving Loan Commitment
of such Bank so long as all Loans, together with accrued and unpaid interest,
fees and all other amounts, owing to such Bank (other than amounts owing in
respect of any Tranche of Term Loans maintained by such Bank, if such Term Loans
are not being repaid pursuant to Section 13.12(b)) are repaid concurrently with
the
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effectiveness of such termination (at which time Schedule I shall be deemed
modified to reflect such changed amounts), and at such time, unless the
respective Bank continues to have outstanding Term Loans hereunder, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to indemnification provisions under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall
survive as to such repaid Bank.
3.03 Mandatory Reduction of Commitments. (a) The Total Commitments
(and the Tranche A Term Loan Commitment, the Tranche B Term Loan Commitment and
the Revolving Loan Commitment of each Bank) shall terminate in its entirety on
April 2, 1997 unless the Initial Borrowing Date shall have occurred on or prior
to such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche A Term Loan Commitment (and the
Tranche A Term Loan Commitment of each Bank) shall (i) terminate in its entirety
on the Initial Borrowing Date (after giving effect to the making of the Tranche
A Term Loans on such date) and (ii) prior to the termination of the Total
Tranche A Term Loan Commitment as provided in clause (i) above, be reduced from
time to time to the extent required by Section 4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche B Term Loan Commitment (and the
Tranche B Term Loan Commitment of each Bank) shall (i) terminate in its entirety
on the Initial Borrowing Date (after giving effect to the making of the Tranche
B Term Loans on such date) and (ii) prior to the termination of the Total
Tranche B Term Loan Commitment as provided in clause (i) above, be reduced from
time to time to the extent required by Section 4.02.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Initial Borrowing Date
upon which a mandatory prepayment of Term Loans pursuant to Section 4.02(d)
through (h), inclusive, is required (and exceeds in amount the aggregate
principal amount of Term Loans then outstanding) or would be required if Term
Loans were then outstanding, the Total Revolving Loan Commitment shall be
permanently reduced by the amount, if any, by which the amount required to be
applied pursuant to said Section (determined as if an unlimited amount of Term
Loans were actually outstanding) exceeds the aggregate principal amount of Term
Loans then outstanding.
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(f) Each reduction to the Total Tranche A Term Loan Commitment, the
Total Tranche B Term Loan Commitment and the Total Revolving Loan Commitment
pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be applied
proportionately to reduce the Tranche A Term Loan Commitment, the Tranche B Term
Loan Commitment or the Revolving Loan Commitment, as the case may be, of each
Bank with such a Commitment.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions: (i) the Borrower
shall give the Administrative Agent prior to 1:00 P.M. (New York time) at its
Notice Office (x) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay Base
Rate Loans (or same day notice in the case of Swingline Loans provided such
notice is given prior to 12:00 Noon (New York time)) and (y) at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay Eurodollar Loans, whether Tranche A Term Loans,
Tranche B Term Loans, Revolving Loans or Swingline Loans shall be prepaid, the
amount of such prepayment and the Types of Loans to be prepaid and, in the case
of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which
made, which notice the Administrative Agent shall promptly transmit to each of
the Banks; (ii) each prepayment shall be in an aggregate principal amount of at
least $1,000,000 (or $250,000 in the case of Swingline Loans) or such lesser
amount of a Borrowing which is outstanding, provided that if any partial
prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less
than $5,000,000, then such Borrowing may not be continued as a Borrowing of
Eurodollar Loans and any election of an Interest Period with respect thereto
given by the Borrower shall have no force or effect; (iii) at the time of any
prepayment of Eurodollar Loans pursuant to this Section 4.01 on any date other
than the last day of the Interest Period applicable thereto, the Borrower shall
pay the amounts required pursuant to Section 1.11; (iv) in the event of certain
refusals by a Bank as provided in Section 13.12(b) to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks, the Borrower may, upon
5 Business Days' written notice to the Administrative Agent at its Notice Office
(which notice the Administrative Agent shall promptly transmit to each of the
Banks) repay all Loans, together with accrued and unpaid interest, Fees, and
other amounts owing to such Bank (or owing to such Bank with respect to each
Tranche which gave rise to the need to obtain such Bank's individual consent) in
accordance with said Section 13.12(b) so long as (A) in the case of the
repayment of Revolving Loans of any Bank pursuant to this clause (iv) the
Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment (at which time
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Schedule I shall be deemed modified to reflect the changed Revolving Loan
Commitments) and (B) the consents required by Section 13.12(b) in connection
with the repayment pursuant to this clause (iv) have been obtained; (v) each
voluntary prepayment of Term Loans pursuant to this Section 4.01 (except
pursuant to preceding clause (iv)) shall be applied to the Tranche A Term Loans
and the Tranche B Term Loans on a pro rata basis (based upon the then
outstanding principal amount of Tranche A Term Loans and Tranche B Term Loans);
and (vi) except as expressly provided in preceding clause (iv), each prepayment
in respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among the Loans comprising such Borrowing; provided that at the Borrower's
election in connection with any prepayment of Revolving Loans pursuant to this
Section 4.01, such prepayment shall not be applied to any Revolving Loan of a
Defaulting Bank. Each prepayment of principal of any Tranche of Term Loans
pursuant to this Section 4.01 shall be applied to reduce the then remaining
Scheduled Repayments of the respective Tranche of Term Loans pro rata based upon
the then remaining principal amounts of the Scheduled Repayments of the
respective Tranche after giving effect to all prior reductions thereto.
4.02 Mandatory Repayments and Commitment Reductions. (a)(i) On any
day on which the sum of the aggregate outstanding principal amount of the
Revolving Loans made by Non-Defaulting Banks, Swingline Loans and the Letter of
Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then
in effect, the Borrower shall prepay principal of Swingline Loans and, after the
Swingline Loans have been repaid in full, Revolving Loans of Non-Defaulting
Banks in an amount equal to such excess. If, after giving effect to the
prepayment of all outstanding Swingline Loans and Revolving Loans of
Non-Defaulting Banks, the aggregate amount of the Letter of Credit Outstandings
exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the
Borrower shall pay to the Administrative Agent at the Payment Office on such
date an amount of cash or Cash Equivalents equal to the amount of such excess
(up to a maximum amount equal to the Letter of Credit Outstandings at such
time), such cash or Cash Equivalents to be held as security for all obligations
of the Borrower to Non-Defaulting Banks hereunder in a cash collateral account
to be established by the Administrative Agent.
(ii) On any day on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall prepay principal of
Revolving Loans of such Defaulting Bank in an amount equal to such excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche A Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be
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reduced as provided in Sections 4.01 and 4.02(i), a "Tranche A Scheduled
Repayment," and each such date, a "Tranche A Scheduled Repayment Date"):
Tranche A
Scheduled Repayment Date Amount
------------------------ ------
The last Business Day of
May, 1997 $2,500,000
The last Business Day of
August, 1997 $2,500,000
The last Business Day of
November, 1997 $2,500,000
The last Business Day of
February, 1998 $2,500,000
The last Business Day of
May, 1998 $2,500,000
The last Business Day of
August, 1998 $2,500,000
The last Business Day of
November, 1998 $2,500,000
The last Business Day of
February, 1999 $2,500,000
The last Business Day of
May, 1999 $3,250,000
The last Business Day of
August, 1999 $3,250,000
The last Business Day of
November, 1999 $3,250,000
The last Business Day of
February, 2000 $3,250,000
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Tranche A
Scheduled Repayment Date Amount
------------------------ ------
The last Business Day of
May, 2000 $4,000,000
The last Business Day of
August, 2000 $4,000,000
The last Business Day of
November, 2000 $4,000,000
The last Business Day of
February, 2001 $4,000,000
The last Business Day of
May, 2001 $6,500,000
The last Business Day of
August, 2001 $6,500,000
The last Business Day of
November, 2001 $6,500,000
Tranche A Term Loan
Maturity Date $6,500,000
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche B Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(i), a "Tranche B Scheduled Repayment," and each such date, a "Tranche B
Scheduled Repayment Date"):
Tranche B
Scheduled Repayment Date Amount
------------------------ ------
The last Business Day of
May, 1997 $250,000
The last Business Day of
August, 1997 $250,000
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Tranche B
Scheduled Repayment Date Amount
------------------------ ------
The last Business Day of
November, 1997 $250,000
The last Business Day of
February, 1998 $250,000
The last Business Day of
May, 1998 $250,000
The last Business Day of
August, 1998 $250,000
The last Business Day of
November, 1998 $250,000
The last Business Day of
February, 1999 $250,000
The last Business Day of
May, 1999 $250,000
The last Business Day of
August, 1999 $250,000
The last Business Day of
November, 1999 $250,000
The last Business Day of
February, 2000 $250,000
The last Business Day of
May, 2000 $250,000
The last Business Day of
August, 2000 $250,000
The last Business Day of
November, 2000 $250,000
The last Business Day of
February, 2001 $250,000
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Tranche B
Scheduled Repayment Date Amount
------------------------ ------
The last Business Day of
May, 2001 $250,000
The last Business Day of
August, 2001 $250,000
The last Business Day of
November, 2001 $250,000
The last Business Day of
February, 2002 $250,000
The last Business Day of
May, 2002 $10,000,000
The last Business Day of
August, 2002 $10,000,000
The last Business Day of
November, 2002 $10,000,000
Tranche B Term Loan
Maturity Date $10,000,000
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which Holdings or any of its Subsidiaries receives any proceeds from any
sale or issuance of its equity (other than (i) proceeds received on or prior to
the Initial Borrowing Date as a result of the Equity Contribution and (ii) cash
proceeds received from sales or issuances of equity to employees, officers or
directors of Holdings or any of its Subsidiaries so long as all such cash
proceeds are, substantially concurrently with the receipt of such cash proceeds,
used to repurchase outstanding shares of common stock (or options to purchase
common stock) of Holdings pursuant to clause (x) of the proviso to Section
9.03(ii) or, to the extent the cash proceeds are not so utilized, so long as the
aggregate amount of cash proceeds excluded pursuant to this clause (ii) does not
exceed $10,000,000) an amount equal to 100% of the cash proceeds of the
respective sale or issuance (net of underwriting discounts and commissions and
other direct costs associated therewith, including, without limitation, legal
fees and expenses) shall be applied as a mandatory repayment of principal of
outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred,
such amounts shall be applied as a mandatory reduction to the Total Term Loan
Commitment) in accordance with the requirements of Section 4.02(i) and (j),
provided that (i) in the case of an Initial
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Public Offering, only 50% of the net cash proceeds thereof, if any, in excess of
$50,000,000 shall be applied as a mandatory repayment as set forth under this
Section 4.02(d) and (ii) the proceeds of any issuance of options, warrants or
other equity as part of a unit in connection with any issuance of Indebtedness
shall be treated as cash proceeds from the issuance of Indebtedness and applied
as a mandatory repayment as set forth under Section 4.02(e).
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which Holdings or any of its Subsidiaries receives any proceeds from any
incurrence by Holdings or any of its Subsidiaries of Indebtedness for borrowed
money (other than Indebtedness for borrowed money permitted to be incurred
pursuant to Section 9.04 as such Section is in effect on the Effective Date), an
amount equal to the cash proceeds (net of underwriting discounts and commissions
and other costs associated therewith including, without limitation, legal fees
and expenses) of the respective incurrence of Indebtedness shall be applied as a
mandatory repayment of principal of outstanding Term Loans (or, if the Initial
Borrowing Date has not yet occurred, such amounts shall be applied as a
mandatory reduction to the Total Term Loan Commitment) in accordance with the
requirements of Sections 4.02(i) and (j).
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which Holdings or any of its Subsidiaries receives proceeds from any sale
of assets (including capital stock and securities held thereby, but excluding
(i) sales or transfers of inventory in the ordinary course of business, (ii)
sales or transfers of assets in accordance with Sections 9.02(v) and (vi) as
originally in effect, (iii) sales of assets between the Borrower and its
Wholly-Owned Subsidiaries and/or sales of assets between Wholly-Owned
Subsidiaries of the Borrower, in each case to the extent permitted by Section
9.02, (iv) the sale or other disposition of equipment in the ordinary course of
business to the extent that the Borrower has delivered a certificate to the
Administrative Agent on or prior to such date stating that it intends to
reinvest such Net Sale Proceeds in replacement equipment within 270 days after
the respective date of sale or disposition and (v) any other sale of assets so
long as, and to the extent that, the aggregate amount of Net Sale Proceeds from
all sales of assets excluded pursuant to this clause (v) during the respective
fiscal year of the Borrower in which the Net Sale Proceeds are received does not
exceed $5,000,000), an amount equal to 100% of the Net Sale Proceeds therefrom
shall be applied as a mandatory repayment of principal of outstanding Term Loans
(or, if the Initial Borrowing Date has not yet occurred, such amounts shall be
applied as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(i) and (j). To the extent any
Net Sale Proceeds are not required to be applied pursuant to this Section
4.02(f) as a result of clause (iv) contained in the parenthetical appearing in
the first sentence of this
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Section 4.02(f), then on the 270th day after the date of the respective sale or
disposition, the Net Sale Proceeds of the respective sale or disposition shall
be applied as otherwise required by this Section 4.02(f) (determined without
regard to clause (iv) contained in the parenthetical appearing in this first
sentence of this Section 4.02(f)) to the extent not actually used as
contemplated by said clause (iv) by said 270th day.
(g) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each Excess Cash Payment Date, an amount equal to 75% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as
a mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Sections 4.02(i) and (j); provided, however, that after the
time (the "Excess Cash Flow Conversion Time") that the principal of Term Loans
have been repaid, and/or the Total Revolving Loan Commitment has been
permanently reduced, in the aggregate amount of $25,000,000 solely as a result
of this Section 4.02(g) (or pursuant to Section 3.03(e) as a result of this
Section 4.02(g)), an amount equal to 50% (rather than 75%) of such Excess Cash
Flow shall be applied pursuant to this clause (g).
(h) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date
after the Initial Borrowing Date on which Holdings or any of its Subsidiaries
receives any proceeds from any Recovery Event, an amount equal to 100% of the
proceeds of such Recovery Event (net of reasonable costs including without
limitation legal costs and expenses, and taxes incurred in connection with such
Recovery Event) shall be applied as a mandatory repayment of principal of
outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred,
such amounts shall be applied as a mandatory reduction to the Total Term Loan
Commitment) in accordance with the requirements of Sections 4.02(i) and (j),
provided that (x) so long as no Default or Event of Default then exists and such
proceeds do not exceed $2,500,000, such proceeds shall not be required to be so
applied on such date to the extent that the Borrower has delivered a certificate
to the Administrative Agent on or prior to such date stating that such proceeds
shall be used or shall be committed to be used to replace or restore any
properties or assets in respect of which such proceeds were paid within one year
following the date of such Recovery Event (which certificate shall set forth the
estimates of the proceeds to be so expended) and (y) so long as no Default or
Event of Default then exists and to the extent that (a) the amount of such
proceeds exceeds $2,500,000, (b) the amount of such proceeds, together with
other cash available to the Borrower and permitted to be spent by it on Capital
Expenditures during the relevant period pursuant to Section 9.07 (without regard
to Section 9.07(c) in the case of such other cash), equals 100% of the cost of
replacement or restoration of the properties or assets in respect of which such
proceeds were paid as determined by the Borrower and as supported by such
estimates or bids from contractors or subcontractors or such other supporting
information as the Administrative Agent may reasonably request and (c) the
Borrower has delivered to
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the Administrative Agent a certificate on or prior to the date the application
would otherwise be required pursuant to this Section 4.02(h) in the form
described in clause (x) above and also certifying (I) its determination as
required by preceding clause (b) and (II) that, for the period from the date of
the respective casualty, condemnation or other event giving rise to the Recovery
Event and continuing through the completion of the replacement or restoration of
respective properties or assets, the Borrower has (and will continue to
maintain) business interruption insurance at levels, and in scope of coverage,
which are at least as great as the amount for such insurance as is set forth in
Schedule VI, then the entire amount of the proceeds of such Recovery Event and
not just the portion in excess of $2,500,000 shall be deposited with the
Administrative Agent pursuant to a cash collateral arrangement reasonably
satisfactory to the Administrative Agent and the Borrower (or, in the case of a
Foreign Subsidiary, with any other lending institution reasonably satisfactory
to the Administrative Agent and the Borrower and located in the jurisdiction of
such Foreign Subsidiary, it being understood and agreed that the Secured
Creditors shall have no security interest in the funds so deposited by a Foreign
Subsidiary) whereby such proceeds shall be disbursed to the Borrower or its
respective Subsidiary from time to time as needed to pay actual costs incurred
by it or required to be advanced by it in connection with the replacement or
restoration of the respective properties or assets (pursuant to such reasonable
certification requirements as may be established by the Administrative Agent),
provided further that (except in the case of funds deposited by a Foreign
Subsidiary as described above) at any time while an Event of Default has
occurred and is continuing, the Required Banks may direct the Administrative
Agent (in which case the Administrative Agent shall, and is hereby authorized by
the Borrower to, follow said directions) to apply any or all proceeds then on
deposit in such collateral account to the repayment of Obligations hereunder in
the same manner as proceeds would be applied pursuant to the Security Agreement,
and provided further, that if all or any portion of such proceeds not required
to be applied to the repayment of Term Loans pursuant to the second preceding
proviso (whether pursuant to clause (x) or (y) thereof) are either (A) not so
used or committed to be so used within one year after the date of the respective
Recovery Event or (B) if committed to be used within one year after the date of
receipt of such proceeds of such Recovery Event and not so used within two years
after the date of the respective Recovery Event then, in either such case, such
remaining portion not used or committed to be used in the case of preceding
clause (A) and not used in the case of preceding clause (B) shall be applied on
the date which is the first anniversary of the date of the respective Recovery
Event in the case of clause (A) above or the date occurring two years after the
date of the respective Recovery Event in the case of clause (B) above as a
mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Section 4.02(i) and (j).
(i) Each amount required to be applied to Term Loans (or to the
Total Term Loan Commitment) pursuant to Sections 4.02(d), (e), (f), (g) and (h)
shall be applied pro
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rata to each Tranche of Term Loans based upon the then remaining principal
amounts of the respective Tranches (with each Tranche of Term Loans to be
allocated that percentage of the amount to be applied as is equal to a fraction
(expressed as a percentage) the numerator of which is the then outstanding
principal amount of such Tranche of Term Loans (or, if the Initial Borrowing
Date has not yet occurred, the aggregate Term Loan Commitments of the Banks with
respect to such Tranche) and the denominator of which is equal to the then
outstanding principal amount of all Term Loans (or, if the Initial Borrowing
Date has not yet occurred, the then Total Term Loan Commitment)). Any amount
required to be applied to any Tranche of Term Loans pursuant to Sections
4.02(d), (e), (f), (g) and (h) shall be applied to repay the outstanding
principal amount of Term Loans of the respective Tranche then outstanding (or,
if the Initial Borrowing Date has not yet occurred, to reduce the Total Tranche
A Term Loan Commitment or Total Tranche B Term Loan Commitment, as the case may
be). The amount of each principal repayment of Term Loans (and the amount of
each reduction to the Term Loan Commitments) made as required by Sections
4.02(d), (e), (f), (g) and (h) shall be applied to reduce the then remaining
Scheduled Repayments of the respective Tranche pro rata based upon the then
remaining principal amounts of the Scheduled Repayments of the respective
Tranche after giving effect to all prior reductions thereto.
(j) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02
may only be made on the last day of an Interest Period applicable thereto unless
all Eurodollar Loans of the respective Tranche with Interest Periods ending on
such date of required repayment and all Base Rate Loans of the respective
Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans
made pursuant to such Borrowing to an amount less than $5,000,000, such
Borrowing shall be converted at the end of the then current Interest Period into
a Borrowing of Base Rate Loans; and (iii) each repayment of any Loans comprising
a Borrowing shall be applied pro rata among such Loans. In the absence of a
designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in its
sole discretion with a view, but no obligation, to minimize breakage costs owing
under Section 1.11.
(k) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
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4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the account of the Bank or Banks entitled thereto
not later than 12:00 Noon (New York time) on the date when due and shall be made
in Dollars in immediately available funds at the Payment Office of the
Administrative Agent. Whenever any payment to be made hereunder or under any
Note shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable at the applicable
rate during such extension.
4.04 Net Payments; Taxes. (a) All payments made by any Credit Party
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Bank pursuant to
the laws of the United States of America, the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Bank is located or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement or under any Note, after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for herein
or in such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank pursuant to the laws of the jurisdiction in which such Bank
is organized or in which the principal office or applicable lending office of
such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which such Bank is organized or in which
the principal office or applicable lending office of such Bank is located and
for any withholding of taxes as such Bank shall determine are payable by, or
withheld from, such Bank, in respect of such amounts so paid to or on behalf of
such Bank pursuant to the preceding sentence and in respect of any amounts paid
to or on behalf of such Bank pursuant to this sentence. The Borrower will
furnish to the Administrative Agent within 45 days after the date the payment of
any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower agrees to indemnify and
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hold harmless each Bank, and reimburse such Bank upon its written request, for
the amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 1.13 or 13.04 (unless
the respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue Service
Form W-8 (or successor form) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Bank agrees that from time to time after the Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
4.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Agent of its inability to deliver any such Form or
Certificate, in which case such Bank shall not be required to deliver any such
Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything
to the contrary contained in Section 4.04(a), but subject to Section 13.04(b)
and the immediately succeeding sentence, (x) the Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, Fees or other amounts
payable hereunder for the account of any Bank which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for U.S.
Federal income tax purposes to the extent that such Bank has not provided to the
Borrower U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Bank in
respect of income or similar taxes imposed by the United States if (I) such Bank
has not provided
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to the Borrower the Internal Revenue Service Forms required to be provided to
the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment,
other than interest, to a Bank described in clause (ii) above, to the extent
that such Forms do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as set forth in Section
13.04(b), the Borrower agrees to pay any additional amounts and to indemnify
each Bank in the manner set forth in Section 4.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in respect
of any Taxes deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes after the Effective Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of such
Taxes.
(c) If the Borrower pays any additional amount under this Section
4.04 to a Bank and such Bank determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid (a "Tax Benefit"), such Bank
shall pay to the Borrower an amount that the Bank shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by the Bank
in such year as a consequence of such Tax Benefit; provided, however, that (i)
such Bank shall not be required to make any payment under this Section 4.04 (c)
if an Event of Default shall have occurred and be continuing; (ii) any Taxes
that are imposed on a Bank as a result of a disallowance or reduction (including
through the expiration of any tax credit carryover or carryback of such Bank
that otherwise would not have expired) of any Tax Benefit with respect to which
such Bank has made a payment to the Borrower pursuant to this Section 4.04 (c)
shall be treated as a Tax for which the Borrower is obligated to indemnify such
Bank pursuant to this Section 4.04 without any exclusions or defenses; and (iii)
nothing in this Section 4.04 (c) shall require the Bank to disclose any
confidential information to the Borrower (including, without limitation, its tax
returns).
SECTION 5. Conditions Precedent to Loans. The obligation of each Bank
to make Loans, and the obligation of each Issuing Bank to issue Letters of
Credit, on the Initial Borrowing Date, is subject at the time of the making of
such Loans or the issuance of such Letters of Credit to the satisfaction of the
following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Banks the appropriate Tranche A Term Note, Tranche B Term Note and/or Revolving
Note executed by the Borrower, and to the Swingline Bank the Swingline Note
executed by the Borrower, in each case in the amount, maturity and as otherwise
provided herein.
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5.02 Fees, etc. On the Initial Borrowing Date, the Borrower shall
have paid to the Agents and the Banks all costs, fees and expenses (including,
without limitation, legal fees and expenses) payable to the respective Agents
and the Banks to the extent then due.
5.03 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received (i) from Dechert Price & Rhoads,
special counsel to Holdings and its Subsidiaries, an opinion addressed to each
of the Agents and each of the Banks and dated the Initial Borrowing Date
covering the matters set forth in Exhibit E and (ii) from local counsel
satisfactory to the Agents, opinions each of which (x) shall be addressed to
each of the Agents and each of the Banks and dated the Initial Borrowing Date,
(y) shall be in form and substance satisfactory to the Agents and the Required
Banks and (z) shall cover the perfection of the security interests granted
pursuant to the Security Agreement and the Mortgages and such other matters
incident to the transactions contemplated herein as the Agents may reasonably
request.
5.04 Corporate Documents; Proceedings; etc. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by the Chairman of the Board, the
President, any Vice President or the Treasurer of each Credit Party, and
attested to by the Secretary or any Assistant Secretary of such Credit Party, in
the form of Exhibit F with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and the
foregoing shall be reasonably acceptable to the Agents.
(b) All corporate and legal proceedings and all material instruments
and agreements in connection with the transactions contemplated by this
Agreement and the other Documents shall be reasonably satisfactory in form and
substance to the Agents and the Required Banks, and the Administrative Agent
shall have received all information and copies of all documents and papers,
including records of corporate proceedings, governmental approvals, good
standing certificates and bring-down telegrams or facsimiles, if any, which any
Agent reasonably may have requested in connection therewith, such documents and
papers where appropriate to be certified by proper corporate or governmental
authorities.
5.05 Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Debt Agreements; Acquisition Documents; Tax Sharing Agreements. On
the Initial Borrowing Date, there shall have been made available for review by
the Agents and the Banks true and correct copies of the following documents:
(i) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most
recent such report
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(including, to the extent required, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information), and for each Plan that is a "single-employer
plan," as defined in Section 4001(a)(15) of ERISA, if any, the most
recently prepared actuarial valuation therefor) and any other "employee
benefit plans," as defined in Section 3(3) of ERISA, and any other
material agreements, plans or arrangements, with or for the benefit of
current or former employees of Holdings or any of its Subsidiaries or any
ERISA Affiliate (provided that the foregoing shall apply in the case of
any multiemployer plan, if any, as defined in 4001(a)(3) of ERISA, only to
the extent that any document described therein is in the possession of
Holdings or any Subsidiary of Holdings or any ERISA Affiliate or
reasonably available thereto from the sponsor or trustee of any such plan)
(collectively, the "Employee Benefit Plans");
(ii) all agreements entered into by Holdings or any of its
Subsidiaries governing the terms and relative rights of its capital stock
and any agreements entered into by shareholders relating to any such
entity with respect to its capital stock (collectively, the "Shareholders'
Agreements");
(iii) all agreements with members of, or with respect to, the
management of Holdings or any of its Subsidiaries (collectively, the
"Management Agreements");
(iv) all agreements evidencing or relating to Indebtedness of
Holdings or any of its Subsidiaries which is to remain outstanding after
giving effect to the incurrence of Loans on the Initial Borrowing Date
(collectively, the "Debt Agreements"); and
(v) all tax sharing, tax allocation and other similar agreements
entered into by Holdings, the Borrower or any of their respective
Subsidiaries (collectively, the "Tax Sharing Agreements");
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Debt Agreements and Tax Sharing Agreements shall be in form
and substance reasonably satisfactory to the Agents and shall be in full
force and effect on the Initial Borrowing Date.
5.06 Consummation of Recapitalization Transaction. (a) On or prior
to the Initial Borrowing Date, there shall have been delivered to the Agents and
the Banks true and correct copies of the Recapitalization Documents with those
Recapitalization Documents delivered to the Agents on or before January 24, 1997
to be in the form so delivered with such changes thereto or waivers therefrom to
be satisfactory to the Agents and the Required Banks, and with all other
Recapitalization Documents to be in form and substance satisfactory to the
Agents and the Required Banks. All Recapitalization Documents shall
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have been duly executed and delivered by the parties thereto and shall be in
full force and effect. All conditions precedent to the consummation of the
Recapitalization Transaction as set forth in the Recapitalization Documents
shall have been satisfied, and not waived except with the consent (which will
not be unreasonably withheld) of each Agent and the Required Banks, to the
satisfaction of each Agent and the Required Banks. The Recapitalization
Transaction shall have been, or shall substantially contemporaneously (and in
any event on the Initial Borrowing Date) be, consummated in accordance with the
Recapitalization Documents and all applicable law (excluding immaterial
violations of law which could not reasonably be expected to have, in the
aggregate for all such violations, a material adverse effect on the consummation
of the Recapitalization Transaction or on the operations, financial condition or
prospects of the Business, taken as a whole).
(b) On or prior to the Initial Borrowing Date, NSC shall have
transferred the Purchased Assets and the Assumed Liabilities to the Borrower,
and the Borrower shall have accepted the Purchased Assets and assumed the
Assumed Liabilities, pursuant to the Asset Purchase Agreement in exchange for
the Purchase Price Note and 100 shares of Borrower Common Stock (collectively,
the "Asset Transfer").
(c) On or prior to the Initial Borrowing Date, NSC shall have
transferred all of the capital stock of the Borrower and approximately $12.8
million in cash to Holdings, in exchange for 11,667 shares of Holdings Series A
Preferred Stock, 2,340,000 shares of Holdings Common Stock and the Seller Note
in the principal amount of $77 million.
(d) On or prior to the Initial Borrowing Date, Holdings shall have
received (in addition to the equity contributions pursuant to preceding clause
(c)) as equity contributions (x) approximately $58.2 million of cash from
Sterling, in return for which Holdings shall have issued to Sterling 52,889
shares of Holdings Series A Preferred Stock and 10,608,000 shares of Holdings
Common Stock and (y) approximately $6.8 million of cash from the Management
Investors (although the aggregate amount of cash received from the equity
contributions pursuant to this clause (d) shall be required to equal at least
$64.9 million), in return for which Holdings shall have issued to such
Management Investors 5,444 shares of Holdings Series A Preferred Stock and
2,652,000 shares of Holdings Common Stock.
(e) On or prior to the Initial Borrowing Date, Holdings shall have
contributed (the "Holdings Contribution") all cash proceeds received by it
pursuant to the transactions described in clauses (c) and (d) above to the
common equity capital of the Borrower. On or prior to the Initial Borrowing
Date, the Borrower shall have used all such cash proceeds to make payments owing
in connection with the Recapitalization Transaction before utilizing any
proceeds of Loans pursuant to this Agreement for such purpose.
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5.07 Senior Subordinated Notes. (a) On or prior to the Initial
Borrowing Date, the Borrower shall have received aggregate gross cash proceeds
of $300,000,000 from the issuance of Senior Subordinated Notes. All terms and
conditions of the Senior Subordinated Notes and the documentation with respect
thereto (including, without limitation, the maturity thereof, the interest rate
applicable thereto, and the required repayments with respect thereto, the
covenants, events of default and subordination provisions with respect thereto,
and the interest rate payable with respect thereto) shall be consistent with the
term sheet for the Senior Subordinated Notes (the "Senior Subordinated Notes
Term Sheet") which was delivered to the Agents on or before January 24, 1997,
and shall otherwise be in form and substance, and pursuant to documentation in
form and substance, reasonably satisfactory to each Agent and the Required
Banks. To the extent that any of the terms and conditions of the Senior
Subordinated Notes are worse, from the perspective of the Borrower or the Banks,
than those described in the Senior Subordinated Notes Term Sheet, such terms and
conditions shall be required to be satisfactory to each Agent. On or prior to
the Initial Borrowing Date, each Bank shall have received copies of all
agreements entered into, or proposed to be entered into, in respect of all of
the foregoing, certified on behalf of the Borrower as true and complete by an
authorized officer of the Borrower, and each of the foregoing shall be in the
form delivered to the Agents prior to January 24, 1997, with such changes
thereto as are reasonably acceptable to the Agents.
(b) On or prior to the Initial Borrowing Date, the Borrower shall
have used all cash proceeds (net of any underwriting commissions, fees or other
expenses) described in preceding clause (a) to make payments owing in connection
with the Recapitalization Transaction before utilizing any proceeds of Loans
pursuant to this Agreement for such purpose. The cash proceeds received on or
prior to the Initial Borrowing Date from the Senior Subordinated Notes, when
added to the cash proceeds of the Equity Contribution plus the aggregate
principal amount of Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans incurred on the Initial Borrowing Date, shall be sufficient to effect the
Recapitalization Transaction and to pay all fees and expenses in connection
therewith.
5.08 Repayment of Purchase Price Note. (a) On or prior to the
Initial Borrowing Date, the Borrower shall have repaid the Purchase Price Note
in full in cash.
5.09 Indebtedness. Each element of the Transaction shall have been
consummated to the reasonable satisfaction of the Agents. After giving effect to
the consummation of the Transaction, Holdings, the Borrower and their respective
Subsidiaries shall have no outstanding Indebtedness except (i) the Senior
Subordinated Notes, (ii) the Seller Note, (iii) the Loans and (iv) such other
indebtedness, if any, as shall be permitted to remain outstanding by the Agents
and the Required Banks and which is listed on Schedule V hereto.
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5.10 Subsidiaries Guaranty. To the extent any Subsidiary Guarantors
exist on the Initial Borrowing Date, each such Subsidiary Guarantor shall have
duly authorized, executed and delivered a Subsidiaries Guaranty on such date.
5.11 Pledge Agreement. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered a Pledge Agreement in
the form of Exhibit H (as modified, supplemented or amended from time to time,
the "Pledge Agreement") and shall have delivered to the Collateral Agent, as
pledgee, all the Pledged Securities, if any, referred to therein then owned by
such Credit Party, (x) endorsed in blank in the case of promissory notes
constituting Pledged Securities and (y) together with executed and undated stock
powers, in the case of capital stock constituting Pledged Securities.
5.12 Security Agreement. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered a Security Agreement in
the form of Exhibit I (as modified, supplemented or amended from time to time,
the "Security Agreement") covering all of such Credit Party's present and future
Security Agreement Collateral, in each case together with:
(a) proper Financing Statements (Form UCC-1) fully executed for
filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to
be created by the Security Agreement;
(b) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
that name any Credit Party as debtor and that are filed in the
jurisdictions referred to in clause (a) above, together with copies of
such other financing statements (none of which shall cover the Collateral
except to the extent evidencing Permitted Liens or in respect of which the
Collateral Agent shall have received termination statements (Form UCC-3)
or such other termination statements as shall be required by local law)
fully executed for filing;
(c) evidence of execution for post-closing filing and recordation of
all other recordings and filings of, or with respect to, the Security
Agreement as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests intended to
be created by such Security Agreement; and
(d) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken.
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5.13 Mortgages; Title Insurance; Surveys; etc. On the Initial
Borrowing Date, the Collateral Agent shall have received:
(a) fully executed counterparts of mortgages or deeds to secure debt
in each case in form and substance reasonably satisfactory to the Agents
(each, a "Mortgage" and, collectively, the "Mortgages"), which Mortgages
shall cover such of the Real Property owned or leased by the Borrower or
any Domestic Subsidiary as shall be designated as such on Schedule III
(each, a "Mortgaged Property" and, collectively, the "Mortgaged
Properties"), together with evidence that counterparts of the Mortgages
have been delivered to the title insurance company insuring the Lien of
the Mortgages for recording in all places to the extent necessary or, in
the reasonable opinion of the Collateral Agent, desirable to effectively
create a valid and enforceable first priority mortgage lien, subject only
to Permitted Encumbrances, on each Mortgaged Property in favor of the
Collateral Agent (or such other trustee as may be required or desired
under local law) for the benefit of the Secured Creditors;
(b) mortgagee title insurance policies on each Mortgaged Property
issued by (x) with respect to the Borrower's Real Property located in West
Jordan, Utah, Lawyers Title Insurance Company and (y) with respect to the
Borrower's Real Property located in South Portland, Maine, First American
Title Insurance Company, or such other title insurers reasonably
satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts
satisfactory to the Agent and the Required Banks assuring the Collateral
Agent that the Mortgages on such Mortgaged Properties are valid and
enforceable first priority mortgage liens on the respective Mortgaged
Properties, free and clear of all defects and encumbrances except
Permitted Encumbrances and such Mortgage Policies shall otherwise be in
form and substance reasonably satisfactory to the Agents and the Required
Banks and shall include, as appropriate, an endorsement for future
advances under this Agreement and the Notes and for any other matter that
the Collateral Agent in its reasonable discretion may reasonably request,
shall not include an exception for mechanics' liens, and shall provide for
affirmative insurance and such reinsurance as the Collateral Agent in its
discretion may reasonably request; and
(c) copies of appraisals prepared for tax allocation purposes for
each Mortgaged Property, which appraisals shall be prepared by Ernst &
Young, shall value the buildings on a depreciated cost basis and on a
continuing use basis and shall otherwise be in form and substance
reasonably satisfactory to each Agent and the Required Banks.
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5.14 Consent Letter. On the Initial Borrowing Date, the
Administrative Agent shall have received a letter from Corporation Service
Company, presently located at 500 Central Avenue, Albany, New York 12206,
substantially in the form of Exhibit J, indicating its consent to its
appointment by each Credit Party as its agent to receive service of process as
specified in Section 13.08.
5.15 Adverse Change, etc. (a) On the Initial Borrowing Date, there
shall not have occurred or been threatened since May 26, 1996 any material
adverse change (or a series of adverse changes) constituting a material adverse
change in the business, property, financial condition or prospects of the
Business taken as a whole.
(b) On or prior to the Initial Borrowing Date, all necessary
material governmental (domestic and foreign) and third party approvals and/or
consents in connection with the Transaction, the transactions contemplated by
the Credit Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction or the transactions contemplated by this
Agreement. Additionally, there shall not exist any judgment, order, injunction
or other restraint prohibiting or imposing materially adverse conditions upon
the Transaction or the transactions contemplated by this Agreement.
(c) There shall not have occurred and be continuing a "market
disruption event" since January 24, 1997. As used in this clause (c), "market
disruption event" shall mean (w) any suspension or limitation of trading in
securities generally on the New York Stock Exchange (not including any
suspension or limitation of trading in any particular security as a result of
computerized trading limits), or any setting of minimum prices for trading on
such exchange, (x) any banking moratorium declared by U.S. Federal or New York
authorities, (y) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency or (z) any other
material adverse change in bank or capital market conditions that has had a
material adverse effect on the syndication of bank credit facilities or the
consummation of high yield offerings. The Borrower shall have fully cooperated
in the syndication efforts, including, without limitation, by promptly providing
the Agents with all information deemed necessary by them to successfully
complete the syndication.
5.16 Litigation. On the Initial Borrowing Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect to
the Transaction or this Agreement or any documentation executed in connection
therewith, or which could reasonably be expected to have a materially adverse
effect on the Transaction or the busi-
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ness, property, assets, condition (financial or otherwise) or prospects of the
Borrower, or the Borrower and its Subsidiaries taken as a whole (after giving
effect to the Transaction).
5.17 Solvency Certificate; Environmental Analyses; Insurance. On or
before the Initial Borrowing Date, the Borrower shall cause to be delivered to
the Administrative Agent (i) a solvency certificate from the chief financial
officer of each of Holdings and the Borrower in the form of Exhibit K hereto,
which shall be addressed to each Agent and each of the Banks and dated the
Initial Borrowing Date, setting forth the conclusion that, after giving effect
to the Transaction and the incurrence of all the financings contemplated herein,
each of Holdings and its Subsidiaries taken as a whole and the Borrower, are not
insolvent and will not be rendered insolvent by the indebtedness incurred in
connection therewith, and will not be left with unreasonably small capital with
which to engage in their businesses and will not have incurred debts beyond
their ability to pay debts as they mature, (ii) environmental and hazardous
substance analyses with respect to the properties of Holdings and its
Subsidiaries, the results of which shall be in scope, and in form and substance
satisfactory to the Agents and the Required Banks (it being acknowledged and
agreed that the environmental and hazardous substance analyses furnished to the
Agents on or prior to January 24, 1997 are in form and substance satisfactory to
the Agents and the Required Banks) and (iii) certificates of insurance complying
with the requirements of Section 8.03 for the business and properties of
Holdings and its Subsidiaries, in scope, form and substance reasonably
satisfactory to the Agents and the Required Banks and naming the Collateral
Agent as an additional insured and/or loss payee, and stating that such
insurance shall not be cancelled or revised without 30 days prior written notice
by the insurer to the Collateral Agent.
5.18 Pro Forma Balance Sheet; Financial Statements; Projections. On
or prior to the Initial Borrowing Date, the Agents shall have received copies of
the financial statements (including the pro forma financial statements) and
Projections referred to in Sections 7.05(a) and (d).
SECTION 6. Conditions Precedent to All Credit Events. The obligation
of each Bank to make Loans (including Loans made on the Initial Borrowing Date
but excluding Mandatory Borrowings made thereafter, which shall be made as
provided in Section 1.01(e)), and the obligation of an Issuing Bank to issue any
Letter of Credit, is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
6.01 No Default; Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though
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such representations and warranties had been made on the date of the making of
such Credit Event (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be required to
be true and correct in all material respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Loan (excluding Swingline Loans), the Administrative Agent shall
have received the notice required by Section 1.03(a). Prior to the making of any
Swingline Loan, the Swingline Bank shall have received the notice required by
Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.02.
The acceptance of the proceeds of each Credit Event shall constitute
a representation and warranty by the Borrower to each of the Agents and each of
the Banks that all the conditions specified in Section 5 and in this Section 6
and applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Administrative Agent at the Notice Office for the account of each of the
Banks and, except for the Notes, in sufficient counterparts for each of the
Banks and shall be in form and substance reasonably satisfactory to the Agents.
SECTION 7. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans, and issue
(or participate in) the Letters of Credit as provided herein, each of Holdings
and the Borrower makes the following representations, warranties and agreements,
in each case after giving effect to the Transaction as consummated on the
Initial Borrowing Date, all of which shall survive the execution and delivery of
this Agreement and the Notes and the making of the Loans and issuance of the
Letters of Credit, with the occurrence of each Credit Event on or after the
Initial Borrowing Date being deemed to constitute a representation and warranty
that the matters specified in this Section 7 are true and correct in all
material respects on and as of the Initial Borrowing Date and on the date of
each such Credit Event (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be required
to be true and correct in all material respects only as of such specified date).
7.01 Corporate Status. Holdings, the Borrower and each of their
respective Subsidiaries (i) is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction of its incorporation, (ii)
has the corporate power and authority to own its property and assets and to
transact the business in which it is engaged and
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presently proposes to engage and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where the conduct of its
business requires such qualifications except for failures to be so qualified
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
7.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents. Each Credit Party has duly executed and
delivered each of the Documents to which it is party, and each of such Documents
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene any provision of any
applicable law, statute, rule or regulation or any applicable order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except pursuant
to the Security Documents) upon any of the properties or assets of Holdings, the
Borrower or any of their respective Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement or loan agreement, or any
other material agreement, contract or instrument, to which Holdings, the
Borrower or any of their respective Subsidiaries is a party or by which it or
any of its property or assets is bound or to which it may be subject (excluding,
in the case of the Recapitalization Documents, from the foregoing clauses (i)
and (ii) such immaterial violations, which in no event shall violate the
provisions of this Agreement or otherwise be reasonably expected to have (x) a
material adverse effect on (I) the Transaction or (II) the rights or remedies of
the Agents or the Banks, or on the ability of any Credit Party to perform their
respective obligations to the Agents and the Banks or (y) a Material Adverse
Effect) or (iii) will violate any provision of the Certificate of Incorporation
or By-Laws of Holdings, the Borrower or any of their respective Subsidiaries.
7.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made or, in the case of any filings or
recordings in respect of the Security Documents executed on the Initial
Borrowing Date, will be made within 10 days thereof),
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or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of (x) any Recapitalization
Document by any Credit Party or (y) any Credit Document or (ii) the legality,
validity, binding effect or enforceability of (x) any Recapitalization Document
with respect to any Credit Party or (y) any Credit Document.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) The audited combined balance sheets of the
Business as of May 28, 1995 and May 26, 1996, and the related combined
statements of operations for each of the years in the three year period ended
May 26, 1996 and the unaudited combined balance sheets of the Business as of
November 24, 1996, and the related combined statements of operations for the six
month period ended November 24, 1996, in each case furnished to the Banks prior
to the Effective Date pursuant to Section 5.18, present fairly the combined
assets, liabilities and business equity of the Business at the respective dates
of such balance sheets and its combined revenues less direct expenses before
taxes for each of the years in the three year period ended May 26, 1996 or the
six month period ended November 24, 1996, as the case may be, on the basis
described in Note 1 to the financial statements audited by KPMG Peat Marwick,
LLP, in conformity with generally accepted accounting principles. Furthermore,
all pro forma financial statements or information contained in the Offering
Circular have been prepared by management of the Borrower from the historical
financial statements referenced above, to reflect adjustments as if the
Transaction had occurred on the dates provided in the Offering Circular, based
on assumptions that management of the Borrower, on the Initial Borrowing Date,
believes are reasonable in the circumstances.
(b) (i) On and as of the Initial Borrowing Date, on a pro forma
basis after giving effect to the Transaction and all other transactions
contemplated by the Documents and to all Indebtedness (including the Loans)
being incurred or assumed, and Liens created by each Credit Party in connection
therewith, with respect to Holdings and the Borrower, individually, and each
such Person and its Subsidiaries taken as a whole, (x) the sum of the assets, at
a fair valuation, of each such Person, individually, and each such Person and
its Subsidiaries taken as a whole, will exceed its or their debts; (y) it has
not incurred and does not intend to incur, nor believes that it will incur,
debts beyond its ability to pay such debts as such debts mature; and (z) it will
have sufficient capital with which to conduct its business. For purposes of this
Section 7.05(b), "debt" means any liability on a claim and "claim" means (i)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
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(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Holdings or any of its Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in the aggregate, would be
adversely material to the Business or Holdings and its Subsidiaries taken as a
whole or the Borrower. As of the Initial Borrowing Date, none of the Credit
Parties knows of any basis for the assertion against it of any liability or
obligation of any nature that is not fully disclosed in the financial statements
delivered pursuant to Section 7.05(a) which, either individually or in the
aggregate, could be materially adverse to Holdings and its Subsidiaries taken as
a whole or the Borrower.
(d) On and as of the Initial Borrowing Date, the Projections set
forth on Schedule X hereto which have been delivered to the Administrative Agent
and the Banks on or prior to the Initial Borrowing Date have been prepared on a
basis consistent with the financial statements referred to in Section 7.05(a),
and are based on good faith estimates and assumptions believed by management of
Holdings to be reasonable and attainable as of the date of such Projections, and
there are no statements or conclusions in any of the Projections which are based
upon or include information known to Holdings or any of its Subsidiaries to be
misleading or which fail to take into account material information regarding the
matters reported therein. On the Initial Borrowing Date, Holdings believes that
the Projections were reasonable and attainable.
(e) After giving effect to the Transaction (but for this purpose
assuming that the Transaction had occurred prior to May 26, 1996), since May 26,
1996 there has been (x) if this representation is being made (or deemed made) on
or prior to the Initial Borrowing Date, no material adverse change in the
operations, properties, financial condition or prospects of the Business,
Holdings and its Subsidiaries taken as a whole or the Borrower and (y) if this
representation is being made (or deemed made) at any time after the Initial
Borrowing Date, no Material Adverse Effect.
7.06 Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of Holdings and the Borrower, threatened (i) with
respect to any Credit Document or (ii) that could reasonably be expected to have
a Material Adverse Effect.
7.07 True and Complete Disclosure. All factual information (taken as
a whole) furnished by or on behalf of Holdings or the Borrower in writing to any
of the Agents or any Bank (including, without limitation, all information
contained in the Documents or in the Offering Circular) for purposes of or in
connection with this Agreement, the other Credit Documents or any transaction
contemplated herein or therein is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of Holdings or the Borrower in
writing to any of the Agents or any Bank will be, true and
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accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided.
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the
Term Loans shall be used by the Borrower (i) to effect the Recapitalization
Transaction and (ii) to pay fees and expenses related to the Recapitalization
Transaction.
(b) All proceeds of all Revolving Loans and all Swingline Loans
incurred after the Initial Borrowing Date shall be used for the Borrower's
general corporate and working capital purposes (excluding the purposes described
in preceding Section 7.08(a)).
(c) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
7.09 Tax Returns and Payments. Each of Holdings and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings and its Subsidiaries in accordance with
generally accepted accounting principles. Holdings and each of its Subsidiaries
have at all times paid, or have provided adequate reserves (in the good faith
judgment of the management of Holdings) for the payment of, all federal, state
and foreign income taxes applicable for all prior fiscal years and for the
current fiscal year to date. There is no action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of Holdings or
any of its Subsidiaries, threatened by any authority regarding any taxes
relating to Holdings or any of its Subsidiaries which could be reasonably
expected to have a Material Adverse Effect. As of the Initial Borrowing Date,
neither Holdings nor any of its Subsidiaries has entered into an agreement or
waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of
Holdings or any of its Subsidiaries, or is aware of any circumstances that would
cause the taxable years or other taxable periods of Holdings or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations.
7.10 Compliance with ERISA. (i) Schedule VII sets forth, as of the
Initial Borrowing Date, each Plan; each Plan (and each related trust, insurance
contract or fund)
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is in substantial compliance with its terms and with all applicable laws,
including without limitation ERISA and the Code; each Plan (and each related
trust, if any) which is intended to be qualified under Section 401(a) of the
Code has received a determination letter from the Internal Revenue Service to
the effect that it meets the requirements of Sections 401(a) and 501(a) of the
Code; no Reportable Event has occurred; no Plan which is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization;
no Plan has an Unfunded Current Liability; no Plan which is subject to Section
412 of the Code or Section 302 of ERISA has an accumulated funding deficiency,
within the meaning of such sections of the Code or ERISA, or has applied for or
received a waiver of an accumulated funding deficiency or an extension of any
amortization period, within the meaning of Section 412 of the Code or Section
303 or 304 of ERISA; to the best knowledge of Holdings or any Subsidiary of
Holdings, all contributions required to be made with respect to a Plan have been
or will be timely made; neither Holdings nor any Subsidiary of Holdings nor any
ERISA Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan; to
the best knowledge of Holdings or any Subsidiary of Holdings, no condition
exists which presents a material risk to Holdings or any Subsidiary of Holdings
or any ERISA Affiliate of incurring a liability to or on account of a Plan
pursuant to the foregoing provisions of ERISA and the Code; no proceedings have
been instituted to terminate or appoint a trustee to administer any Plan which
is subject to Title IV of ERISA; to the best knowledge of Holdings or any
Subsidiary of Holdings, no action, suit, proceeding, hearing, audit or
investigation with respect to the administration, operation or the investment of
assets of any Plan (other than routine claims for benefits) is pending, or, to
the best knowledge of Holdings or any Subsidiary of Holdings, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings
and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event, would
not exceed $200,000; each group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees
or former employees of Holdings, any Subsidiary of Holdings, or any ERISA
Affiliate has at all times been operated in material compliance with the
provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the
Code; no lien imposed under the Code or ERISA on the assets of Holdings or any
Subsidiary of Holdings or any ERISA Affiliate exists or is likely to arise on
account of any Plan; and Holdings and its Subsidiaries may cease contributions
to or terminate any employee benefit plan maintained by any of them without
incurring any material liability.
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(ii) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been or will be timely made. Neither Holdings nor any of its Subsidiaries has
incurred any obligation in connection with the termination of or withdrawal from
any Foreign Pension Plan. Except as otherwise disclosed in Note 4 to the
financial statements audited by KPMG Peat Marwick, LLP, as described in Section
7.05(a), the excess of the present value of the accrued benefit liabilities
(whether or not vested) under each Foreign Pension Plan, determined as of the
end of Holdings' most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, over the current value of the assets
of each such Foreign Pension Plan allocable to such benefit liabilities does
not, in the aggregate, have a Material Adverse Effect.
7.11 The Security Documents. (a) The provisions of the Security
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Credit Parties in the Security
Agreement Collateral described therein, and the Security Agreement, upon the
filing of Form UCC-1 financing statements or the appropriate equivalent (which
filings, if this representation is being made more than 10 days after the
Initial Borrowing Date, have been made), create a fully perfected first lien on,
and security interest in, all right, title and interest in all of the Security
Agreement Collateral described therein, subject to no other Liens other than
Permitted Liens, to the extent a security interest in such collateral can be
perfected by the filing of a financing statement. The recordation of the
Assignment of Security Interest in U.S. Patents and Trademarks in the form
attached to the Security Agreement in the United States Patent and Trademark
Office together with filings on Form UCC-1 made pursuant to the Security
Agreement will be effective when recorded or filed (which recordings or filings,
if this representation is being made more than 10 days after the Initial
Borrowing Date, have been made), under applicable law, to perfect the security
interest granted to the Collateral Agent in the trademarks and patents covered
by the Security Agreement and the recordation of the Assignment of Security
Interest in U.S. Copyrights in the form attached to the Security Agreement with
the United States Copyright Office together with filings on Form UCC-1 made
pursuant to the Security Agreement will be effective when recorded or filed
(which recordings or filings, if this representation is being made more than 10
days after the Initial Borrowing Date, have been made) under federal law to
perfect the security interest granted to the Collateral Agent in the copyrights
covered by the Security Agreement. Each of the Credit Parties party to the
Security Agreement has good and valid title to all Security Agreement Collateral
described therein, free and clear of all Liens except those described above in
this clause (a).
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(b) The security interests created in favor of the Collateral Agent,
as pledgee, for the benefit of the Secured Creditors under the Pledge Agreement
constitute first priority perfected security interests in the Pledged Securities
described in the Pledge Agreement, subject to no security interests of any other
Person. No filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests created in the Pledged
Securities and the proceeds thereof under the Pledge Agreement.
(c) The Mortgages create, as security for the obligations purported
to be secured thereby, a valid and enforceable perfected security interest in
and mortgage lien on all of the Mortgaged Properties in favor of the Collateral
Agent (or such other trustee as may be required or desired under local law) for
the benefit of the Secured Creditors, superior to and prior to the rights of all
third persons (except that the security interest and mortgage lien created in
the Mortgaged Properties may be subject to the Permitted Encumbrances related
thereto) and subject to no other Liens (other than Permitted Liens). Schedule
III contains a true and complete list of each parcel of Real Property owned or
leased by the Borrower and its Subsidiaries on the Effective Date, and the type
of interest therein held by the Borrower or such Subsidiary. The Borrower and
each of its Subsidiaries have good and indefeasible title to all fee-owned
Mortgaged Properties and valid leasehold title to all Leaseholds, in each case
free and clear of all Liens except those described in the first sentence of this
subsection (c).
7.12 Representations and Warranties in Documents. All
representations and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made), provided that to the extent the
representations and warranties in the Recapitalization Documents are made by
Persons other than the Credit Parties and the CVC Permitted Holders, then the
representations and warranties so made by such Persons shall be deemed to be
true and correct in all material respects for purposes of this Section 7.12
unless the aggregate effect of all misrepresentations made by such Persons in
the Recapitalization Documents are such as would evidence a material adverse
change in the operations, properties, condition (financial or otherwise) or
prospects of the Business from that which would have applied if all
representations made by such Persons in the Recapitalization Documents had been
true and correct in all respects.
7.13 Properties. Holdings, the Borrower and each of their respective
Subsidiaries have good and valid title to all properties owned by them,
including all property reflected in the most recent balance sheet of the
Business referred to in Section 7.05(a) and in the pro forma balance sheet
referred to in Section 5.18 (except as sold or otherwise disposed of since the
date of such balance sheet in the ordinary course of business), free and clear
of all Liens, other than (i) as referred to in the balance sheet or in the notes
thereto or in the pro forma balance sheet or (ii) Permitted Liens otherwise
permitted by
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Section 9.01. On the Effective Date, Schedule III sets forth a true and complete
description of all Real Property owned or leased by the Borrower and/or its
Subsidiaries and sets forth the direct owner or lessee thereof.
7.14 Capitalization. (a) On the Initial Borrowing Date and after
giving effect to the Transaction, the authorized capital stock of Holdings shall
consist of 30,000,000 shares of Class A Holdings Common Stock, 7,300,000 of
which shall be issued and outstanding, 30,000,000 shares of Class B Holdings
Common Stock, 8,300,000 of which shall be issued and outstanding, and 70,000
shares of Holdings Series A Preferred Stock, all of which shall be issued and
outstanding. All such outstanding shares have been duly and validly issued, are
fully paid and non-assessable and have been issued free of preemptive rights,
except for the preemptive rights set forth in the Securities Purchase and
Holders Agreement. Except as set forth on Schedule XI, on the Initial Borrowing
Date, Holdings does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreement providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction, the authorized capital stock of the Borrower shall consist of 1,000
shares of Borrower Common Stock, 100 of which shall be issued and outstanding
and delivered for pledge pursuant to the Pledge Agreement. All such outstanding
shares of common stock have been duly and validly issued, are fully paid and
nonassessable and are free of preemptive rights. As of the Initial Borrowing
Date, the Borrower does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
7.15 Subsidiaries. After giving effect to the Transaction, Holdings
will have no Subsidiaries other than the Borrower and its Subsidiaries. After
giving effect to the Transaction, the Borrower will have no Subsidiaries other
than (i) those Subsidiaries listed on Schedule VIII and (ii) new Subsidiaries
created in compliance with Section 9.14. An accurate organization chart, showing
the ownership structure of Holdings and each of its Subsidiaries on the Initial
Borrowing Date, and after giving effect to the Transaction, is set forth on
Schedule XII.
7.16 Compliance with Statutes, etc. Each of Holdings, the Borrower
and its Subsidiaries is in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable
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statutes, regulations, orders and restrictions relating to environmental
standards and controls), except such noncompliances as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
7.17 Investment Company Act. None of Holdings, the Borrower or any
of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
7.18 Public Utility Holding Company Act. None of Holdings, the
Borrower or any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
7.19 Environmental Matters. (a) Holdings, the Borrower and each of
their respective Subsidiaries have complied with, and on the date of each Credit
Event will be in compliance with, all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws. There are no
pending or, to the best knowledge of Holdings and the Borrower after due
inquiry, past or threatened Environmental Claims against Holdings, the Borrower
or any of their respective Subsidiaries or any Real Property owned or operated
by Holdings, the Borrower or any of their respective Subsidiaries. There are no
facts, circumstances, conditions or occurrences in respect of any Real Property
owned or operated by Holdings, the Borrower or any of their respective
Subsidiaries that, to the best knowledge of Holdings or the Borrower after due
inquiry, could reasonably be expected (i) to form the basis of an Environmental
Claim against Holdings, the Borrower or any of their respective Subsidiaries or
any such Real Property, or (ii) to cause any such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability of such
Real Property by Holdings, the Borrower or any of their respective Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings, the Borrower or any of their respective Subsidiaries where
such generation, use, treatment or storage has violated or could reasonably be
expected to violate any Environmental Law. Hazardous Materials, to the best
knowledge of Holdings and the Borrower, have not been Released on or from any
Real Property owned or operated by Holdings, the Borrower or any of their
respective Subsidiaries where such Release has violated or could reasonably be
expected to violate any applicable Environmental Law.
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(c) Notwithstanding anything to the contrary in this Section 7.19,
the representations made in this Section 7.19 shall only be untrue if the
aggregate effect of all failures and noncompliances of the types described above
could reasonably be expected to have a Material Adverse Effect.
7.20 Labor Relations. Except as set forth on Schedule IX, none of
Holdings, the Borrower nor any of their respective Subsidiaries is engaged in
any unfair labor practice that could reasonably be expected to have a material
adverse effect on Holdings and its Subsidiaries taken as a whole or the Borrower
and there is (i) no unfair labor practice complaint pending against Holdings,
the Borrower or any of their respective Subsidiaries or, to the best knowledge
of Holdings or the Borrower, threatened against any of them, before the National
Labor Relations Board, and no material grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against Holdings, the Borrower or any of their respective Subsidiaries or, to
the best knowledge of Holdings or the Borrower, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against Holdings,
the Borrower or any of their respective Subsidiaries or, to the best knowledge
of Holdings or the Borrower, threatened against Holdings, the Borrower or any of
their respective Subsidiaries and (iii) to the best knowledge of Holdings and
the Borrower, no union representation proceeding is pending with respect to the
employees of Holdings or the Borrower or any of their respective Subsidiaries,
except (with respect to any matter specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as could not reasonably be
expected to have a Material Adverse Effect.
7.21 Patents, Licenses, Franchises and Formulas. Each of Holdings,
the Borrower and their respective Subsidiaries owns all material patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect to the foregoing, and has
obtained assignments of all leases and other rights of whatever nature,
necessary for the present conduct of its business, without any known conflict
with the rights of others which, or the failure to own or obtain which, as the
case may be, would be reasonably likely to result in a Material Adverse Effect.
7.22 Indebtedness. Schedule V sets forth a true and complete list of
all Indebtedness (excluding (i) the Senior Subordinated Notes, (ii) the Seller
Note and (iii) the Loans and Letters of Credit) of Holdings, the Borrower and
their respective Subsidiaries as of the Initial Borrowing Date and which is to
remain outstanding after giving effect to the Transaction (the "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof and
the name of the respective borrower and any other entity which directly or
indirectly guaranteed such debt.
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7.23 Transaction. At the time of consummation thereof, the
Transaction shall have been consummated in all material respects in accordance
with the terms of the respective Documents and all applicable laws. At the time
of consummation of the Transaction, all necessary material consents and
approvals of, and filings and registrations with, and all other actions in
respect of, all governmental agencies, authorities or instrumentalities required
in order to make or consummate the Transaction will have been obtained, given,
filed or taken and are or will be in full force and effect (or effective
judicial relief with respect thereto has been obtained). All applicable waiting
periods with respect thereto have or, prior to the time when required, will
have, expired without, in all such cases, any action being taken by any
competent authority which restrains, prevents, or imposes material adverse
conditions upon the Transaction. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Transaction, or the occurrence of any Credit Event or the
performance by Holdings or the Borrower of its obligations under the respective
Credit Documents. All actions taken by Holdings and the Borrower pursuant to or
in furtherance of the Transaction have been taken in all material respects in
compliance with the respective Documents and all applicable laws.
7.24 Special Purpose Corporations. Holdings was formed for the
purpose of effecting the Recapitalization Transaction and, prior to the
consummation thereof, had no material assets or liabilities except in connection
therewith. Holdings engages in no business activities other than the employment
of management of the Borrower, except in connection with its ownership of the
capital stock of the Borrower and liabilities incident thereto.
SECTION 8. Affirmative Covenants. Holdings and the Borrower hereby
covenant and agree that on and after the Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations incurred
hereunder and thereunder, are paid in full:
8.01 Information Covenants. Holdings and/or the Borrower will
furnish to the Administrative Agent (with sufficient copies for each of the
Banks) and the Administrative Agent will promptly thereafter furnish to each
Bank:
(a) Monthly Reports. Within 30 days after the end of each fiscal
month of Holdings, the consolidated balance sheets of Holdings and its
consolidated Subsidiaries (and Unrestricted Subsidiaries to the extent
required to be consolidated with Holdings for financial reporting purposes
in accordance with GAAP) as at the end of such month and the related
consolidated statements of income (including consolidating income
statements by each of the Borrower's Logic, Memory and
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Discrete Power and Signal Technologies Business Units, as well as booking,
billing and backlog information related to such Business Units) and
retained earnings and statement of cash flows for such month and for the
elapsed portion of the fiscal year ended with the last day of such month,
in each case setting forth comparative figures for the corresponding month
in the prior fiscal year.
(b) Quarterly Financial Statements. Within 45 days after the close
of the first three quarterly accounting periods in each fiscal year of
Holdings, (i) the consolidated and consolidating balance sheets of
Holdings and its Consolidated Subsidiaries as at the end of such quarterly
accounting period and the related consolidated and consolidating
statements of income (including consolidating income statements by each of
the Borrower's Logic, Memory and Discrete Power and Signal Technologies
Business Units, as well as booking, billing and backlog information
related to such Business Units) and cash flows, in each case for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period, and in each
case, setting forth comparative figures for the related periods in the
prior fiscal year, after the delivery of the first budget pursuant to
Section 8.01(e), and the budgeted figures for such quarterly periods as
set forth in the respective budget delivered pursuant to Section 8.01(e),
all of which shall be certified by the Chief Financial Officer or
Treasurer of Holdings, subject to normal year-end audit adjustments and
(ii) management's discussion and analysis of the important operational and
financial developments during the fiscal quarter and year-to-date periods.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of Holdings, (i) the consolidated and consolidating
balance sheets of Holdings and its consolidated Subsidiaries (and
Unrestricted Subsidiaries to the extent required to be consolidated with
Holdings for financial reporting purposes in accordance with GAAP) as at
the end of such fiscal year and the related consolidated and consolidating
statements of income (including consolidating income statements by each of
the Borrower's Logic, Memory and Discrete Power and Signal Technologies
Business Units, as well as booking, billing and backlog information
related to such Business Units) and retained earnings and of cash flows
for such fiscal year setting forth comparative figures for the preceding
fiscal year and certified (x) in the case of such consolidated financial
statements, by KPMG Peat Marwick, LLP, or such other independent certified
public accountants of recognized national standing reasonably acceptable
to the Administrative Agent, together with a report of such accounting
firm stating that in the course of its regular audit of the financial
statements of Holdings and its Subsidiaries, which audit was conducted in
accordance with generally accepted auditing standards, such accounting
firm obtained no knowledge of any Default or Event of Default which
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has occurred and is continuing or, if in the opinion of such accounting
firm such a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof, and (y) in the case of such
consolidating financial statements, by the Chief Financial Officer or
Treasurer of Holdings, and (ii) management's discussion and analysis of
the important operational and financial developments during such fiscal
year.
(d) Management Letters. Promptly after the receipt thereof by
Holdings, the Borrower or any of their respective Subsidiaries, a copy of
any "management letter" received by any such Person from its certified
public accountants and the management's responses thereto.
(e) Budgets. No later than 30 days following the commencement of the
first day of each fiscal year of Holdings, a budget in form satisfactory
to the Agents (including budgeted statements of income by each of the
Borrower's Logic, Memory and Discrete Power and Signal Technologies
Business Units and sources and uses of cash and balance sheets) prepared
by Holdings for (x) each of the twelve months of such fiscal year prepared
in detail and (y) each of the five years immediately following such fiscal
year prepared in summary form, in each case, of Holdings and its
Subsidiaries, accompanied by the statement of the Chief Financial Officer
or Treasurer of Holdings to the effect that, to the best of his knowledge,
the budget is a reasonable estimate for the period covered thereby.
(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 8.01(a), (b) and (c), a
certificate of the Chairman of the Board, the President, Chief Financial
Officer or the Treasurer of the Borrower to the effect that, to the best
of such officer's knowledge, no Default or Event of Default has occurred
and is continuing or, if any Default or Event of Default has occurred and
is continuing, specifying the nature and extent thereof, which certificate
shall, in the case of any such financial statements delivered in respect
of a period ending on the last day of a fiscal quarter or year of
Holdings, (x) set forth the calculations required to establish whether the
Borrower was in compliance with the provisions of Sections 4.02(f), (g)
and (h) (but with respect to Section 4.02(g) only to the extent delivered
with the financial statements required by Sections 8.01(c)), 9.05, 9.07
and 9.08 through 9.10, inclusive, at the end of such fiscal quarter or
year, as the case may be and (y) if delivered with the financial
statements required by Section 8.01(c), set forth the amount of Excess
Cash Flow for the respective Excess Cash Payment Period.
(g) Notice of Default or Litigation. Promptly, and in any event
within three Business Days in the case of item (i) below or five Business
Days in the case of
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item (ii) below after an officer of Holdings or the Borrower obtains
knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or Event of Default and (ii) any litigation or
governmental investigation or proceeding pending or threatened (x) against
Holdings, the Borrower or any of their respective Subsidiaries which could
reasonably be expected to have a Material Adverse Effect, (y) with respect
to any Indebtedness in excess of $2,500,000 of Holdings, the Borrower or
any of their respective Subsidiaries or (z) with respect to any Document.
(h) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if any,
which Holdings, the Borrower or any of their respective Subsidiaries shall
file with the Securities and Exchange Commission or any successor thereto
(the "SEC") or deliver to holders of its Indebtedness pursuant to the
terms of the documentation governing such Indebtedness (or any trustee,
agent or other representative therefor).
(i) Environmental Matters. Promptly upon, and in any event within
ten Business Days after, an officer of Holdings, the Borrower or any of
their respective Subsidiaries obtains knowledge thereof, notice of one or
more of the following environmental matters which occurs after the Initial
Borrowing Date, unless such environmental matters could not, individually
or when aggregated with all other such environmental matters, be
reasonably expected to have a Material Adverse Effect:
(i) any Environmental Claim pending or threatened in writing
against Holdings, the Borrower or any of their respective
Subsidiaries or any Real Property owned or operated by Holdings, the
Borrower or any of their respective Subsidiaries;
(ii) any condition or occurrence on or arising from any Real
Property owned or operated by Holdings, the Borrower or any of their
respective Subsidiaries that (a) results in noncompliance by
Holdings, the Borrower or any of their respective Subsidiaries with
any applicable Environmental Law or (b) could reasonably be expected
to form the basis of an Environmental Claim against Holdings, the
Borrower or any of their respective Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned
or operated by Holdings, the Borrower or any of their respective
Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by
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Holdings, the Borrower or any of their respective Subsidiaries of
such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by Holdings, the Borrower or any of
their respective Subsidiaries as required by any Environmental Law
or any governmental or other administrative agency; provided that in
any event Holdings and/or the Borrower shall deliver to the
Administrative Agent all material notices received by it or any of
their respective Subsidiaries from any government or governmental
agency under, or pursuant to, CERCLA.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and Holdings', the Borrower's or such Subsidiary's response thereto. In
addition, the Borrower will provide the Banks with copies of all material
communications with any government or governmental agency and all material
communications with any Person (other than Holdings', the Borrower's or
any Subsidiary's attorneys) relating to any Environmental Claim of which
notice is required to be given pursuant to this Section 8.01(i), and such
detailed reports of any such Environmental Claim as may reasonably be
requested by the Banks.
(j) Annual Meetings with Banks. At the request of Administrative
Agent, Holdings shall within 120 days after the close of each fiscal year
of Holdings hold a meeting at a time and place selected by Holdings and
acceptable to the Agents with all of the Banks at which meeting shall be
reviewed the financial results of the previous fiscal year and the
financial condition of Holdings and its Subsidiaries and the budgets
presented for the current fiscal year of Holdings and its Subsidiaries.
(k) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to Holdings, the Borrower
or their respective Subsidiaries as any Agent (whether acting on its own
or at the request of any Bank) may reasonably request in writing.
8.02 Books, Records and Inspections. Holdings and the Borrower will,
and will cause each of their respective Subsidiaries to, keep proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. Holdings and the Borrower will, and will cause each of their
respective Subsidiaries to, permit officers and designated representatives of
any of the Agents or any Bank to visit and inspect, during regular business
hours and under
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guidance of officers of Holdings, the Borrower or such Subsidiary, any of the
properties of Holdings and the Borrower or such Subsidiary, and to examine the
books of account of Holdings and the Borrower or such Subsidiary and discuss the
affairs, finances and accounts of Holdings, the Borrower or such Subsidiary
with, and be advised as to the same by, its and their officers and independent
accountants, all upon reasonable advance notice and at such reasonable times and
intervals and to such reasonable extent as such Agent or such Bank may request.
8.03 Maintenance of Property; Insurance. (a) Schedule VI sets forth
a true and complete listing of all insurance maintained by Holdings, the
Borrower and their respective Subsidiaries as of the Effective Date. Holdings
and the Borrower will, and will cause each of their respective Subsidiaries to,
(i) keep all property necessary in its business in good working order and
condition (ordinary wear and tear and loss or damage by casualty or condemnation
excepted), (ii) maintain insurance on all its property in at least such amounts
and against at least such risks as is consistent and in accordance with industry
practice and (iii) furnish to each Bank, upon written request, full information
as to the insurance carried. In addition to the requirements of the immediately
preceding sentence, Holdings and the Borrower will at all times cause insurance
of the types described in Schedule VI to be maintained (with the same scope of
coverage as that described in Schedule VI) at levels which are at least as great
as the respective amount described opposite the respective type of insurance on
Schedule VI under the column headed "Minimum Amount Required to be Maintained".
(b) Holdings and the Borrower will, and will cause their respective
Subsidiaries to, at all times keep their respective property insured in favor of
the Collateral Agent, and all policies or certificates (or certified copies
thereof) with respect to such insurance (and any other insurance maintained by
Holdings, the Borrower or any of their respective Subsidiaries) (i) shall be
endorsed to the Collateral Agent's satisfaction for the benefit of the
Collateral Agent (including, without limitation, by naming the Collateral Agent
as loss payee or as an additional insured), (ii) shall state that such insurance
policies shall not be cancelled without 30 days' prior written notice thereof by
the respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non-contributing mortgage clause endorsement in favor of the
Collateral Agent with respect to hazard liability insurance, (v) shall, except
in the case of public liability insurance, provide that any losses shall be
payable notwithstanding (A) any act or neglect of Holdings, the Borrower or any
of their respective Subsidiaries, (B) the occupation or use of the properties
for purposes more hazardous than those permitted by the terms of the respective
policy if such coverage is obtainable at commercially reasonable rates and is of
the kind from time to time customarily insured against by Persons owning or
using similar property and in such amounts as are customary, (C) any foreclosure
or
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other proceeding relating to the insured properties or (D) any change in the
title to or ownership or possession of the insured properties and (vi) shall be
deposited with the Collateral Agent.
(c) If Holdings, the Borrower or any of their respective
Subsidiaries shall fail to maintain all insurance in accordance with this
Section 8.03, or if Holdings, the Borrower or any of their respective
Subsidiaries shall fail to so endorse and deposit all policies or certificates
with respect thereto, the Administrative Agent and/or the Collateral Agent shall
have the right (but shall be under no obligation), upon thirty days advance
notice to Holdings, the Borrower or any of their respective Subsidiaries, as the
case may be, to procure such insurance and the Borrower agrees to reimburse the
Administrative Agent or the Collateral Agent as the case may be, for all costs
and expenses of procuring such insurance.
8.04 Corporate Franchises. Holdings and the Borrower will, and will
cause each of their respective Subsidiaries to, do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence and
its material rights, franchises, licenses and patents used in its business;
provided, however, that nothing in this Section 8.04 shall prevent (i) sales of
assets, consolidations or mergers by or involving Holdings, the Borrower or any
of their respective Subsidiaries in accordance with Section 9.02, (ii) the
withdrawal by Holdings, the Borrower or any of their respective Subsidiaries of
their qualification as a foreign corporation in any jurisdiction where such
withdrawal could not reasonably be expected to have a Material Adverse Effect or
(iii) the abandonment by Holdings, the Borrower or any of their respective
Subsidiaries of any rights, franchises, licenses and patents that the Borrower
reasonably determines are not useful to its business.
8.05 Compliance with Statutes, etc. Holdings and the Borrower will,
and will cause each of their respective Subsidiaries to, comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property, except such
noncompliances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
8.06 Compliance with Environmental Laws. (a) Holdings and the
Borrower will comply, and will cause each of their respective Subsidiaries to
comply, in all material respects with all Environmental Laws applicable to the
ownership or use of its Real Property now or hereafter owned or operated by
Holdings, the Borrower or any of their respective Subsidiaries, will within a
reasonable time-period pay or cause to be paid all costs and expenses incurred
in connection with such compliance (except to the extent being contested in good
faith), and will keep or cause to be kept all such Real Property free and clear
of any Liens imposed pursuant to such Environmental Laws. None of Holdings,
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the Borrower nor any of their respective Subsidiaries will generate, use, treat,
store, release or dispose of, or permit the generation, use, treatment, storage,
release or disposal of Hazardous Materials on any Real Property now or hereafter
owned or operated by Holdings, the Borrower or any of their respective
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property except in material compliance with all
applicable Environmental Laws and reasonably required in connection with the
operation, use and maintenance of any such Real Property or otherwise in
connection with their businesses.
(b) At the written request of the Administrative Agent or the
Required Banks, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, the Borrower will provide, at the
Borrower's sole cost and expense, an environmental site assessment report
concerning any Real Property now or hereafter owned or operated by Holdings, the
Borrower or any of their respective Subsidiaries, prepared by an environmental
consulting firm reasonably acceptable to the Administrative Agent, indicating
the presence or absence of Hazardous Materials and the potential cost of any
removal or remedial action in connection with any Hazardous Materials on such
Real Property; provided, that such request may be made only if (i) there has
occurred and is continuing an Event of Default, (ii) the Administrative Agent or
the Required Banks reasonably believe that Holdings, the Borrower or any such
Real Property is not in compliance with Environmental Law and such circumstances
could reasonably be expected to have a Material Adverse Effect, or (iii)
circumstances exist that reasonably could be expected to form the basis of a
material Environmental Claim against Holdings, the Borrower or any such Real
Property. If the Borrower fails to provide the same within 90 days after such
request was made, the Administrative Agent may order the same, and the Borrower
shall grant and hereby grants to the Administrative Agent and the Banks and
their agents access to such Real Property and specifically grants the
Administrative Agent and the Banks an irrevocable non-exclusive license, subject
to the rights of tenants, to undertake such an assessment, all at the Borrower's
expense.
8.07 ERISA. As soon as reasonably possible and, in any event, within
ten (10) days after Holdings, the Borrower or any of their respective
Subsidiaries or any ERISA Affiliate knows or has reason to know of the
occurrence of any of the following, Holdings or the Borrower will deliver to
each of the Banks a certificate of the chief financial officer of Holdings or
the Borrower setting forth the full details as to such occurrence and the
action, if any, that Holdings, the Borrower, such Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required or
proposed to be given to or filed with or by Holdings, the Borrower, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred (except
to the extent that Holdings or the Borrower has previously delivered to the
Banks a certificate and notices (if any) concerning
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such event pursuant to the next clause hereof); that a contributing sponsor (as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA
is subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof), and an event described
in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur with respect to such Plan within the
following 30 days; that an accumulated funding deficiency, within the meaning of
Section 412 of the Code or Section 302 of ERISA, has been incurred or an
application may be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made with
respect to a Plan or Foreign Pension Plan has not been timely made; that a Plan
has been or may be reasonably expected to be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability; that proceedings may be reasonably expected to be or
have been instituted to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan;
that Holdings, the Borrower, any of their respective Subsidiaries or any ERISA
Affiliate will or may reasonably expect to incur any liability (including any
indirect, contingent, or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29),
4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or
with respect to a group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that
Holdings, the Borrower, or any of their respective Subsidiaries may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any Plan or
any Foreign Pension Plan. Upon request, the Borrower will deliver to any of the
Banks (i) a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service and (ii) copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of annual reports and
any records, documents or other information required to be furnished to the
PBGC, and any material notices received by Holdings, the Borrower, any of their
respective Subsidiaries or any ERISA Affiliate with respect to any Plan or
Foreign Pension Plan shall be delivered to the Banks no later than ten (10) days
after the date such annual report has been filed with the Internal Revenue
Service or such records,
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documents and/or information has been furnished to the PBGC or such notice has
been received by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate,
as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. Holdings shall cause (i)
each of its, and each of its Subsidiaries', fiscal years to end on the Sunday
closest to the last day in May of each year and (ii) its fiscal quarters to end
in a manner consistent therewith.
8.09 Performance of Obligations. Each of Holdings and the Borrower
will, and will cause each of its Subsidiaries to, perform all of its obligations
under the terms of each mortgage, indenture, security agreement and other debt
instrument by which it is bound, except such non-performances as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8.10 Payment of Taxes. Each of Holdings and the Borrower will pay
and discharge, and will cause each of their respective Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties belonging to it,
prior to the date on which penalties attach thereto, and all lawful claims for
sums that have become due and payable which, if unpaid, might become a Lien not
otherwise permitted under Section 9.01(i), provided, that none of Holdings, the
Borrower nor any of their respective Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
8.11 Ownership of Subsidiaries. Holdings shall at all times own 100%
of the outstanding capital stock of the Borrower. The Borrower shall directly or
indirectly own (except to the extent permitted by Section 9.13(b)(iii)) 100% of
the capital stock of each Subsidiary of Holdings other than the Borrower.
8.12 Additional Security; Further Assurances; Surveys. (a) Holdings
and the Borrower will, and will cause each of their respective Domestic
Wholly-Owned Subsidiaries to, grant to the Collateral Agent security interests
and mortgages (an "Additional Mortgage") in such Real Property (excluding
leaseholds of Real Property where the fair market value of the respective
leasehold interest is less than $1,000,000) of Holdings, the Borrower or any of
their respective Domestic Wholly-Owned Subsidiaries as are not covered by the
original Mortgages, to the extent acquired after the Effective Date, and as may
be requested from time to time by the Administrative Agent or the Required Banks
(each such Real Property, an "Additional Mortgaged Property"). All such
Additional Mortgages shall be granted pursuant to documentation substantially in
the form of the Mortgages delivered to the Administrative Agent on the Effective
Date or in such other form as is reasonably satisfactory to the Administrative
Agent and shall constitute valid and
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enforceable perfected Liens superior to and prior to the rights of all third
Persons and subject to no other Liens except as are permitted by Section 9.01 at
the time of perfection thereof. The Additional Mortgages or instruments related
thereto shall be duly recorded or filed in such manner and in such places as are
required by law to establish, perfect, preserve and protect the Liens in favor
of the Collateral Agent required to be granted pursuant to the Additional
Mortgages and all taxes, fees and other charges payable in connection therewith
shall be paid in full.
(b) Holdings and the Borrower will, and will cause each of their
respective Domestic Wholly-Owned Subsidiaries to, at the expense of the
Borrower, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require pursuant to this Section 8.12. Additionally, upon the request
of the Collateral Agent or the Required Banks, Holdings and the Borrower shall
take, or cause to be taken, action as may be requested in order to perfect (or
maintain the perfection of) the security interests (or take any analogous
actions under the applicable provisions of local law in order to protect such
security interests) in any Collateral located outside the U.S., in each case to
the extent such actions are permitted to be taken under the laws of the
applicable jurisdictions and so long as no Default or Event of Default exists,
the requested actions will not result in any material costs (including
additional taxes) or material burdens in the conduct of the Borrower's business,
in each case in relation to the benefit to be received. Furthermore, Holdings
and the Borrower shall cause to be delivered to the Collateral Agent such
opinions of counsel, title insurance and other related documents as may be
reasonably requested by the Collateral Agent to assure itself that this Section
8.12 has been complied with.
(c) Holdings and the Borrower agree to cause each Domestic
Wholly-Owned Subsidiary established or created in accordance with Section 9.14
to execute and deliver, (i) in the case of the first such Subsidiary so
established or created (unless a Subsidiaries Guaranty has been executed and
delivered prior to such date pursuant to Section 5.10), the Subsidiaries
Guaranty and (ii) otherwise, a guaranty of all Obligations and all obligations
under Interest Rate Protection or Other Hedging Agreements in substantially the
form of the Subsidiaries Guaranty.
(d) The Borrower agrees to pledge and deliver, or cause to be
pledged and delivered, all of the capital stock of each new Subsidiary
(excluding that portion of the voting stock of any Foreign Subsidiary which
would be in excess of 65% of the total outstanding voting stock of such Foreign
Subsidiary) established or created after the
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Effective Date, to the extent owned by Holdings, the Borrower or any Domestic
Wholly-Owned Subsidiary, to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Pledge Agreement.
(e) Holdings and the Borrower will cause each Domestic Wholly-Owned
Subsidiary established or created in accordance with Section 9.14 to grant to
the Collateral Agent a first priority (subject to Permitted Liens) Lien on
property (tangible and intangible) of such Subsidiary upon terms and with
exceptions similar to those set forth in the Security Documents as appropriate,
and satisfactory in form and substance to the Borrower, the Administrative Agent
and Required Banks. Holdings and the Borrower shall cause each such Domestic
Wholly-Owned Subsidiary, at its own expense, to execute, acknowledge and
deliver, or cause the execution, acknowledgement and delivery of, and thereafter
register, file or record in any appropriate governmental office, any document or
instrument reasonably deemed by the Collateral Agent to be necessary or
desirable for the creation and perfection of the foregoing Liens. Holdings and
the Borrower will cause each of such Domestic Wholly-Owned Subsidiaries to take
all actions reasonably requested by the Administrative Agent (including, without
limitation, the filing of UCC-1's) in connection with the granting of such
security interests.
(f) The security interests required to be granted pursuant to this
Section 8.12 shall be granted pursuant to security documentation (which shall be
substantially similar to the Security Documents already executed and delivered
by the Borrower or its Subsidiaries, as applicable) or otherwise satisfactory in
form and substance to the Collateral Agent and the Borrower and shall constitute
valid and enforceable perfected security interests prior to the rights of all
third Persons and subject to no other Liens except such Liens as are permitted
by Section 9.01. The Additional Security Documents and other instruments related
thereto shall be duly recorded or filed in such manner and in such places and at
such times as are required by law to establish, perfect, preserve and protect
the Liens, in favor of the Collateral Agent for the benefit of the respective
Secured Creditors, required to be granted pursuant to the Additional Security
Documents and all taxes, fees and other charges payable in connection therewith
shall be paid in full by the Borrower. At the time of the execution and delivery
of the Additional Security Documents, the Borrower shall cause to be delivered
to the Collateral Agent such opinions of counsel, Mortgage Policies, title
surveys, real estate appraisals and other related documents as may be reasonably
requested by the Agents or the Required Banks to assure themselves that this
Section 8.12 has been complied with.
(g) Each of Holdings and the Borrower agrees that each action
required above by Section 8.12 (a) or (b) shall be completed as soon as
possible, but in no event later than 90 days after such action is requested to
be taken by the Administrative Agent or the Required Banks. Each of Holdings and
the Borrower further agrees that each action
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required by Section 8.12(c), (d), (e) and (f) with respect to the creation or
acquisition of a new Subsidiary shall be completed contemporaneously with (or,
in the case of any documents or instruments to be registered, filed or recorded,
within 10 days of) the creation of such new Subsidiary.
8.13 Interest Rate Protection. No later than the 60th day after the
Initial Borrowing Date, the Borrower shall enter into, and for a minimum of
three years thereafter maintain, Interest Rate Protection Agreements acceptable
to the Agents establishing a fixed or maximum interest rate acceptable to the
Agents for an aggregate amount with respect to the Term Loans outstanding from
time to time as is equal to 30% of the aggregate principal amount of Term Loans
then outstanding.
8.14 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Administrative Agent and the Required Banks does not
within 30 days after a request from the Administrative Agent or the Required
Banks deliver to the Administrative Agent evidence, in form and substance
satisfactory to the Administrative Agent and the Required Banks, with respect to
any Foreign Subsidiary which has not already had all of its stock pledged
pursuant to the Pledge Agreement that a pledge of 66-2/3% or more of the total
combined voting power of all classes of capital stock of such Foreign Subsidiary
entitled to vote, would cause the undistributed earnings of such Foreign
Subsidiary as determined for Federal income tax purposes to be treated as a
deemed dividend to such Foreign Subsidiary's United States parent for Federal
income tax purposes, then that portion of such Foreign Subsidiary's outstanding
capital stock not theretofore pledged pursuant to the Pledge Agreement shall be
pledged to the Collateral Agent for the benefit of the Secured Creditors
pursuant to the Pledge Agreement (or another pledge agreement in substantially
similar form, if needed), to the extent that the entering into such Pledge
Agreement is permitted by the laws of the respective foreign jurisdiction and
with all documents delivered pursuant to this Section 8.14 to be in form and
substance reasonably satisfactory to the Administrative Agent and the Required
Banks.
8.15 Maintenance of Corporate Separateness. Holdings will, and will
cause each of its Subsidiaries and Unrestricted Subsidiaries to, satisfy
customary corporate formalities, including the holding of regular board of
directors' and shareholders' meetings or action by directors or shareholders
without a meeting and the maintenance of corporate offices and records. Neither
Holdings nor any of its Subsidiaries shall make any payment to a creditor of any
Unrestricted Subsidiaries in respect of any liability of any Unrestricted
Subsidiaries, and no bank account of any Unrestricted Subsidiary shall be
commingled with any bank account of Holdings or any of its Subsidiaries. Any
financial statements distributed to any creditors of any Unrestricted
Subsidiaries shall clearly establish or
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indicate the corporate separateness of such Unrestricted Subsidiary from
Holdings and its Subsidiaries. Finally, neither Holdings nor any of its
Subsidiaries shall take any action, or conduct its affairs in a manner, which is
likely to result in the corporate existence of Holdings or any of its
Subsidiaries or Unrestricted Subsidiaries being ignored, or in the assets and
liabilities of Holdings or any of its Subsidiaries being substantively
consolidated with those of any other such Person or any Unrestricted Subsidiary
in a bankruptcy, reorganization or other insolvency proceeding.
SECTION 9. Negative Covenants. Holdings and the Borrower covenant
and agree that on and after the Effective Date and until the Total Commitments
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:
9.01 Liens. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to Holdings or any of its Subsidiaries), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute; provided that the provisions of this Section 9.01
shall not prevent the creation, incurrence, assumption or existence of the
following (Liens described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with generally accepted accounting principles in the United
States (or the equivalent thereof in any country in which a Foreign
Subsidiary is doing business, as applicable);
(ii) Liens in respect of property or assets of the Borrower or any
of its Subsidiaries imposed by law, which were incurred in the ordinary
course of business and do not secure Indebtedness for borrowed money, such
as carriers', warehousemen's, materialmen's and mechanics' liens and other
similar Liens arising in the ordinary course of business, and (x) which do
not in the aggregate materially detract from the value of the property or
assets of Holdings and its Subsidiaries taken as a whole or the Borrower
and do not materially impair the use thereof in the operation of the
business of Holdings and its Subsidiaries taken as a whole or the Borrower
or (y) which are being contested in good faith by appropriate proceed-
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ings, which proceedings (or orders entered in connection with such
proceedings) have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and
the property subject thereto described, in Schedule IV, but only to the
respective date, if any, set forth in such Schedule IV for the removal and
termination of any such Liens, plus renewals and extensions of such Liens
to the extent set forth on Schedule IV, provided that (x) the aggregate
principal amount of the Indebtedness, if any, secured by such Liens does
not increase from that amount outstanding at the time of any such renewal
or extension and (y) any such renewal or extension does not encumber any
additional assets or properties of Holdings or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to the Security Documents;
(vi) licenses, leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the conduct of
the business of Holdings and its Subsidiaries taken as a whole;
(vii) Liens upon assets of the Borrower and its Subsidiaries subject
to Capitalized Lease Obligations to the extent permitted by Section 9.04,
provided that (x) such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and (y) the
Lien encumbering the asset giving rise to the Capitalized Lease Obligation
does not encumber any other asset (other than proceeds thereof) of the
Borrower or any Subsidiary of the Borrower;
(viii) Liens placed upon assets used in the ordinary course of
business of the Borrower or any of its Subsidiaries at the time of
acquisition thereof by the Borrower or any such Subsidiary or within 90
days thereafter to secure Indebtedness incurred to pay all or a portion of
the purchase price thereof, provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens permitted by this
clause (viii) shall not at any time exceed $2,500,000 and (y) in all
events, the Lien encumbering the assets so acquired does not encumber any
other asset (other than proceeds thereof) of the Borrower or such
Subsidiary;
(ix) easements, rights-of-way, restrictions (including zoning
restrictions), covenants, encroachments, protrusions and other similar
charges or encumbrances, and minor title deficiencies, in each case
whether now or hereafter in existence, not
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securing Indebtedness and not materially interfering with the conduct of
the business of the Holdings and its Subsidiaries taken as a whole or the
Borrower;
(x) Liens arising from precautionary UCC financing statement filings
regarding operating leases entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(xi) Liens arising out of judgments or awards in respect of which
the Borrower or any of its Subsidiaries shall in good faith be prosecuting
an appeal or proceedings for review in respect of which there shall have
been secured a subsisting stay of execution pending such appeal or
proceedings, provided that the aggregate amount of all such judgments or
awards (and any cash and the fair market value of any property subject to
such Liens) does not exceed $1,000,000 at any time outstanding;
(xii) statutory and common law landlords' liens under leases or
subleases to which the Borrower or any of its Subsidiaries is a party;
(xiii) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, (y) to secure the performance of tenders, statutory obligations
(other than excise taxes), surety, stay, customs and appeal bonds,
statutory bonds, bids, leases, government contracts, trade contracts,
performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or (z)
arising by virtue of deposits made in the ordinary course of business to
secure liability for premiums to insurance carriers, provided that the
aggregate amount of deposits at any time pursuant to sub-clause (y) and
sub-clause (z) shall not exceed $500,000 in the aggregate;
(xiv) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this Agreement;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure the payment of customs duties in connection with
the importation of goods;
(xvi) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Borrower or any of its Subsidiaries in the ordinary course of business
in accordance with the past practices of the Borrower and its
Subsidiaries;
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(xvii) Liens on assets of Foreign Subsidiaries, provided that (x)
such Liens do not extend to, or encumber, assets which constitute
Collateral or the capital stock of the Borrower or any of its Subsidiaries
and (y) such Liens extending to the assets of any Foreign Subsidiary
secure only Indebtedness incurred by such Foreign Subsidiary pursuant to
Section 9.04(xiv); and
(xviii) Liens not otherwise permitted by the foregoing clauses (i)
through (xvii) to the extent attaching to properties and assets with an
aggregate fair value not in excess of, and securing liabilities not in
excess of, $10,000,000 in the aggregate at any time outstanding.
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any sale-leaseback transactions, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, materials,
equipment and intangible assets in the ordinary course of business) of any
Person (or agree to do any of the foregoing at any future time), except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries shall
be permitted to the extent not in violation of Section 9.07;
(ii) each of the Borrower and its Subsidiaries may (x) in the
ordinary course of business, sell, lease or otherwise dispose of any
assets which, in the reasonable judgment of such Person, are obsolete,
worn out or otherwise no longer useful in the conduct of such Person's
business and (y) sell, lease or otherwise dispose of any other assets,
provided that the aggregate Net Sale Proceeds of all assets subject to
sales or other dispositions pursuant to this clause (ii) shall not exceed
$5,000,000 in any four fiscal quarters of the Borrower;
(iii) investments may be made to the extent permitted by Section
9.05;
(iv) each of the Borrower and its Subsidiaries may lease (as lessee)
real or personal property in the ordinary course of business (so long as
any such lease does not create a Capitalized Lease Obligation except to
the extent permitted by Section 9.04);
(v) each of the Borrower and its Subsidiaries may make sales or
transfers of inventory in the ordinary course of business and consistent
with past practices
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(including without limitation sales or transfers of inventory by the
Borrower to its Subsidiaries);
(vi) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse and in the ordinary course of business, overdue
accounts receivable arising in the ordinary course of business, but only
in connection with the compromise or collection thereof consistent with
customary industry practice (and not as part of any bulk sale);
(vii) licenses or sublicenses by the Borrower and its Subsidiaries
of software, trademarks and other intellectual property in the ordinary
course of business and which do not materially interfere with the business
of Holdings and its Subsidiaries taken as a whole or the Borrower shall be
permitted;
(viii) the Asset Transfer shall be permitted; and
(ix) the Borrower or any Domestic Wholly-Owned Subsidiary of the
Borrower may transfer assets or lease to or acquire or lease assets from
the Borrower or any other Domestic Wholly-Owned Subsidiary or any Domestic
Wholly-Owned Subsidiary may be merged into the Borrower (as long as the
Borrower is the surviving corporation of such merger as a Wholly-Owned
Subsidiary of) or any other Domestic Wholly-Owned Subsidiary of the
Borrower.
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this Section 9.02, such Collateral (unless sold to Holdings or a Subsidiary of
Holdings) shall be sold free and clear of the Liens created by the Security
Documents, and the Administrative Agent and Collateral Agent shall be authorized
to take any actions deemed appropriate in order to effect the foregoing.
9.03 Dividends. Holdings shall not, and shall not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries, except that:
(i) any Subsidiary of the Borrower (x) may pay cash Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) if such
Subsidiary is not a Wholly-Owned Subsidiary, may pay cash Dividends to its
shareholders generally so long as the Borrower or its respective Subsidiary
which owns the equity interest or interests in the Subsidiary paying such
Dividends receives at least its proportionate share thereof (based upon its
relative holdings of equity interests in the Subsidiary paying such Dividends
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and taking into account the relative preferences, if any, of the various classes
of equity interests in such Subsidiary);
(ii) so long as there shall exist no Default or Event of Default (both
before and after giving effect to the payment thereof), Holdings may repurchase
outstanding shares of its common stock (or options to purchase such common
stock) following the death, disability, retirement or termination of employment
of employees, officers or directors of Holdings or any of its Subsidiaries,
provided that (x) all amounts used to effect such repurchases are obtained by
Holdings from a substantially concurrent issuance of its common stock (or
options to purchase such common stock) to other employees, members of
management, executive officers or directors of Holdings or any of its
Subsidiaries or (y) to the extent the proceeds used to effect any repurchase
pursuant to this clause (y) are not obtained as described in preceding clause
(x), the aggregate amount of Dividends paid by Holdings pursuant to this clause
(ii) (exclusive of amounts paid as described pursuant to preceding clause (x))
shall not exceed $1,000,000 in any fiscal year of Holdings, provided that, in
the event that the maximum amount which is permitted to be expended in respect
of Dividends during any fiscal year pursuant to this clause (ii)(y) is not fully
expended during such fiscal year, the maximum amount which may be expended
during the immediately succeeding fiscal year pursuant to this clause (ii)(y)
shall be increased by such unutilized amount;
(iii) the Borrower may pay cash Dividends to Holdings for the purpose of
paying, so long as all proceeds thereof are promptly used by Holdings to pay,
its operating expenses incurred in the ordinary course of business and other
corporate overhead costs and expenses (including, without limitation, legal and
accounting expenses and similar expenses), provided that the aggregate amount of
Dividends paid by Holdings pursuant to this clause (iii) shall not exceed
$500,000 in any fiscal year of Holdings;
(iv) the Borrower may pay cash Dividends to Holdings for the purpose of
paying, so long as all proceeds thereof are promptly used by Holdings to pay,
franchise taxes and federal, state and local income taxes and interest and
penalties with respect thereto, if any, payable by Holdings, provided that any
refund shall be promptly returned by Holdings to the Borrower;
(v) the Borrower may pay cash Dividends to Holdings for the purpose of
enabling Holdings to pay the Dividends referred to in clause (ii) above, so long
as all proceeds thereof are promptly used by Holdings to pay such Dividends; and
(vi) the exchange of Holdings Junior Subordinated Debentures for Holdings
Series A Preferred Stock, to the extent permitted as provided in Section
9.04(xv), shall be permitted.
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9.04 Indebtedness. Holdings will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness of the Borrower pursuant to the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$300,000,000 less the aggregate amount of all repayments of Senior
Subordinated Notes effected after the Initial Borrowing Date;
(iii) Existing Indebtedness shall be permitted to the extent
actually outstanding on the Initial Borrowing Date and as the same is
listed on Schedule V, but no refinancings or renewals thereof;
(iv) accrued expenses and trade accounts payable incurred in the
ordinary course;
(v) Indebtedness under Interest Rate Protection Agreements entered
into in compliance with Section 8.13, and such other non-speculative
Interest Rate Protection Agreements which may be entered into from time to
time by the Borrower and which the Borrower in good faith believes will
provide protection against fluctuations in interest rates with respect to
outstanding floating rate Indebtedness then outstanding, and permitted to
remain outstanding, pursuant to the other provisions of this Section 9.04;
(vi) Indebtedness evidenced by Capitalized Lease Obligations to the
extent permitted pursuant to Section 9.07, provided that in no event shall
the aggregate principal amount of Capitalized Lease Obligations permitted
by this clause (vi) exceed $5,000,000 at any time outstanding;
(vii) Indebtedness subject to Liens permitted under Section
9.01(viii), so long as the outstanding amount of such Indebtedness does
not exceed the amount provided in said Section 9.01(viii);
(viii) intercompany Indebtedness of the Borrower and its
Subsidiaries outstanding to the extent permitted by Section 9.05(vii)
and/or (x);
(ix) in addition to any Indebtedness permitted by the preceding
clause (viii), Indebtedness of any Wholly-Owned Subsidiary to the Borrower
or another Wholly-Owned Subsidiary constituting the purchase price in
respect of intercompany
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transfers of goods made in the ordinary course of business to the extent
not constituting Indebtedness for borrowed money;
(x) Indebtedness evidenced by Other Hedging Agreements entered into
pursuant to Section 9.05(vi);
(xi) Indebtedness of Holdings pursuant to the Seller Note in an
aggregate principal amount not to exceed $77,000,000 plus any accrued and
unpaid interest thereon, less the aggregate amount of all repayments of
principal thereon effected after the Initial Borrowing Date;
(xii) Indebtedness under performance bonds, letter of credit
obligations to provide security for worker's compensation claims and bank
overdrafts, in each case incurred in the ordinary course of business,
provided that any obligations arising in connection with such bank
overdraft Indebtedness is extinguished within five Business Days;
(xiii) the Assumed Liabilities;
(xiv) Indebtedness incurred by Foreign Subsidiaries (which shall not
be directly or indirectly guaranteed by Holdings, the Borrower or any
Domestic Subsidiaries of Holdings or the Borrower) incurred from time to
time after the Initial Borrowing Date so long as the aggregate principal
amount of all indebtedness incurred pursuant to this clause (xiv) at any
time outstanding does not exceed the remainder of (x) $25,000,000 less (y)
the aggregate principal amount of all Indebtedness of Foreign Subsidiaries
then outstanding pursuant to clause (iii) of this Section 9.04;
(xv) Indebtedness of Holdings constituting junior subordinated
debentures issued in exchange for the Holdings Series A Preferred Stock
pursuant to the terms of such Holdings Series A Preferred Stock ("Holdings
Junior Subordinated Debentures"), so long as (x) Level 1 pricing shall be
in effect both before and after giving effect to the incurrence of such
Indebtedness, (y) such Indebtedness shall in no event be incurred to
exchange in the aggregate more than 50% of the Holdings Series A Preferred
Stock issued on or prior to the Initial Borrowing Date and (z) the
Holdings Junior Subordinated Debentures shall be in the form provided in
the certificate of incorporation of Holdings as in effect on the Initial
Borrowing Date; and
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(xvi) additional Indebtedness of the Borrower and its Subsidiaries to
the extent not permitted by the foregoing clauses of this Section 9.04 not
to exceed $10,000,000 in aggregate principal amount at any time
outstanding.
9.05 Advances, Investments and Loans. Holdings will not, and will
not permit any of its Subsidiaries to, directly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold accounts
receivables owing to any of them;
(ii) the Borrower and its Subsidiaries may acquire and hold cash and
Cash Equivalents, provided that during any time that Revolving Loans of
Non-Defaulting Banks or Swingline Loans are outstanding, the aggregate
amount of cash and Cash Equivalents permitted to be held by the Borrower
and its Domestic Subsidiaries shall not exceed $5,000,000 for any period
of ten consecutive days;
(iii) the Borrower and its Subsidiaries may make loans and advances
in the ordinary course of business to their respective employees so long
as the aggregate principal amount thereof at any time outstanding
(determined without regard to any write-downs or write-offs of such loans
and advances) shall not exceed $3,000,000;
(iv) the Borrower may enter into Interest Rate Protection Agreements
to the extent permitted in Section 9.04(v);
(v) the Recapitalization Transaction may be effected on the Initial
Borrowing Date and, in connection therewith, Holdings may effect the
Holdings Contribution;
(vi) the Borrower may enter into and perform its obligations under
Other Hedging Agreements entered into in the ordinary course of business
and so long as any such Other Hedging Agreement is not speculative in
nature and is (x) related to income derived from foreign operations of the
Borrower or any Subsidiary or otherwise related to purchases permitted
hereunder from foreign suppliers or (y) entered into to protect the
Borrower and/or its Subsidiaries against fluctuations in the prices of raw
materials used in their businesses;
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(vii) any Wholly-Owned Subsidiary may make intercompany loans to the
Borrower or any Wholly-Owned Subsidiary and the Borrower may make
inter-company loans and advances to any Wholly-Owned Subsidiary, provided
that any promissory notes evidencing such intercompany loans shall be
pledged (and delivered) by the Borrower or the respective Domestic
Wholly-Owned Subsidiary that is the lender of such intercompany loan as
Collateral pursuant to the applicable Pledge Agreement, further provided,
that (x) neither the Borrower nor any Domestic Subsidiaries of the
Borrower may make loans to any Foreign Subsidiaries of the Borrower
pursuant to this clause (vii) and (y) any loans made by any Foreign
Subsidiaries to the Borrower or any of its Domestic Subsidiaries pursuant
to this clause (vii) shall be subordinated to the obligations of the
Credit Parties pursuant to subordination provisions in substantially the
form of Exhibit M hereto;
(viii) the Borrower and it Subsidiaries may sell or transfer assets
to the extent permitted by Section 9.02;
(ix) the Borrower may establish Subsidiaries to the extent permitted
by Section 9.14; and
(x) the Borrower and its Domestic Wholly-Owned Subsidiaries may make
loans and advances to, or other investments in, Foreign Subsidiaries of
the Borrower so long as the aggregate amount of any loans, advances or
other investments at any time outstanding (determined without regard to
any write-downs or write-offs thereof) pursuant to this clause (x) shall
not exceed $20,000,000;
(xi) in addition to investments permitted by clauses (i) through (x)
above, the Borrower and its Wholly-Owned Subsidiaries may make investments
in Unrestricted Subsidiaries and/or Joint Ventures, so long as the
aggregate amount invested pursuant to this clause (x) does not exceed
$10,000,000 during any fiscal year of the Borrower and $20,000,000 in the
aggregate.
9.06 Transactions with Affiliates. Holdings will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Holdings or such Subsidiary as would reasonably be obtained by Holdings or such
Subsidiary at that time in a comparable arm's-length transaction with a Person
other than an Affiliate, except that:
(i) Dividends may be paid to the extent provided in Section 9.03;
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(ii) loans may be made and other transactions may be entered into
between the Borrower and its Subsidiaries to the extent permitted by
Sections 9.04 and 9.05;
(iii) customary fees may be paid to non-officer directors of
Holdings;
(iv) Borrower may pay management fees to Holdings from time to time
in an amount not in excess of Holdings' compensation expenses for its
employees;
(v) Holdings and its Subsidiaries may enter into the Operating
Agreements; and
(vi) the Recapitalization Transaction shall be effected.
9.07 Capital Expenditures. (a) Holdings will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(x) during the period (taken as one accounting period) from the Effective Date
through and including May 25, 1997, the Borrower and its Subsidiaries may make
Capital Expenditures in an aggregate amount not to exceed $10,000,000, (y)
during the fiscal year ended May 24, 1998 (taken as one accounting period), the
Borrower and its Subsidiaries may make Capital Expenditures in an aggregate
amount not to exceed $50,000,000 and (z) during each fiscal year thereafter
(taken as one accounting period), the Borrower and its Subsidiaries may make
Capital Expenditures in an aggregate amount not to exceed $60,000,000.
(b) Notwithstanding anything to the contrary contained in clause (a)
above, to the extent that the aggregate amount of Capital Expenditures made by
the Borrower and its Subsidiaries pursuant to Section 9.07(a) (except as set
forth in clause (x) thereof) in any fiscal year of the Borrower (beginning with
the fiscal year ended May 24, 1998) are less than (x) $50,000,000 (or
$60,000,000 in the case of a fiscal year beginning after May 24, 1998), the
amount of such difference, but in no case more than $10,000,000, may be carried
forward and used to make Capital Expenditures in the immediately succeeding
fiscal year (after the full amount of Capital Expenditures otherwise permitted
to be made under Section 9.07(a) in such fiscal year, without regard to the
provisions of this clause (b), have been made), provided that amounts once
carried forward to such succeeding fiscal year shall lapse and terminate at the
end of such fiscal year.
(c) In addition to the Capital Expenditures permitted pursuant to
preceding clauses (a) and (b) the Borrower and its Subsidiaries may make
additional Capital Expenditures consisting of the reinvestment of proceeds of
Recovery Events not required to be applied to prepay the Loans pursuant to
Section 4.02(h).
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9.08 Consolidated Interest Coverage Ratio. Holdings will not permit
the Consolidated Interest Coverage Ratio for any period of four consecutive
fiscal quarters (or, if shorter, the period beginning on the first day of the
fiscal year beginning on, or closest to, May 26, 1997 and ended on the last day
of a fiscal quarter ended thereafter), in each case taken as one accounting
period, ended on the last day of a fiscal quarter described below to be less
than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ended
In, or Closest to Ratio
-------------------- -----
August, 1997 2.6:1.0
November, 1997 2.6:1.0
February, 1998 2.6:1.0
May, 1998 3.0:1.0
August, 1998 3.0:1.0
November, 1998 3.0:1.0
February, 1999 3.0:1.0
May, 1999
and thereafter 3.5:1.0
9.09 Consolidated Fixed Charge Coverage Ratio. Holdings will not
permit the Consolidated Fixed Charge Coverage Ratio for any period of four
consecutive fiscal quarters (or, if shorter, the period beginning on the first
day of the fiscal year beginning on, or closest to, May 26, 1997 and ending on
the last day of a fiscal quarter ended thereafter), in each case taken as one
accounting period, ended on the last day of any fiscal quarter set forth below
to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ended
In, or Closest to Ratio
-------------------- -----
August, 1997 1.1:1.0
November, 1997 1.1:1.0
February, 1998 1.1:1.0
May, 1998
and thereafter 1.2:1.0
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9.10 Maximum Leverage Ratio. Holdings will not permit the Leverage
Ratio at any time during a fiscal quarter set forth below to be greater than the
ratio set forth opposite such fiscal quarter below:
Fiscal Quarter
Ended In Ratio
-------------- -----
August, 1997 3.5:1.0
November, 1997 3.5:1.0
February, 1998 3.5:1.0
May, 1998 3.0:1.0
August, 1998 3.0:1.0
November, 1998 3.0:1.0
February, 1999 3.0:1.0
May, 1999 3.0:1.0
August, 1999 3.0:1.0
November, 1999 3.0:1.0
February, 2000 3.0:1.0
May, 2000
and thereafter 2.5:1.0
9.11 Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, By-Laws and Certain Other Agreements; etc.
Holdings will not, and will not permit any of its Subsidiaries to, (i) amend or
modify, or permit the amendment or modification of, any provision of the
Existing Indebtedness or of any agreement (including, without limitation, any
purchase agreement, indenture, loan agreement or security agreement) relating
thereto other than any amendments or modifications to the Existing Indebtedness
which do not in any way adversely affect the interests of the Banks and are
otherwise permitted under Section 9.04(iii), (ii) make (or give any notice in
respect of) any payment of any nature whatsoever (whether principal, interest or
otherwise) with respect to, or any payment (including without limitation any
prepayment) on or redemption or acquisition for value of, the Seller Note
(except that a redemption required by the first sentence of Section 4(c) of the
Seller Note shall be permitted to the extent required in accordance with the
terms of such first sentence as in effect on the Effective Date and so long as
all proceeds used to make such payment are received from an initial Public
Equity Offering (as such term is defined in the Seller Note) by Holdings) or any
Holdings Junior Subordinated Debentures, (iii) make (or give any notice in
respect thereof) any voluntary or optional payment or prepayment on or
redemption or acquisition for value of, or any prepayment or redemption as a
result of any asset sale, change of control or similar event of, any Senior
Subordinated Notes, (iv) amend or modify, or permit the amendment or
modification of, any provision of any Senior Subordinated Notes, the
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Seller Note or (after the issuance thereof) any Holdings Junior Subordinated
Debentures or any agreement (including, without limitation, any Senior
Subordinated Note Document) relating thereto other than amendments or
modifications which do not in any way adversely affect the interests of the
Banks and which are effected to make technical corrections to the respective
documentation, (v) amend or modify, or permit the amendment or modification of,
the Recapitalization Agreement, the Asset Purchase Agreement, any Operating
Agreement or any other Recapitalization Document, except for amendments or
modifications which are not in any way adverse in any material respect to the
interests of the Banks or (vi) amend, modify or change its Certificate of
Incorporation (including, without limitation, by the filing or modification of
any certificate of designation) or By-Laws, or any agreement entered into by it,
with respect to its capital stock (including any Shareholders' Agreement), or
enter into any new agreement with respect to its capital stock, other than any
amendments, modifications or changes pursuant to this clause (vi) or any such
new agreements pursuant to this clause (vi) which do not in any way adversely
affect in any material respect the interests of the Banks, provided that nothing
in this clause (vi) shall prevent Holdings or any of its Subsidiaries from
amending its Certificate of Incorporation or By-Laws to provide indemnification
to any officer or director of Holdings or any such Subsidiary to the maximum
extent permitted by the law of its jurisdiction of incorporation and provided
that Holdings may issue such capital stock as is not prohibited by Section 9.13
and may amend its Certificate of Incorporation to authorize any such capital
stock. Without limiting the foregoing provisions, it is understood and agreed by
all parties hereto that (i) for purposes of Section 1 of the Seller Note, the
provisions of clause (ii) of the immediately preceding sentence prohibit the
payment of interest on the Seller Note in cash and (ii) for purposes of Section
4(f) of the Seller Note, the provisions of clause (ii) of the immediately
preceding sentence prohibit all partial or total redemptions of the Seller Note,
except to the extent expressly otherwise provided in said clause (ii).
9.12 Limitation on Certain Restrictions on Subsidiaries. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (c) transfer any of its properties or assets to the
Borrower or any of the Borrower's Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents, (iii) the Senior Subordinated Note
Documents, (iv) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of the Borrower or a Subsidiary of the
Borrower, (v) customary provisions restricting assignment of any agreement
entered into by the Borrower or a Subsidiary of the Borrower in the ordinary
course of business, (vi)
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any holder of a Permitted Lien may restrict the transfer of the asset or assets
subject thereto and (vii) restrictions which are not more restrictive than those
contained in this Agreement contained in any documents governing any
Indebtedness incurred after the Effective Date in accordance with the provisions
of this Agreement.
9.13 Limitation on Issuance of Capital Stock. (a) Holdings will not
issue any capital stock which is not Qualified Capital Stock.
(b) Holdings will not permit any of its Subsidiaries to issue any
capital stock (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock, except (i)
for transfers and replacements of then outstanding shares of capital stock, (ii)
for stock splits, stock dividends and additional issuances which do not decrease
the percentage ownership of Holdings or any of its Subsidiaries in any class of
the capital stock of such Subsidiary, (iii) in the case of Foreign Subsidiaries
of the Borrower, to qualify directors to the extent required by applicable law,
and (iv) Subsidiaries of the Borrower formed after the Effective Date pursuant
to Section 9.14 may issue capital stock to the Borrower or the respective
Subsidiary of the Borrower which is to own such stock in accordance with the
requirements of Section 8.11. All capital stock issued in accordance with this
Section 9.13(b) shall, to the extent required by the Pledge Agreement, be
delivered to the Collateral Agent for pledge pursuant to the Pledge Agreement.
9.14 Limitation on Creation of Subsidiaries. Neither Holdings nor
the Borrower shall establish, create or acquire any additional Subsidiaries
without the prior written consent of the Required Banks; provided that the
Borrower may establish or create one or more Wholly-Owned Subsidiaries of the
Borrower without such consent so long as (i) 100% of the capital stock of any
new Domestic Subsidiary (or all capital stock of any new Foreign Subsidiary
which is owned by any Credit Party, except that not more than 65% of the voting
stock of any such Foreign Subsidiary shall be required to be so pledged) is upon
the creation or establishment of any such new Subsidiary pledged and delivered
to the Collateral Agent for the benefit of the Secured Creditors under the
Pledge Agreement and (ii) upon the creation or establishment of any such new
Domestic Subsidiary such Domestic Subsidiary executes the Additional Security
Documents and guaranty required to be executed by it in accordance with Section
8.12.
9.15 Business. (a) Holdings shall engage in no business activities
and shall have no assets or liabilities, other than (x) its ownership of the
capital stock of the Borrower and liabilities incident thereto, including its
liabilities pursuant to the Pledge Agreement and its guarantee pursuant to
Section 14.01 and its guarantee of the Senior Subordinated Notes, (y) its
obligations pursuant to the Seller Note and the Holdings
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Series A Preferred Stock and (z) its employment of members of management of the
Borrower.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than the
business in which the Borrower and its Subsidiaries are engaged on the Effective
Date and other businesses reasonably related thereto.
9.16 Designated Senior Indebtedness. In no event shall the Borrower
designate any indebtedness as "Designated Senior Indebtedness" for purposes of
the Senior Subordinated Note Indenture unless the Required Banks specifically
consent thereto in writing.
SECTION 10. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for three or more Business Days, in the payment when
due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any
other amounts owing hereunder or thereunder; or
10.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any certificate delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
10.03 Covenants. Holdings or the Borrower shall (i) default in the
due performance or observance by it of any term, covenant or agreement contained
in Section 8.01(g)(i), 8.08, 8.11 or Section 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and such default shall continue unremedied for a
period of 30 days after written notice to the Borrower by any Agent or any of
the Banks; or
10.04 Default Under Other Agreements. Holdings, the Borrower or any
of their respective Subsidiaries shall (i) default in any payment of any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created or (ii) default in the observance or performance of any agreement or
condition relating to any Indebtedness (other than the Obligations) or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
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other event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity (other than, in the case
of the Seller Note, as a result of a redemption required by the first sentence
of Section 4(c) of the Seller Note and permitted to be paid pursuant to Section
9.11(ii)), or (iii) any Indebtedness (other than the Obligations) of Holdings,
the Borrower or any of their respective Subsidiaries shall be declared to be due
and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof, (other than, in the
case of the Seller Note, as a result of a redemption required by the first
sentence of Section 4(c) of the Seller Note and permitted to be paid pursuant to
Section 9.11(ii)), provided that (x) it shall not be a Default or Event of
Default under this Section 10.04 unless the aggregate principal amount of all
Indebtedness as described in preceding clauses (i) through (iii), inclusive, is
at least $5,000,000; or
10.05 Bankruptcy, etc. Holdings, the Borrower or any of their
respective Subsidiaries shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against Holdings, the Borrower or any of their respective
Subsidiaries and the petition is not controverted within 15 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings, the Borrower or any of their
respective Subsidiaries or Holdings, the Borrower or any of their respective
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to Holdings, the Borrower or any of their respective
Subsidiaries or there is commenced against Holdings, the Borrower or any of
their respective Subsidiaries any such proceeding which remains undismissed for
a period of 60 days, or Holdings, the Borrower or any of their respective
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or Holdings, the
Borrower or any of their respective Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or Holdings, the Borrower or
any of their respective Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by Holdings, the Borrower or any
of their respective Subsidiaries for the purpose of effecting any of the
foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period
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is sought or granted under Section 412 of the Code or Section 303 or 304 of
ERISA, a Reportable Event shall have occurred, a contributing sponsor (as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA
shall be subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof) and an event described
in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 shall be reasonably expected to occur with respect to such Plan within the
following 30 days, any Plan which is subject to Title IV of ERISA shall have had
or is reasonably likely to have a trustee appointed to administer such Plan, any
Plan which is subject to Title IV of ERISA is, shall have been or is reasonably
likely to be terminated or to be the subject of termination proceedings under
ERISA, any Plan shall have an Unfunded Current Liability, a contribution
required to be made with respect to a Plan or a Foreign Pension Plan has not
been timely made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate
has incurred or is reasonably likely to incur any liability to or on account of
a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on
account of a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings, or any of
its Subsidiaries has incurred or is reasonably likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans or Foreign
Pension Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) such lien, security interest or
liability, individually, and/or in the aggregate, in the opinion of the Required
Banks, has had, or could reasonably be expected to have, a Material Adverse
Effect; or
10.07 Security Documents. At any time after the execution and
delivery thereof, any of the Security Documents shall cease to be in full force
and effect, or shall cease in any material respect to give the Collateral Agent
for the benefit of the Secured Creditors the Liens, rights, powers and
privileges purported to be created thereby (including, without limitation, a
perfected security interest in, and Lien on, all of the Collateral (excluding
(i) assets valued at up to $250,000 in the aggregate, (ii) cash proceeds of any
such Collateral to the extent same are not required to be paid to, or deposited
with, the Collateral Agent pursuant to the respective Security Document and
(iii) inventory (including work-in-process), which, in the ordinary course of
business, is located outside of the U.S. or any territories thereof and is
temporarily in transit or held pending the completion or sale thereof (except to
the extent Holdings and the Borrower have failed to comply, following the
request of the Collateral Agent or the Required Banks, with the requirements of
the second sentence of Section 8.12(b)); provided that if the Borrower is
notified by the Administrative Agent of a lack of perfection with respect to any
of the Collateral, the Borrower will take such steps as are necessary or
advisable to perfect the Collateral Agent's
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security interest in such Collateral)), in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section 9.01), and subject to no other Liens (except as permitted by Section
9.01), or any Credit Party shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any of the Security Documents and such default shall continue beyond any
grace period specifically applicable thereto pursuant to the terms of such
Security Document; or
10.08 Guaranty. Any Guaranty or any provision thereof shall cease to
be in full force or effect as to the relevant Guarantor (unless such Guarantor
is no longer a Subsidiary by virtue of a liquidation, sale, merger or
consolidation permitted by Section 9.02), or any Guarantor or Person acting by
or on behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under the relevant Guaranty, or any Guarantor shall default in the
due performance or observance of any term, covenant or agreement on its part to
be performed or observed pursuant to its Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered
against Holdings, the Borrower or any of their respective Subsidiaries involving
in the aggregate for Holdings, the Borrower and their respective Subsidiaries a
liability (not paid or fully covered by a reputable and solvent insurance
company) and such judgments and decrees either shall be final and non-appealable
or shall not be vacated, discharged or stayed or bonded pending appeal for any
period of 60 consecutive days, and the aggregate amount of all such judgments to
the extent not covered by insurance exceeds $1,000,000; or
10.10 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of any Agent, any Bank or
the holder of any Note to enforce its claims against any Credit Party (provided
that, if an Event of Default specified in Section 10.05 shall occur with respect
to the Borrower, the result which would occur upon the giving of written notice
by the Administrative Agent to the Borrower as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitments terminated, whereupon all Commitments of each Bank
shall forthwith terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans and
the Notes and all Obligations owing hereunder and thereunder to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived
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by each Credit Party; (iii) terminate any Letter of Credit, which may be
terminated, in accordance with its terms; (iv) direct the Borrower to pay (and
the Borrower agrees that upon receipt of such notice, or upon the occurrence of
an Event of Default specified in Section 10.05 with respect to the Borrower, it
will pay) to the Collateral Agent at the Payment Office such additional amount
of cash, to be held as security by the Collateral Agent, as is equal to the
aggregate Stated Amount of all Letters of Credit issued for the account of the
Borrower and then outstanding; (v) enforce, as Collateral Agent, all of the
Liens and security interests created pursuant to the Security Documents; and
(vi) apply any cash collateral as provided in Section 4.02.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Additional Collateral" shall mean all property (whether real or
personal) in which security interests are granted (or have been purported to be
granted) (and continue to be in effect at the time of determination) pursuant to
Section 8.12.
"Additional Mortgage" shall have the meaning provided in Section
8.12(a).
"Additional Mortgaged Property" shall have the meaning provided in
Section 8.12(a).
"Additional Security Documents" shall mean all mortgages, pledge
agreements, security agreements and other security documents entered into
pursuant to Section 8.12 with respect to Additional Collateral.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable, then
on the basis of other sources reasonably selected by the Administrative Agent,
by (y) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements as specified in Regulation D
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applicable on such day to a three-month certificate of deposit of a member bank
of the Federal Reserve System in excess of $100,000 (including, without
limitation, any marginal, emergency, supplemental, special or other reserves),
plus (2) the then daily net annual assessment rate as estimated by the
Administrative Agent for determining the current annual assessment payable by
the Administrative Agent to the Federal Deposit Insurance Corporation for
insuring three-month certificates of deposit.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, without duplication, the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense and non-cash interest expense,
but excluding any net non-cash charges reflected in Adjusted Consolidated
Working Capital) and net non-cash losses which were included in arriving at
Consolidated Net Income for such period less the sum of the amount of all net
non-cash gains (exclusive of items reflected in Adjusted Consolidated Working
Capital) included in arriving at Consolidated Net Income for such period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan
Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total
Revolving Loan Commitment, as the case may be, has been terminated shall be
references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such termination,
provided that (A) no Bank's Adjusted Percentage shall change upon the occurrence
of a Bank Default from that in effect immediately prior to such Bank Default if
after giving effect to such Bank Default, and any repayment of Revolving Loans
and Swingline Loans at such time pursuant to Section 4.02(a) or otherwise, the
sum of (i) the aggregate outstanding principal amount of Revolving Loans of all
Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of
Swingline Loans plus (iii) the Letter of Credit Outstandings, exceed the
Adjusted Total Revolving Loan Commitment; (B) the changes to the Adjusted
Percentage that would have become effective upon the occurrence of a Bank
Default but that did not become effective as a result of the preceding clause
(A) shall become effective on the first date after the occurrence of the
relevant Bank Default on which the sum of (i) the aggregate outstanding
principal amount of the Revolving Loans of all Non-Defaulting Banks plus (ii)
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the aggregate outstanding principal amount of Swingline Loans plus (iii) the
Letter of Credit Outstandings is equal to or less than the Adjusted Total
Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
Percentage is changed pursuant to the preceding clause (B) and (ii) any
repayment of such Bank's Revolving Loans, or of Unpaid Drawings with respect to
Letters of Credit or of Swingline Loans, that were made during the period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted Percentage must be returned to the Borrower as a
preferential or similar payment in any bankruptcy or similar proceeding of the
Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage
effected pursuant to said clause (B) shall be reduced to that positive change,
if any, as would have been made to its Adjusted Percentage if (x) such
repayments had not been made and (y) the maximum change to its Adjusted
Percentage would have resulted in the sum of the outstanding principal of
Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of
the outstanding principal amount of Swingline Loans and of Letter of Credit
Outstandings equalling such Bank's Revolving Loan Commitment at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of
all Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement, and shall include any successor thereto.
"Affiliate" shall mean, with respect to any Person, any other Person
(including, for purposes of Section 9.06 only, all directors, officers and
partners of such Person) directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person; provided, however,
that for purposes of Section 9.06, an Affiliate of Holdings shall include any
Person that directly or indirectly owns more than 5% of any class of the capital
stock of Holdings and any officer or director of Holdings or any of its
Subsidiaries. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agent" shall have the meaning set forth in the first paragraph of
this Agreement.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed or replaced from time to
time.
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"Applicable Margin" shall mean (i) in the case of Tranche B Term
Loans maintained as (x) Base Rate Loans, 2.00% and (y) Eurodollar Loans, 3.00%
and (ii) in the case of Revolving Loans and Tranche A Term Loans, during each
Margin Adjustment Period beginning after the Initial Borrowing Date, the
percentage per annum set forth below opposite the respective Level indicated to
have been achieved on the applicable Start Date for such Margin Adjustment
Period (as shown on the respective officer's certificate delivered pursuant to
Section 8.01(f)) in accordance with the Requirements for the various Levels
specified in the table below:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Base Rate Eurodollar
Level Requirements Loans Loans
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 For the Margin Adjustment Test Period last 0% 1.00%
ended, the Leverage Ratio was less than or
equal to 1.50:1.00 on the last day of such
Margin Adjustment Test Period and the
Consolidated Interest Coverage Ratio for such
Margin Adjustment Test Period was greater than
or equal to 5.00:1.00.
2 For the Margin Adjustment Test Period last 0.50% 1.50%
ended, the Requirements for Level 1, as set
forth above, were not met, and the Leverage
Ratio was less than or equal to 2.00:1.00 on
the last day of such Margin Adjustment Test
Period and the Consolidated Interest Coverage
Ratio for such Margin Adjustment Test Period
was greater than or equal to 4.00:1.00
</TABLE>
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<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Base Rate Eurodollar
Level Requirements Loans Loans
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
3 For the Margin Adjustment Test Period last 1.00% 2.00%
ended, the Requirements for Levels 1 and 2, as
set forth above, were not met, and the
Leverage Ratio was less than 2.25:1.00 on the
last day of such Margin Adjustment Test Period
and the Consolidated Interest Coverage Ratio
for such Margin Adjustment Test Period was
greater than or equal to 3.50:1.00
4 Level 4 pricing shall apply at all times when 1.50% 2.50%
the Requirements set forth above for Levels 1
through 3 are not met
</TABLE>
; provided, however, that Level 4 pricing shall also apply (x) from the period
from the Initial Borrowing Date to but excluding the first day of the first
Margin Adjustment Period occurring after the Initial Borrowing Date and (y) at
any time when any Default or Event of Default is in existence.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement,
dated as of March 11, 1997, between the Borrower and NSC.
"Asset Transfer" shall have the meaning provided in Section 5.06(b).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit L (appropriately
completed).
"Assumed Liabilities" shall mean those liabilities in respect of the
Business which are being assumed by the Borrower pursuant to Section 2.3 of the
Asset Purchase Agreement.
"Bank" shall mean each financial institution listed on Schedule I, as
well as any Person which becomes a "Bank" hereunder pursuant to 13.04(b).
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"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.03(c) or (ii) a Bank having notified in writing the Borrower
and/or the Administrative Agent that it does not intend to comply with its
obligations under Section 1.01(c) or Section 2.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" shall mean for any day, a rate of interest per annum
equal to the higher of (i) the Prime Lending Rate for such day and (ii) the sum
of the Adjusted Certificate of Deposit Rate for such day plus 1/2 of 1% per
annum.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each
Loan designated or deemed designated as such by the Borrower at the time of the
incurrence thereof or conversion thereto.
"Borrower" shall have the meaning set forth in the first paragraph of
this Agreement.
"Borrower Common Stock" shall mean the common stock of the Borrower.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Banks (other than any Bank which has not funded its share
of a Borrowing in accordance with this Agreement) having Commitments of the
respective Tranche (or from the Swingline Bank in the case of Swingline Loans)
on a given date (or resulting from a conversion or conversions on such date)
having in the case of Eurodollar Loans the same Interest Period, provided that
Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of
the related Borrowing of Eurodollar Loans. It is understood that there may be
more than one Borrowing outstanding pursuant to a given Tranche.
"BTCo" shall mean Bankers Trust Company in its individual capacity.
"Business" shall mean NSC's Logic, Memory and Discrete Power and
Signal Technologies Business Units as historically conducted and accounted for
(including Flash Memory, but excluding Public Networks, Programmable Products
and Mil Logic Products).
"Business Day" shall mean (i) with respect to any borrowing, payment
or rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday)
on which banks generally are open in New York for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States dollars are carried on in the London interbank market and (ii) for all
other purposes, a day (other than a Saturday or
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Sunday) on which banks generally are open in New York for the conduct
of substantially all of their commercial lending activities.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken at
the amount thereof accounted for as indebtedness in accordance with such
principles.
"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) time deposits and certificates
of deposit of any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any State thereof, the District of Columbia or any foreign jurisdiction
having capital, surplus and undivided profits aggregating in excess of
$200,000,000, with maturities of not more than one year from the date of
acquisition by such Person, (iii) repurchase obligations with a term of not more
than 90 days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(ii) above, (iv) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than one year after the date of
acquisition by such Person, (v) investments in money market funds substantially
all of whose assets are comprised of securities of the types described in
clauses (i) through (iv) above and (vi) demand deposit accounts maintained in
the ordinary course of business.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. Section 9601 et seq.
"Change of Control" shall mean (i) Holdings shall at any time cease
to own 100% of the capital stock of the Borrower; (ii) at any time a "Change of
Control" under and as defined in the Senior Subordinated Note Indenture, the
Seller Note or in any
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documentation relating to any Indebtedness refinancing all or any part thereof
shall have occurred; (iii) at any time prior to the consummation of a Qualified
Public Offering, and for any reason whatsoever, (x) the CVC Permitted Holders
shall own less than 40% of the then outstanding Voting Stock at such time or (y)
the CVC Permitted Holders and the Management Investors, taken together, shall
own less than a majority or the outstanding Voting Stock of Holdings; (iv) at
any time after the consummation of a Qualified Public Offering, and for any
reason whatsoever, (x) the CVC Permitted Holders shall own less than 20% of the
outstanding Voting Stock of Holdings or (y) any "Person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding the
CVC Permitted Holders, is or shall become the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of a
greater percentage of the Voting Stock of Holdings than is owned by the CVC
Permitted Holders at such time; or (v) at any time the Board of Directors of
Holdings shall cease to consist of a majority of Continuing Directors.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purported to be
granted) pursuant to any Security Document, including, without limitation, all
Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged
Properties, all cash and Cash Equivalents delivered as collateral pursuant to
Section 4.02 or 10 hereof and all Additional Collateral, if any.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors pursuant to the Security Documents.
"Commitment" shall mean any of the commitments of any Bank, i.e.,
whether the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment or
Revolving Loan Commitment.
"Commitment Commission" shall have the meaning provided in Section
3.01(a).
"Common Management Fund" shall mean with respect to any Person, a
fund under common control with such Person.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of Holdings and its Consolidated Subsidiaries.
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"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of Holdings and its Consolidated Subsidiaries
at such time, but excluding (i) the current portion of any Indebtedness under
this Agreement and any other long-term Indebtedness which would otherwise be
included therein, (ii) accrued but unpaid interest with respect to the
Indebtedness described in clause (i), and (iii) the current portion of
Indebtedness constituting Capitalized Lease Obligations.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income for such period, before interest expense and provision for taxes based on
income and without giving effect to any extraordinary gains or losses or gains
or losses from sales of assets other than inventory sold in the ordinary course
of business.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all amortization of intangibles and
depreciation, in each case that were deducted in arriving at Consolidated EBIT
for such period.
"Consolidated Fixed Charge Coverage Ratio" for any period shall mean
the ratio of Consolidated EBITDA to Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" for any period shall mean the sum,
without duplication, of (i) Consolidated Interest Expense for such period, (ii)
the amount of all Capital Expenditures made by Holdings and its Subsidiaries
during such period (other than Capital Expenditures to the extent made pursuant
to Section 9.07(c)), (iii) all cash payments in respect of taxes made during
such period (net of any cash refunds actually received during such period) and
(iv) the scheduled principal amount of all amortization payments on all
Indebtedness (including without limitation the principal component of all
Capitalized Lease Obligations) of Holdings and its Subsidiaries for such period
(as determined on the first day of the respective period).
"Consolidated Indebtedness" shall mean, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness
(but including in any event the then outstanding principal amount of all Loans,
all Senior Subordinated Notes, all Capitalized Lease Obligations and all Letter
of Credit Outstandings) of Holdings and its Subsidiaries on a consolidated basis
as determined in accordance with GAAP; provided that Indebtedness outstanding
pursuant to (x) the Seller Note, (y) the Holdings Junior Subordinated Debentures
and (z) trade payables incurred in the ordinary course of business shall be
excluded in determining Consolidated Indebtedness.
"Consolidated Interest Coverage Ratio" shall mean, for any period,
the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated
Interest Expense for such period.
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"Consolidated Interest Expense" shall mean, for any period, the total
consolidated interest expense of Holdings and its Consolidated Subsidiaries for
such period (calculated without regard to any limitations on the payment
thereof) plus, without duplication, that portion of Capitalized Lease
Obligations of Holdings and its Consolidated Subsidiaries representing the
interest factor for such period, but excluding (i) the amortization of any
deferred financing costs incurred in connection with this Agreement or the
issuance of the Senior Subordinated Notes and (ii) any interest expense in
respect of (x) the Seller Note and (y) the Holdings Junior Subordinated
Debentures.
"Consolidated Net Income" shall mean, for any period, the
consolidated net after tax income of Holdings and its Consolidated Subsidiaries
determined in accordance with GAAP.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with GAAP. Notwithstanding anything
to the contrary contained in this Agreement (and except for purposes of the
definition of Unrestricted Subsidiary), an Unrestricted Subsidiary shall be
deemed not to be a Subsidiary of the Borrower or any of its other Subsidiaries
for purposes of this Agreement.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business and any
products warranties extended in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or, if the less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the terms of
the instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
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(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Continuing Directors" shall mean the (i) directors of Holdings on
the Initial Borrowing Date and (ii) each other director, if (x) such director's
nomination for election to the Board of Directors of Holdings is recommended by
a majority of the then Continuing Directors or (y) such director became a member
of the Board of Directors pursuant to, and in accordance with, Article V of the
Securities Purchase and Holders Agreement prior to the termination of the voting
agreements pursuant to Section 5.7 of the Securities Purchase and Holders
Agreement.
"Credit Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, each Note, each
Security Document and the Subsidiaries Guaranty and, after the execution and
delivery thereof, each additional guaranty or security document executed
pursuant to Section 8.12.
"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower, each Subsidiary
Guarantor and any other Subsidiary which at any time executes and delivers any
Credit Document as required by this Agreement.
"CVC" shall mean Citicorp Venture Capital, Ltd.
"CVC Permitted Holders" shall mean (i) CVC, (ii) any officer,
employee or director of CVC or any trust, partnership or other entity
established solely for the benefit of such officers, employees or directors and
(iii) Sterling (or any successor) so long as CVC, employees, officers and
directors of CVC and corporations, partnerships and other entities at least a
majority of the equity in which is held in the aggregate by CVC and its
employees, officers and directors, hold no less than a majority of the aggregate
economic interests in Sterling or such successor.
"Debt Agreements" shall have the meaning provided in Section 5.05.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
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"Disqualified Stock" shall mean any capital stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the first anniversary of the Tranche B Term Loan Maturity Date, or (ii)
is convertible into or exchangeable (unless at the sole option of the issuer
thereof) for (a) debt securities or (b) any capital stock referred to in (i)
above, in each case at any time prior to the first anniversary of the Tranche B
Term Loan Maturity Date, or (iii) otherwise contains terms which are materially
more restrictive (or provide the holders thereof materially greater rights) than
the Holdings Series A Preferred Stock in the form issued on or prior to the
Initial Borrowing Date.
"Dividend" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(other than common stock of such Person) or cash to its stockholders as such, or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
a consideration any shares of any class of its capital stock outstanding on or
after the Effective Date (or any options or warrants issued by such Person with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its Subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock of such Person outstanding on or after the Effective Date (or any options
or warrants issued by such Person with respect to its capital stock). Without
limiting the foregoing, "Dividends" with respect to any Person shall also
include all payments made or required to be made by such Person with respect to
any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes.
"Documentation Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Documents" shall mean the Credit Documents and the Recapitalization
Documents.
"Dollars" and the sign "$" shall each mean lawful money of the United
States.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated or organized in the United States of America, any State thereof,
the United States Virgin Islands or Puerto Rico.
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"Domestic Wholly-Owned Subsidiary" shall mean each Domestic
Subsidiary which is a Wholly-Owned Subsidiary of the Borrower.
"Drawing" shall have the meaning provided in Section 2.04(b).
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
insurance company, financial institution, fund or other Person which regularly
purchases interests in loans or extensions of credit of the types made pursuant
to this Agreement, any other Person which would constitute a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act as
in effect on the Effective Date or other "accredited investor" (as defined in
Regulation D of the Securities Act).
"Employee Benefit Plans" shall have the meaning provided in Section
5.05.
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health, safety or the environment due to the presence of Hazardous
Materials.
"Environmental Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy and rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Holdings, the
Borrower or any of their respective Subsidiaries, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and the
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the
Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq. and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. (to the
extent it regulates occupational exposure to Hazardous Materials); and
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any state and local or foreign counterparts or equivalents, in each case as
amended from time to time.
"Equity Contribution" shall mean the equity contributions made in
Holdings on or prior to the Initial Borrowing Date as contemplated by Sections
5.06(c) and (d).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or a Subsidiary of Holdings would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
"Eurodollar Loan" shall mean each Loan (excluding Swingline Loans)
designated as such by the Borrower at the time of the incurrence thereof or
conversion thereto.
"Eurodollar Rate" shall mean the sum of (i) the quotient of (a) the
rate determined by the Administrative Agent to be the rate at which deposits in
U.S. dollars are offered by BTCo to first-class banks in the London interbank
market at approximately 11 a.m. (London time) two Business Days prior to the
first day of the Interest Period applicable to such Eurodollar Loan, in the
approximate amount of BTCo's relevant Eurodollar Loan and having a maturity
approximately equal to the Interest Period applicable to such Eurodollar Loan
divided by (b) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves required by applicable law)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D). The Eurodollar Rate shall be
rounded to the next higher multiple of 1/100 of 1% if the rate is not such a
multiple.
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Adjusted Consolidated Net Income for such period, (ii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, (iii) the Net Sale Proceeds of asset sales to the
extent such proceeds are excluded under Section 4.02(f) by the operation of
clause (v) thereof and (iv) any amount of permitted
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Capital Expenditures carried forward into the respective period pursuant to the
provisions of Section 9.07(b), to the extent such amount has lapsed and
terminated during (or at the end of) such period pursuant to the proviso to
Section 9.07(b), minus (b) the sum of (i) the amount of Capital Expenditures
made by the Borrower and its Subsidiaries on a consolidated basis during such
period pursuant to and in accordance with Section 9.07(a) (but without giving
effect to any Capital Expenditures made during such period as a result of, or
pursuant to, Section 9.07(b) or to Capital Expenditures made pursuant to Section
9.07(c)), in each case except to the extent financed with the proceeds of
Indebtedness or pursuant to Capitalized Lease Obligations or to the extent
constituting a reinvestment of Net Sale Proceeds of asset sales under Section
4.02(f)(iv), (ii) the aggregate amount of permanent principal payments of
Indebtedness for borrowed money of the Borrower and its Subsidiaries and the
permanent repayment of the principal component of Capitalized Lease Obligations
of the Borrower and its Subsidiaries (excluding (1) payments with proceeds of
asset sales, (2) payments with the proceeds of other Indebtedness or equity and
(3) payments of Loans or other Obligations, provided that repayments of Loans
shall be deducted in determining Excess Cash Flow if such repayments were (x)
required as a result of a Scheduled Repayment under Section 4.02(b) or (c) (but
not as a reduction to the amount of Scheduled Repayments pursuant to another
provision of this Agreement) or (y) made as a voluntary prepayment pursuant to
Section 4.01 with internally generated funds (but in the case of a voluntary
prepayment of Revolving Loans or Swingline Loans, only to the extent accompanied
by a voluntary reduction to the Total Revolving Loan Commitment)) during such
period; (iii) the increase, if any, in Adjusted Consolidated Working Capital
from the first day to the last day of such period and (iv) if any amount
representing permitted Capital Expenditures is being carried forward from such
period into a subsequent period pursuant to the provisions of Section 9.07(b),
the amount being so carried forward to a subsequent period.
"Excess Cash Flow Conversion Time" shall have the meaning provided in
Section 4.02(g).
"Excess Cash Payment Date" shall mean the date occurring 90 days
after the last day of each fiscal year of Holdings (beginning with its fiscal
year ending in May 1998).
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of Holdings.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" shall have the meaning provided in Section
7.22.
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"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any day, an interest 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 on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11 a.m. (New York
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated or organized under the laws of any jurisdiction other than the
United States of America, any State thereof, the United States Virgin Islands or
Puerto Rico.
"GAAP" shall have the meaning provided in Section 13.07(a).
"Guaranteed Creditors" shall mean and include each of the Agents, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent such party constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean all obligations of the Borrower
(i) to each Bank for the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of the principal and interest on each
Note issued by the Borrower to such Bank, and Loans made, under the Credit
Agreement and all reimbursement obligations and Unpaid Drawings with respect to
Letters of Credit, together with all the other obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Borrower to such Bank now existing or hereafter incurred under, arising out
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of or in connection with the Credit Agreement or any other Credit
Document and the due performance and compliance with all the terms, conditions
and agreements contained in the Credit Documents by the Borrower and (ii) to
each Bank and each Affiliate of a Bank which enters into an Interest Rate
Protection or Other Hedging Agreement with the Borrower, which by its express
terms are entitled to the benefit of the Guaranty pursuant to Section 14 with
the written consent of Holdings, the full and prompt payment when due (whether
by acceleration or otherwise) of all obligations of the Borrower owing under any
such Interest Rate Protection or Other Hedging Agreement, whether now in
existence or hereafter arising, and the due performance and compliance with all
terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
"Guaranty" shall mean the guaranty issued by Holdings pursuant to
Section 14 hereof, the Subsidiaries Guaranty and any other guarantee executed
and delivered by a Subsidiary of the Borrower pursuant to Section 8.12.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority under Environmental Laws.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Holdings Common Stock" shall mean common stock of Holdings.
"Holdings Contribution" shall have the meaning provided in Section
5.06(e).
"Holdings Junior Subordinated Debentures" shall have the meaning
provided in Section 9.04(xv).
"Holdings Series A Preferred Stock" shall mean shares of Holding's
12% Series A Cumulative Compounding Preferred Stock.
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"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person (to the extent of the value of the respective
property), (iv) the aggregate amount required to be capitalized under leases
under which such Person is the lessee, (v) all obligations of such person to pay
a specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection Agreement or Other Hedging Agreement or under any similar type of
agreement.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing of Term Loans hereunder
occurs.
"Initial Public Offering" shall mean an underwritten initial public
offering of common stock of, and by, Holdings pursuant to a registration
statement filed with the Securities and Exchange Commission in accordance with
the Securities Act.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement, interest
rate hedging agreement, interest rate floor agreement or other similar agreement
or arrangement.
"Issuing Bank" shall mean the Administrative Agent and any Bank which
at the request of the Borrower and with the consent of the Administrative Agent
(which shall not be unreasonably withheld) agrees, in such Bank's sole
discretion, to become an Issuing Bank for the purpose of issuing Letters of
Credit pursuant to Section 2.
"Joint Venture" shall mean any Person in which Holdings, the Borrower
and its Subsidiaries own, directly or indirectly, more than 5% but 50% or less
of the equity interests.
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"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Borrower or any of its Subsidiaries as are permitted to exist pursuant to the
terms of this Agreement.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Level 1" shall have the meaning provided in the definition of
Applicable Margin.
"Level 4" shall have the meaning provided in the definition of
Applicable Margin.
"Leverage Ratio" shall mean, at any date of determination, the ratio
of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test
Period last ended; provided that in the case of a Test Period ended before the
last day of the fiscal year ended in 1998, for purposes of the Leverage Ratio
only, Consolidated EBITDA for such Test Period shall be multiplied by a fraction
the numerator of which is 365 and the denominator of which is the number of days
actually elapsed during the respective Test Period.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
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"Loan" shall mean each Tranche A Term Loan, each Tranche B Term Loan,
each Revolving Loan and each Swingline Loan.
"Majority Banks" of any Tranche shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in, this
Agreement if all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Management Agreements" shall have the meaning provided in Section
5.05.
"Management Investors" shall mean Kirk P. Pond, Joseph R. Martin and
certain other key employees of the Borrower who purchase Holdings Common Stock
and/or Holdings Preferred Stock pursuant to the Securities Purchase and Holders
Agreement.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(e).
"Margin Adjustment Period" shall mean each period which shall
commence on a date occurring after the first anniversary of the Initial
Borrowing Date on which the financial statements are delivered pursuant to
Section 8.01(b) or (c) for a fiscal quarter or year, as the case may be, which
ends at least one year after the Initial Borrowing Date and which Margin
Adjustment Period shall end on the earlier of (i) the date of actual delivery of
the next financial statements pursuant to Section 8.01(b) or (c) and (ii) the
latest date on which the next financial statements are required to be delivered
pursuant to Section 8.01(b) or (c).
"Margin Adjustment Test Period" shall mean, with respect to each
Margin Adjustment Period, the Test Period ended on the last day of the fiscal
quarter or year, as the case may be, for which financial statements were last
delivered or required to be delivered pursuant to Section 8.01(b) or (c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole or the
Borrower.
"Maturity Date" shall mean, with respect to any Tranche of Loans, the
Tranche A Term Loan Maturity Date, the Tranche B Term Loan Maturity Date, the
Revolving Loan Maturity Date or the Swingline Expiry Date, as the case may be.
"Maximum Swingline Amount" shall mean $5,000,000.
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"Mortgage" shall have the meaning provided in Section 5.13 and, after
the execution and delivery thereof, shall include each Additional Mortgage.
"Mortgage Policies" shall have the meaning provided in Section 5.13.
"Mortgaged Property" shall have the meaning provided in Section 5.13
and, after the execution and delivery of any Additional Mortgage, shall include
the respective Additional Mortgaged Property.
"NSC" shall mean National Semiconductor Corporation, a Delaware
corporation.
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith), (ii) payments of
unassumed liabilities relating to the assets sold at the time of, or within 90
days after, the date of such sale, (iii) the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Banks pursuant to this Agreement) which is secured by the respective assets
which were sold, and (iv) the estimated marginal increase in income taxes which
will be payable by Holdings' consolidated group with respect to the fiscal year
in which the sale occurs as a result of such sale.
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Note" shall mean each Tranche A Term Note, each Tranche B Term Note,
each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, NY 10006, Attention: Anthony Logrippo,
or such other office as the Administrative Agent may hereafter designate in
writing as such to the other parties hereto.
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"Obligations" shall mean all amounts owing to any of the Agents, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Operating Agreements" shall mean the Technology Licensing and
Transfer Agreement, Transition Services Agreement, Fairchild Foundry Services
Agreement, Revenue Side Letter, Fairchild Assembly Services Agreement, National
Foundry Services Agreement, National Assembly Services Agreement, Mil/Aero Wafer
Services Agreement, Shared Facilities Agreement, Shared Services Agreement and
Shared Services and Occupancy Agreement, all of which as defined in the
Recapitalization Agreement.
"Offering Circular" shall mean the Offering Circular dated March 6,
1997, and prepared in connection with the Senior Subordinated Notes.
"Other Hedging Agreement" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency or
commodity values.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, New York 10006, or such other office as
the Administrative Agent may hereafter designate in writing as such to the other
parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction (expressed
as a percentage) the numerator of which is the Revolving Loan Commitment of such
Bank at such time and the denominator of which is the Total Revolving Loan
Commitment at such time, provided that if the Percentage of any Bank is to be
determined after the Total Revolving Loan Commitment has been terminated, then
the Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.
"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, provided that in the
case of any Additional Mortgaged Property, all such exceptions shall also be
acceptable to the Administrative Agent in its reasonable discretion.
"Permitted Liens" shall have the meaning provided in Section 9.01.
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"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which Holdings, or a Subsidiary of Holdings or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 5.11.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in each of the Pledge Agreements.
"Pledged Securities" shall mean "Pledged Securities" as defined in
the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Projections" shall mean the projections set forth on Schedule X
hereto.
"Purchase Price Note" shall mean, collectively, demand promissory
notes in the aggregate principal amount of approximately $400,960,000] issued by
the Borrower and its Subsidiaries to NSC and its Subsidiaries.
"Purchased Assets" shall mean all of the assets, properties and
rights which are primarily used in the conduct of the Business and which are
being transferred to the Borrower pursuant to Section 2.1 of the Asset Purchase
Agreement.
"Qualified Capital Stock" of any Person shall mean any capital stock
of such Person which is not Disqualified Stock; provided that in any event the
Holdings Series A Preferred Stock in the form issued on or prior to the Initial
Borrowing Date shall constitute Qualified Capital Stock.
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"Qualified Public Offering" shall mean an underwritten public
offering of common stock of, and by, Holdings pursuant to a registration
statement filed with the Securities and Exchange Commission in accordance with
the Securities Act, which public equity offering results in gross proceeds to
Holdings of not less than $50,000,000; provided, however, that Holdings
contributes to the common equity of the Company the net cash proceeds from such
underwritten public offering.
"Quarterly Payment Date" shall mean the last Business Day of
February, May, August and November occurring after the Initial Borrowing Date.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization Agreement" shall mean the Agreement and Plan of
Recapitalization, dated as of January 24, 1997, between Sterling and NSC, as in
effect on the Initial Borrowing Date and as the same may be amended, modified or
supplemented from time to time pursuant to the terms hereof and thereof.
"Recapitalization Documents" shall mean the Recapitalization
Agreement and all other documents entered into or delivered in connection with
the Recapitalization Agreement (including, without limitation, the Asset
Purchase Agreement and the Operating Agreements.
"Recapitalization Transaction" shall mean, collectively, the
transactions to occur on or prior to the Closing (as defined in the
Recapitalization Agreement) pursuant to the Recapitalization Documents,
including without limitation (x) the consummation of (i) the Asset Transfer,
(ii) the Equity Contribution, (iii) the Holdings Contribution and (iv) the
repayment in full of the Purchase Price Note and (y) the payment of all fees and
expenses to be paid on or prior to such Closing or the Initial Borrowing Date
and owing in connection with the foregoing.
"Recovery Event" shall mean the receipt by the Holdings or any of its
Subsidiaries of any cash insurance proceeds or condemnation award payable (i) by
reason of theft, loss, physical destruction or damage, condemnation action or
conveyance in lieu thereof or any other similar event with respect to any
property or assets of the Borrower or any of its Subsidiaries, (ii) under any
policy of insurance required to be maintained under Section 8.03 or (iii) by any
condemning authority (or any authority receiving a conveyance in lieu of
condemning the subject property).
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"Register" shall have the meaning provided in Section 13.17.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Related Business" shall mean the business of designing, developing
and manufacturing of logic, discrete and memory semiconductors conducted by the
Borrower and its Subsidiaries (or, if the reference is to an Unrestricted
Subsidiary, by such Unrestricted Subsidiary) and any and all related businesses
in support of and ancillary to or reasonably related to such business of
designing, developing and manufacturing of logic, discrete and memory
semiconductors.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migration into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
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"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitments) and Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans and Adjusted Percentage of Swingline Loans and
Letter of Credit Outstandings) represent an amount greater than 50% of the sum
of all outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term
Loan Commitments) of Non-Defaulting Banks and the Adjusted Total Revolving Loan
Commitment (or after the termination thereof, the sum of the then total
outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Adjusted
Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans
and Letter of Credit Outstandings at such time).
"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan" shall have the meaning provided in Section 1.01(c).
"Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I hereto directly below the column
entitled "Revolving Loan Commitment," as same may be (x) reduced from time to
time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to Section 1.13
or 13.04(b).
"Revolving Loan Maturity Date" shall mean March 11, 2002.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Scheduled Repayments" shall mean Tranche A Scheduled Repayments and
Tranche B Scheduled Repayments.
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).
"Secured Creditors" shall have the meaning assigned that term in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Purchase and Holders Agreement" shall mean the Securities
Purchase and Holders Agreement, dated as of March 11, 1997, among Holdings,
Sterling, NSC and the Management Investors.
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"Security Agreement" shall have the meaning provided in Section 5.12.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Document" shall mean the Pledge Agreement, the Security
Agreement, each Mortgage and, after the execution and delivery thereof, each
Additional Mortgage and each Additional Security Document.
"Seller Note" shall mean the promissory note issued by Holdings to
NSC in the principal amount of $77,000,000 pursuant to the Recapitalization
Agreement, which promissory note shall be in the form delivered to the Agents on
or prior to the Initial Borrowing Date (which promissory note shall be in the
form of Exhibit 1-A to the Recapitalization Agreement, with any insertions or
modifications thereto to be identified to the Agents and to be satisfactory to
them (which, in any event, shall not adversely affect the interests of the
Banks)).
"Senior Subordinated Note Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Note Indenture and all other
documents executed and delivered with respect to the Senior Subordinated Notes
or Senior Subordinated Note Indenture.
"Senior Subordinated Note Indenture" shall mean the indenture dated
as of March 11, 1997, between the Borrower and the Senior Subordinated Note
Indenture Trustee, as in effect on the Effective Date and as thereafter amended
from time to time in accordance with the requirements thereof and of this
Agreement.
"Senior Subordinated Note Indenture Trustee" shall mean United States
Trust Company of New York.
"Senior Subordinated Notes" shall mean the Borrower's 10-1/8% Senior
Subordinated Notes due 2007 issued pursuant to the Senior Subordinated Note
Indenture and any notes issued by the Borrower in exchange for, and as
contemplated by, the Senior Subordinated Notes with substantially identical
terms as the Senior Subordinated Notes.
"Senior Subordinated Notes Term Sheet" shall have the meaning
provided in Section 5.07(a).
"Shareholders' Agreements" shall have the meaning provided in Section
5.05.
"Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).
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"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any conditions to drawing could then be met).
"Start Date" shall mean, with respect to any Margin Adjustment
Period, the first day of such Margin Adjustment Period.
"Sterling" shall mean Sterling Holding Company, LLC, a Delaware
limited liability company.
"Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty in the
form of Exhibit G (appropriately completed), and, after the execution and
delivery thereof, as modified, supplemented or amended from time to time.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time. Notwithstanding the
foregoing (and except for purposes of the definition of Unrestricted Subsidiary
contained herein) an Unrestricted Subsidiary shall be deemed not to be a
Subsidiary of the Borrower or any of its other Subsidiaries for purposes of this
Agreement.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
designated as a "Subsidiary Guarantor" on Schedule VIII hereto or which executes
a guarantee after the Initial Borrowing Date pursuant to Section 8.12.
"Supermajority Banks" of any Tranche shall mean those Non-Defaulting
Banks which would constitute the Required Banks under, and as defined in, this
Agreement if (x) all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated and (y) the percentage "50%" contained therein were changed to
"66-2/3%".
"Swingline Bank" shall mean BTCo.
"Swingline Expiry Date" shall mean the date which is two Business
Days prior to the Revolving Loan Maturity Date.
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"Swingline Loan" shall have the meaning provided in Section 1.01(d).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Syndication Date" shall mean that date upon which the Administrative
Agent determines in its sole discretion (and notifies the Borrower) that the
primary syndication (and resultant addition of institutions as Banks pursuant to
Section 13.04) has been completed.
"Tax Sharing Agreement" shall have the meaning provided in Section
5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall mean each Tranche A Term Loan and the Tranche B
Term Loan.
"Term Loan Commitment" shall mean each Tranche A Term Loan Commitment
and each Tranche B Term Loan Commitment, with the Term Loan Commitment of any
Bank at any time to equal the sum of its Tranche A Term Loan Commitment and
Tranche B Term Loan Commitment as then in effect.
"Test Period" shall mean each period of four consecutive fiscal
quarters of the Borrower (or, if shorter, the period beginning on the first day
of the fiscal year beginning on, or closest to, May 26, 1997 and ending on the
last day of a fiscal quarter of the Borrower ended thereafter), in each case
taken as one accounting period, ended after the first day of the fiscal year
beginning on, or closest to, May 26, 1997.
"Total Commitments" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Total Tranche A Term Loan Commitment and Total Tranche B Term Loan Commitment.
"Total Tranche A Term Loan Commitment" shall mean, at any time, the
sum of the Tranche A Term Loan Commitments of each of the Banks.
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"Total Tranche B Term Loan Commitment" shall mean, at any time, the
sum of the Tranche B Term Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Trade Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being four separate Tranches, i.e.,
Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and Swingline Loans.
"Tranche A Scheduled Repayment" shall have the meaning provided in
Section 4.02(b).
"Tranche A Scheduled Repayment Date" shall have the meaning provided
in Section 4.02(b).
"Tranche A Term Loan" shall have the meaning provided in Section
1.01(a).
"Tranche A Term Loan Commitment" shall mean, for each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly below
the column entitled "Tranche A Term Loan Commitment", as same may be (x) reduced
from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.13 or 13.04.
"Tranche A Term Loan Maturity Date" shall mean March 11, 2002.
"Tranche A Term Note" shall have the meaning provided in Section
1.05(a).
"Tranche B Scheduled Repayment" shall have the meaning provided in
Section 4.02(c).
"Tranche B Scheduled Repayment Date" shall have the meaning provided
in Section 4.02(c).
"Tranche B Term Loan" shall have the meaning provided in Section
1.01(b).
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"Tranche B Term Loan Commitment" shall mean, for each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly below
the column entitled "Tranche B Term Loan Commitment", as same may be (x) reduced
from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.13 or 13.04(b).
"Tranche B Term Loan Maturity Date" shall mean March 11, 2003.
"Tranche B Term Note" shall have the meaning provided in Section
1.05(a).
"Transaction" shall mean, collectively, (i) the Recapitalization
Transaction, (ii) the incurrence of Loans and the issuance of the Senior
Subordinated Notes and the Seller Note on the Initial Borrowing Date and (iii)
the payment of fees and expenses owing in connection with the foregoing.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year, determined in accordance
with actuarial assumptions at such time consistent with Statement of Financial
Accounting Standards No. 87, exceeds the market value of the assets allocable
thereto.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided for in Section
2.04(a).
"Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower
that, at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Borrower, as provided below) provided that such Subsidiary
does not and shall not engage, to any substantial extent, in any line or lines
of business activity other than a Related Business. The Borrower may designate
any Person to be an Unrestricted Subsidiary if (a) no Default or Event of
Default is existing or will occur as a consequence thereof, (b) either (x) such
Subsidiary, at the time of designation thereof, has no assets (except assets
which could be invested in such Unrestricted Subsidiary at the time of
designation as described in the immediately succeeding sentence) or (y) such
Subsidiary is designated an "Unrestricted Subsidiary" at the time of the
acquisition thereof by the Borrower, in the case
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of Subsidiaries acquired after the Effective Date and (c) such Subsidiary does
not own any equity interests in, or hold any Lien on any property of, the
Borrower or any other Subsidiary (excluding other Unrestricted Subsidiaries).
Any such designation shall also be deemed to constitute an investment pursuant
to Section 9.05(xi) in an amount equal to a percentage equal to the Borrower's
and its Subsidiaries' percentage ownership interest of such Subsidiary of the
sum of the net assets (with assets other than cash and Cash Equivalents valued
at fair market value) of such Subsidiary at the time of the designation (which
investment must be permitted to be made in accordance with the requirements of
Section 9.05(xi)), unless the designation is made pursuant to clause (b)(y) of
the first sentence of this definition, in which case the amount of consideration
paid by the Borrower and its Subsidiaries to effect such acquisition shall be
included as such an investment. The Borrower may designate any Unrestricted
Subsidiary to be a Subsidiary, provided that no Default or Event of Default is
existing or will occur as a consequence thereof. Each such designation shall be
evidenced by filing with the Administrative Agent a certified copy of the
resolution giving effect to such designation and an officers' certificate of the
Chairman of the Board, the President, any Vice President or the Treasurer of the
Borrower certifying that such designation complied with the foregoing
conditions.
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time less the
sum of (i) the aggregate outstanding principal amount of Revolving Loans made by
such Bank and (ii) such Bank's Adjusted Percentage of the Letter of Credit
Outstandings in respect of Letters of Credit issued under this Agreement.
"Voting Stock" shall mean any class or classes of capital stock of
Holdings pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the Board of
Directors of Holdings.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 12. The Agents.
12.01 Appointment. The Banks hereby designate Bankers Trust Company
as Administrative Agent (for purposes of this Section 12, the term
"Administrative Agent" shall include Bankers Trust Company (and/or any of its
affiliates) in its capacity as Collateral Agent pursuant to the Security
Documents) to act as specified herein and in the other Credit Documents. The
Banks hereby designate Credit Suisse First Boston as
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Syndication Agent and Canadian Imperial Bank of Commerce as Documentation Agent
to act as specified herein and in the other Credit Documents. Each Bank hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agents to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the respective Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
Each of the Agents may perform any of its duties hereunder by or through its
respective officers, directors, agents, employees or affiliates.
12.02 Nature of Duties. No Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. None of the Agents nor any of their respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by such Person's gross
negligence or willful misconduct. The duties of each Agent shall be mechanical
and administrative in nature; no Agent shall have by reason of this Agreement or
any other Credit Document a fiduciary relationship in respect of any Bank or the
holder of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
any Agent any obligations in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein.
12.03 Lack of Reliance on the Agents. Independently and without
reliance upon any Agent, each Bank and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Holdings and its
Subsidiaries in connection with the making and the continuance of the Loans and
the taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of Holdings and its Subsidiaries and, except
as expressly provided in this Agreement, no Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. No Agent shall be responsible to any Bank or the
holder of any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectability, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of Holdings
and its Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or
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the financial condition of Holdings and its Subsidiaries or the existence or
possible existence of any Default or Event of Default.
12.04 Certain Rights of the Agents. If any Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Banks; and such Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank or the holder of any
Note shall have any right of action whatsoever against any Agent as a result of
such Agent acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Banks.
12.05 Reliance. Each Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and its duties hereunder and thereunder, upon advice of counsel selected by such
Agent.
12.06 Indemnification. To the extent any Agent is not reimbursed and
indemnified by the Borrower the Banks will reimburse and indemnify such Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks (without regard to the existence of any Defaulting Banks), for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever kind
or nature which may be imposed on, asserted against or incurred by such Agent in
performing its respective duties hereunder or under any other Credit Document,
in any way relating to or arising out of this Agreement or any other Credit
Document; provided that no Bank shall be liable for any portion of such liabili-
ties, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
12.07 Each Agent in its Individual Capacity. With respect to its
obligation to make Loans under this Agreement, each Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if they were not performing the
duties
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specified herein, and may accept fees and other consideration from the Borrower
or any other Credit Party for services in connection with this Agreement and
otherwise without having to account for the same to the Banks.
12.08 Holders. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
12.09 Resignation by the Agents. (a) The Administrative Agent may
resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 15 Business Days' prior
written notice to the Borrower and the Banks. Such resignation shall take effect
upon the appointment of a successor Administrative Agent pursuant to clauses (b)
and (c) below or as otherwise provided below. Each other Agent may resign from
the performance of all of its functions and duties hereunder and/or under the
other Credit Documents at any time by giving notice to the Borrower, the
Administrative Agent and the Banks. Such resignation shall take effect upon
delivery of such notice.
(b) Upon any such notice of resignation by the Administrative Agent,
the Banks shall appoint a successor Administrative Agent hereunder or thereunder
who shall be a commercial bank or trust company reasonably acceptable to the
Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower (which shall not be unreasonably withheld or delayed),
shall then appoint a commercial bank or trust company with capital and surplus
of not less than $500,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 25th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Agents (if one or more so agrees), or
if there are no Agents or no Agent so agrees, then the Required Banks, shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Banks
appoint a successor Administrative Agent as provided above.
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SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agents (including, without limitation,
the reasonable fees and disbursements of White & Case and local counsel) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments referred to herein
and therein and any amendment, waiver or consent relating hereto or thereto, of
the Agents in connection with their syndication efforts with respect to this
Agreement and of the Agents and, following and during the continuation of an
Event of Default, each of the Banks in connection with the enforcement of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel (including in-house counsel) for the Agents
and, following and during the continuation of an Event of Default, for each of
the Banks); (ii) pay and hold each of the Banks harmless from and against any
and all present and future stamp, excise and other similar taxes with respect to
the foregoing matters and save each of the Banks harmless from and against any
and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to such Bank) to pay such taxes; and
(iii) indemnify the Agents and each Bank, and each of their respective officers,
directors, trustees, employees, representatives and agents from and hold each of
them harmless against any and all liabilities, obligations (including removal or
remedial actions), losses, damages, penalties, claims, actions, judgments,
suits, costs, expenses and disbursements (including reasonable attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed against
any of them as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
the Agents or any Bank is a party thereto) related to the entering into and/or
performance of this Agreement or any other Credit Document or the use of any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated herein (including, without limitation, the
Transaction), or in any other Credit Document or the exercise of any of their
rights or remedies provided herein or in the other Credit Documents, or (b) the
actual or alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Real Property owned or at any
time operated by Holdings or any of its Subsidiaries, the generation, storage,
transportation, handling or disposal of Hazardous Materials at any location,
whether or not owned or operated by Holdings or any of its Subsidiaries, the
non-compliance of any Real Property with foreign, federal, state and local laws,
regulations, and ordinances (including applicable permits thereunder) applicable
to any Real Property, or any Environmental Claim asserted against Holdings, any
of its Subsidiaries or any Real Property owned or at any time operated by
Holdings or any of its Subsidiaries, including, in each case, without
limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such
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investigation, litigation or other proceeding (but excluding any losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified). To the
extent that the undertaking to indemnify, pay or hold harmless the Agents or any
Bank set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
13.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to Holdings or the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of Holdings, the Borrower or any Subsidiary Guarantor
but in any event excluding assets held in trust for any such Person against and
on account of the Obligations and liabilities of Holdings, the Borrower or such
Subsidiary Guarantor, as applicable, to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all interests
in Obligations purchased by such Bank pursuant to Section 13.06(b), and all
other claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telex or telecopier communication) and mailed, telexed, telecopied or
delivered: if to Holdings, at Holdings' address specified opposite its signature
below; if to the Borrower, at the Borrower's address specified opposite its
signature below; if to any Bank, at its address specified opposite its name on
Schedule II below; and if to the Administrative Agent, at its Notice Office; or,
as to any Credit Party or any of the Agents, at such other address as shall be
designated by such party in a written notice to the other parties hereto and, as
to each Bank, at such other address as shall be designated by such Bank in a
written notice to the Borrower and the Agents. All such notices and
communications shall, when mailed, telexed, telecopied or sent by overnight
courier, be effective when deposited in the mails or delivered to the overnight
courier, prepaid and properly addressed for delivery on such or the next
Business Day, or sent by telex or telecopier, except that notices and
communications to the Agents and the Borrower shall not be effective until
received by the Agents or the Borrower, as the case may be.
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13.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Banks and, provided
further, that, although any Bank may transfer, assign or grant participations in
its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments hereunder
except as provided in Section 13.04(b)) and the transferee, assignee or
participant, as the case may be, shall not constitute a "Bank" hereunder and,
provided fur- ther, that no Bank shall transfer or grant any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the
Revolving Loan Maturity Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except (x) in connection with a waiver of applicability of any post-default
increase in interest rates and (y) that any amendment or modification to the
financial definitions in this Agreement shall not constitute a reduction in the
rate of interest for purposes of this clause (i)) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Commitments shall
not constitute a change in the terms of such participation, and that an increase
in any Commitment or Loan shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof), (ii) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement or (iii) release all or
substantially all of the Collateral under all of the Security Documents (except
as expressly provided in the Credit Documents) supporting the Loans hereunder in
which such participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any of the
other Credit Documents (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such Bank
in favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitment) to its (i) parent company and/or any affiliate of such Bank which is
at least 50% owned by such Bank or its parent company or (ii) with the consent
of the Administrative Agent, a Common Management Fund or (iii) to one or more
Banks or (y) assign all, or if less than all, a portion equal to
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at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks,
of such Revolving Loan Commitments and outstanding principal amount of Term
Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitment)
hereunder to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement, provided that, (i) at such time Schedule I shall be deemed
modified to reflect the Commitments (and/or outstanding Term Loans, as the case
may be) of such new Bank and of the existing Banks, (ii) new Notes will be
issued, at the Borrower's expense, to such new Bank and to the assigning Bank
upon the request of such new Bank or assigning Bank, such new Notes to be in
conformity with the requirements of Section 1.05 (with appropriate
modifications) to the extent needed to reflect the revised Commitments (and/or
outstanding Term Loans, as the case may be), (iii) the consent of the
Administrative Agent shall be required in connection with any such assignment
(which consent shall not be unreasonably withheld) and (iv) the Administrative
Agent shall receive at the time of each such assignment, from the assigning or
assignee Bank, the payment of a non-refundable assignment fee of $3,500. To the
extent of any assignment pursuant to this Section 13.04(b), the assigning Bank
shall be relieved of its obligations hereunder with respect to its assigned
Commitments (it being understood that the indemnification provisions under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01
and 13.06) shall survive as to such assigning Bank). At the time of each
assignment pursuant to this Section 13.04(b) to a Person which is not already a
Bank hereunder and which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall provide to the Borrower and the Agent the
appropriate Internal Revenue Service Forms (and, if applicable, a Section
4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an
assignment of all or any portion of a Bank's Commitments and related outstanding
Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10, 1.11 or 4.04
from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank and, with the
consent of the Borrower and the Administrative Agent, any Lender which is a fund
may pledge all or any portion of its Notes or Loans to a trustee for the benefit
of investors and in support of its obligation to such investors.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the part
of any Agent or any Bank or any holder of any Note in exercising any right,
power or
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privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower or any other Credit Party and any Agent or any Bank
or the holder of any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which any Agent or any Bank or the holder of any Note would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of any Agent or any Bank or the holder of
any Note to any other or further action in any circumstances without notice or
demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its pro rata share of any such payment)
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Banks
is in a greater proportion than the total of such Obligation then owed and due
to such Bank bears to the total of such Obligation then owed and due to all of
the Banks immediately prior to such receipt, then such Bank receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
the Banks in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
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13.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with generally accepted accounting principles in the United States (or the
equivalent thereof in any country in which a Foreign Subsidiary is doing
business, as applicable) consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided that, except as otherwise specifically
provided herein, all computations of Excess Cash Flow and all computations
determining compliance with Sections 9.08 through 9.10, inclusive, shall utilize
accounting principles and policies in conformity with those used to prepare the
historical financial statements delivered to the Banks for the first fiscal year
of the Borrower ended after the Initial Borrowing Date pursuant to Section
8.01(c) (which annual financial statements shall be generally consistent with
the historical financial statements delivered to the Banks pursuant to Section
7.05(a), except as regards to inter-company transactions between the Borrower
and NSC) (with the foregoing generally accepted accounting principles, subject
to the preceding proviso, herein called "GAAP"). Notwithstanding anything to the
contrary contained herein, all computations determining compliance with Sections
9.08 through 9.10, inclusive, including definitions used therein, shall treat
Unrestricted Subsidiaries as if the same did not exist.
(b) All computations of interest, Commitment Commission and Fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest, Commitment Commission or Fees are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE
PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY
DESIGNATES, APPOINTS AND EMPOWERS CORPORATION SERVICE COMPANY, WITH OFFICES ON
THE DATE HEREOF AT 500 CENTRAL AVENUE, ALBANY, NEW YORK 12206 AS ITS
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DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS
BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS,
SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO
BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY AGREES TO DESIGNATE A NEW
DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION SATISFACTORY TO THE ADMINISTRATIVE AGENT UNDER THIS
AGREEMENT. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS
SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY
BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT
PARTY IN ANY OTHER JURISDICTION.
(b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together
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constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Administrative
Agent.
13.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Borrower and each of the
Banks who are initially parties hereto shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered the same
to the Administrative Agent or, in the case of the Banks, shall have given to
the Administrative Agent telephonic (confirmed in writing), written or telex
notice (actually received) at such office that the same has been signed and
mailed to it. The Administrative Agent will give the Borrower and each Bank
prompt written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except (x) in connection with the waiver of applicability of any post-default
increase in interest rates and (y) that any amendment or modification to the
financial definitions in this Agreement shall not constitute a reduction in the
rate of interest for purposes of this clause (i)), or reduce the principal
amount thereof (except to the extent repaid in cash), (ii) release all or
substantially all of the Collateral (except as expressly provided in the Credit
Documents) under all the Security Documents, (iii) amend, modify or waive any
provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loans and Revolving Loan Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall (u)
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitments shall not constitute an
increase of
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the Commitment of any Bank, and that an increase in the available portion of any
Commitment of any Bank shall not constitute an increase in the Commitment of
such Bank), (v) without the consent of BTCo or, in the case of Letters of
Credit, the respective Issuing Bank, amend, modify or waive any provision of
Section 2 or alter its rights or obligations with respect to Letters of Credit
or Swingline Loans, (w) without the consent of each Agent affected thereby,
amend, modify or waive any provision of Section 12 as same applies to such Agent
or any other provision as same relates to the rights or obligations of such
Agent, (x) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent, (y)
without the consent of the Majority Banks of each Tranche which is being
allocated a lesser prepayment, repayment or commitment reduction as a result of
the actions described below (or without the consent of the Majority Banks of
each Tranche in the case of an amendment to the definition of Majority Banks),
amend the definition of Majority Banks (it being understood that, with the
consent of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Majority Banks on
substantially the same basis as the extensions of Term Loans and Revolving Loan
Commitments are included on the Effective Date) or alter the required
application of any prepayments or repayments (or commitment reductions), as
between the various Tranches, pursuant to Section 4.01 or 4.02 (excluding
Sections 4.02(b) and (c)) (although (x) the Required Banks may waive, in whole
or in part, any such prepayment, repayment or commitment reduction, so long as
the application, as amongst the various Tranches, of any such prepayment,
repayment or commitment reduction which is still required to be made is not
altered and (y) if additional Tranches of Term Loans are extended after the
Initial Borrowing Date with the consent of the Required Banks as required above,
such Tranches may be included on a pro rata basis (as is originally done with
the Tranche A Term Loans and Tranche B Term Loans) in the various prepayments or
repayments required pursuant to Sections 4.01 and 4.02 (excluding Sections
4.02(b) and (c) and any section providing Scheduled Repayments for any new
Tranche of Term Loans) or (z) without the consent of the Supermajority Banks of
the respective Tranche, reduce the amount of, or extend the date of, any
Scheduled Repayment applicable to such Tranche or, without the consent of the
Supermajority Banks of each Tranche, amend the definition of Supermajority Banks
(it being understood that, with the consent of the Required Banks, additional
extensions of credit pursuant to this Agreement may be included in the
determination of the Supermajority Banks on substantially the same basis as the
extensions of Term Loans and Revolving Loan Commitments are included on the
Effective Date).
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-
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consenting Banks whose individual consent is required are treated as described
in either clauses (A) or (B) below, to either (A) replace each such
non-consenting Bank or Banks (or, at the option of the Borrower if the
respective Bank's consent is required with respect to less than all Tranches of
Loans (or related Commitments), to replace only the respective Tranche or
Tranches of Commitments and/or Loans of the respective non-consenting Bank which
gave rise to the need to obtain such Bank's individual consent) with one or more
Replacement Banks pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change, waiver,
discharge or termination or (B) terminate such non-consenting Bank's Revolving
Loan Commitment (if such Bank's consent is required as a result of its Revolving
Loan Commitment) and/or repay each Tranche of outstanding Term Loans of such
Bank which gave rise to the need to obtain such Bank's consent, in accordance
with Sections 3.02(b) and/or 4.01(iv), provided that, unless the Commitments are
terminated, and Loans repaid, pursuant to preceding clause (B) are immediately
replaced in full at such time through the addition of new Banks or the increase
of the Commitments and/or outstanding Loans of existing Banks (who in each case
must specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined before giving effect to the
proposed action) shall specifically consent thereto, provided further, that in
any event the Borrower shall not have the right to replace a Bank, terminate its
Revolving Loan Commitment or repay its Loans solely as a result of the exercise
of such Bank's rights (and the withholding of any required consent by such Bank)
pursuant to the second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject
to Section 13.15 (to the extent applicable), survive the execution, delivery and
termination of this Agreement and the Notes and the making and repayment of the
Loans.
13.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from
those being charged by the respective Bank prior to such transfer, then the
Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
transfer).
13.15 Limitation on Additional Amounts, Etc. Notwithstanding anything
to the contrary contained in Sections 1.10, 1.11, 2.05 or 4.04 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under any such Section within one year after the later of (x) the
date the Bank incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or
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receivable or reduction in return on capital or (y) the date such Bank has
actual knowledge of its incurrence of the respective increased costs, Taxes,
loss, expense or liability, reductions in amounts received or receivable or
reduction in return on capital, then such Bank shall only be entitled to be
compensated for such amount by the Borrower pursuant to said Section 1.10, 1.11,
2.05 or 4.04, as the case may be, to the extent the costs, Taxes, loss, expense
or liability, reduction in amounts received or receivable or reduction in return
on capital are incurred or suffered on or after the date which occurs one year
prior to such Bank giving notice to the Borrower that it is obligated to pay the
respective amounts pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the
case may be. This Section 13.15 shall have no applicability to any Section of
this Agreement other than said Sections 1.10, 1.11, 2.05 and 4.04.
13.16 Confidentiality. (a) Subject to the provisions of clause (b) of
this Section 13.16, each Bank agrees that it will use its best efforts not to
disclose without the prior consent of Holdings or the Borrower (other than to
its employees, auditors, advisors or counsel or to another Bank if the Bank or
such Bank's holding or parent company or board of trustees in its sole
discretion determines that any such party should have access to such
information, provided such Persons shall be subject to the provisions of this
Section 13.16 to the same extent as such Bank) any information with respect to
Holdings or any of its Subsidiaries which is now or in the future furnished
pursuant to this Agreement or any other Credit Document and which is designated
by Holdings to the Banks in writing as confidential, provided that any Bank may
disclose any such information (a) as has become generally available to the
public other than by virtue of a breach of this Section 13.16(a) by the
respective Bank, (b) as may be required or appropriate in any report, statement
or testimony submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over such Bank or to the Federal Reserve Board
or the Federal Deposit Insurance Corporation or similar organizations (whether
in the United States or elsewhere) or their successors, (c) as may be required
or appropriate in respect to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Bank, (e) to the Agents or the Collateral Agent and (f) to
any prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Notes or Commitments or any
interest therein by such Bank, provided that such prospective transferee agrees
to be bound by the confidentiality provisions contained in this Section 13.16.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries, provided such Persons shall be subject to the provisions of
this Section 13.16 to the same extent as such Bank).
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13.17 Register. The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for purposes of this Section
13.17, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount of the Loans of
each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of any
Commitments and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Borrower agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Administrative
Agent in performing its duties under this Section 13.17.
13.18 Certain Prior Documents. Upon execution of this Agreement, all
rights and obligations of the Agents and Citicorp Venture Capital Ltd. under the
commitment letter and related documents attached as Exhibit 4.7B to the
Recapitalization Agreement are terminated; provided that all obligations set
forth in the fee letter related thereto are hereby expressly assumed by the
Borrower, and, as so assumed, shall continue in full force and effect.
SECTION 14. Holdings Guaranty.
14.01 The Holdings Guaranty. In order to induce the Agents and the
Banks to enter into this Agreement and to extend credit hereunder, to induce
Banks or any of their respective Affiliates to enter into the Interest Rate
Protection Agreements or other Hedging Agreements, and in recognition of the
direct benefits to be received by Holdings from the proceeds of the Loans, the
issuance of the Letters of Credit, and the entering into of Interest Rate
Protection Agreements or Other Hedging Agreements, Holdings hereby agrees with
the Guaranteed Creditors as follows: Holdings hereby unconditionally and
irrevocably
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guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, acceleration or otherwise, of any and
all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors.
If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors becomes due and payable hereunder, Holdings irrevocably and
unconditionally promises to pay such indebtedness to the Guaranteed Creditors,
or order, on demand, together with any and all expenses which may be incurred by
the Guaranteed Creditors in collecting any of the Guaranteed Obligations. If
claim is ever made upon any Guaranteed Creditor for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (i) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (ii) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the Borrower), then and in such event Holdings agrees that
any such judgment, decree, order, settlement or compromise shall be binding upon
Holdings, notwithstanding any revocation of this Holdings Guaranty or other
instrument evidencing any liability of the Borrower, and Holdings shall be and
remain liable to the aforesaid payees hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such payee.
14.02 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of an Event of Default under any of the events
specified in Section 10.05, and unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money
of the United States.
14.03 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder is not
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, or (e) any payment
made to any Guaranteed Creditor on the Guaranteed Obligations which any such
Guaranteed Creditor repays to the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and Holdings waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
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14.04 Independent Obligation. The obligations of Holdings hereunder
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any statute
of limitations as to the Borrower shall operate to toll the statute of
limitations as to Holdings.
14.05 Authorization. Holdings authorizes the Guaranteed Creditors
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any
of the Guaranteed Obligations (including any increase or decrease in the
rate of interest thereon), any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the Holdings
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other Credit Party or others or otherwise act or refrain
from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
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(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of Holdings or the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or default
under, this Agreement or any of the instruments or agreements referred to
herein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Holdings Guaranty.
14.06 Reliance. It is not necessary for any Guaranteed Creditor to
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Guaranteed Obligations made or created in reliance upon the professed exercise
of such powers shall be guaranteed hereunder.
14.07 Subordination. Any of the indebtedness of the Borrower now or
hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations
of the Borrower owing to the Guaranteed Creditors; and if the Administrative
Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to Holdings shall be collected, enforced and
received by Holdings for the benefit of the Guaranteed Creditors and be paid
over to the Administrative Agent on behalf of the Guaranteed Creditors on
account of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors, but without affecting or impairing in any manner the liability of
Holdings under the other provisions of this Holdings Guaranty. Prior to the
transfer by Holdings of any note or negotiable instrument evidencing any of the
indebtedness of the Borrower to Holdings, Holdings shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, Holdings hereby
agrees with the Guaranteed Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a result of this Holdings
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
14.08 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor
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or any other party, other than payment in full of the Guaranteed Obligations,
based on or arising out of the disability of the Borrower, any other guarantor
or any other party, or the validity, legality or unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of the Borrower other than payment in full of the
Guaranteed Obligations. The Guaranteed Creditors may, at their election,
foreclose on any security held by any Agent, the Collateral Agent or any other
Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Guaranteed Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of Holdings
hereunder except to the extent the Guaranteed Obligations have been paid.
Holdings waives any defense arising out of any such election by the Guaranteed
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of Holdings against the
Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Holdings
Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Holdings assumes all responsibility for being
and keeping itself informed of the Borrower's financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and agrees that neither the Agents nor
any Bank shall have any duty to advise Holdings of information known to them
regarding such circumstances or risks.
14.09 Maximum Liability. It is the desire and intent of Holdings and
the Guaranteed Creditors that this Holdings Guaranty shall be enforced against
Holdings to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If, however, and to
the extent that, the obligations of Holdings under this Holdings Guaranty shall
be adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the
maximum amount of the Guaranteed Obligations which would be permissible under
applicable law.
* * *
-139-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Addresses:
333 Western Avenue FSC SEMICONDUCTOR CORPORATION
South Portland, ME 04106
Tel: (207) 775-8755 By
Fax: (207) 761-6020 ------------------------
Attention: Dan Boxer Name:
Title:
333 Western Avenue FAIRCHILD SEMICONDUCTOR
South Portland, ME 04106 CORPORATION
Tel: (207) 775-8755
Fax: (207) 761-6020
Attention: Dan Boxer By
-------------------------
Name:
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative
Agent
By
-------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
Individually and as Syndication Agent
By
-------------------------
<PAGE>
Name:
Title:
By
-------------------------
Name:
Title:
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
Individually and as Documentation
Agent
By
-------------------------
Name:
Title:
<PAGE>
ABN AMRO BANK, N.V.
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By
-------------------------
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By
-------------------------
Name:
Title:
<PAGE>
BANK OF SCOTLAND
By
-------------------------
Name:
Title:
<PAGE>
BANK OF TOKYO-MITSUBISHI
By
-------------------------
Name:
Title:
<PAGE>
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By
-------------------------
Name:
Title:
<PAGE>
CHANCELLOR SENIOR SECURED
MANAGEMENT
By
-------------------------
Name:
Title:
<PAGE>
CORESTATES BANK, N.A.
By
-------------------------
Name:
Title:
<PAGE>
DRESDNER BANK AG, New York Branch and
Grand Cayman Branch
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
<PAGE>
SENIOR DEBT PORTFOLIO
By Boston Management and Research,
as Investment Advisor
By
-------------------------
Name:
Title:
<PAGE>
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
its Agent/Manager
By
-------------------------
Name:
Title:
<PAGE>
FLEET NATIONAL BANK
By
-------------------------
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED
NEW YORK BRANCH
By
-------------------------
Name:
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By
-------------------------
Name:
Title:
<PAGE>
KEYBANK NATIONAL ASSOCIATION
By
-------------------------
Name:
Title:
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By
-------------------------
Name:
Title:
<PAGE>
THE MITSUBISHI TRUST & BANKING
CORPORATION, LOS ANGELES AGENCY
By
-------------------------
Name:
Title:
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By
-------------------------
Name:
Title:
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By
-------------------------
Name:
Title:
<PAGE>
PRIME INCOME TRUST
By
-------------------------
Name:
Title:
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By
-------------------------
Name:
Title:
<PAGE>
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term Revolving
Bank Loan Commitment Loan Commitment Loan Commitment
- ---- --------------- --------------- ---------------
<S> <C> <C> <C>
Bankers Trust Company $5,333,333.34 $15,000,000 $5,333,333.34
Credit Suisse First Boston 5,333,333.33 -- 5,333,333.33
Canadian Imperial Bank of 5,333,333.33 -- 5,333,333.33
Commerce
PNC Bank National Association 5,000,000 -- 5,000,000
Fleet National Bank 5,000,000 -- 5,000,000
The Fuji Bank, Limited New York 5,000,000 -- 5,000,000
Branch
Bank of Scotland 4,000,000 -- 4,000,000
ABN Amro Bank, N.V. 4,000,000 -- 4,000,000
First Source Financial LLP 4,000,000 -- 4,000,000
Corestates Bank, N.A. 4,000,000 -- 4,000,000
Bank of Tokyo-Mitsubishi 4,000,000 -- 4,000,000
The Bank of Nova Scotia 4,000,000 -- 4,000,000
The First National Bank of Boston 4,000,000 -- 4,000,000
General Electric Capital 4,000,000 -- 4,000,000
Corporation
Banque Francaise du Commerce 4,000,000 -- 4,000,000
Exterieur
The Mitsubishi Trust & Banking 4,000,000 -- 4,000,000
Corporation, Los Angeles Agency
Dresdner Bank AG, New York 4,000,000 -- 4,000,000
Branch and Grand Cayman Branch
</TABLE>
<PAGE>
SCHEDULE I
Page 2
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term Revolving
Bank Loan Commitment Loan Commitment Loan Commitment
- ---- --------------- --------------- ---------------
<S> <C> <C> <C>
Van Kampen American Capital Prime -- $7,500,000 --
Rate Income Trust
Pilgrim America Prime Rate Trust -- 7,500,000 --
Prime Income Trust -- 7,500,000 --
Merrill Lynch Senior Floating Rate -- 7,500,000 --
Fund, Inc.
Totals $75,000,000 $45,000,000 $75,000,000
</TABLE>
<PAGE>
SCHEDULE II
BANK ADDRESSES
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Telephone No.: (212) 250-4886
Telecopier No.: (212) 250-7218
Attention: Anthony Logrippo
Credit Suisse First Boston 11 Madison Avenue
New York, New York 10010
Telephone No.: (212) 325-9157
Telecopier No.: (212) 325-8309
Attention: Chris T. Horgan
Canadian Imperial 425 Lexington Avenue, 3rd Floor
Bank of Commerce New York, New York 10017
Telephone No.: (212) 885-4695
Telecopier No.: (212) 885-4933
Attention: Ed Levy
ABN Amro Bank, N.V. One Post Office Square
39th Floor
Boston, MA 02109
Tel: (617) 988-7935
Fax: (617) 988-7910
Attention: Chip Wahle
The First National Bank of Boston 100 Federal Street
High Technology Division
Mail Stop: 01-08-06
Boston, MA 02106
Tel: (617) 434-0819
Attention: Daniel Head, Jr.
The Bank of Nova Scotia 101 Federal Street
16th Floor
Boston, MA 02110
Tel: (617) 737-6310
Fax: (617) 951-2177
<PAGE>
SCHEDULE II
Page 2
Attention: T.M. Pitcher
Bank of Scotland New York Branch
565 Fifth Avenue
New York, NY 10017
Tel: (212) 450-0871
Fax: (212) 557-9460
Attention: Annie Chin Tat
Bank of Tokyo-Mitsubishi 1251 Avenue of the Americas
New York, NY 10020
Tel: (212) 782-4268
Fax: (212) 782-4981
Attention: Nick Campbell
Banque Francaise du Commerce 645 Fifth Avenue
Exteriuer New York, NY 10022
Tel: (212) 872-5180
Fax: (212) 872-5045
Attention: Peter Harris
Chancellor Senior Secured 1166 Avenue of the Americas
Management New York, NY 10036
Tel: (212) 278-9563
Fax: (212) 278-9869
Attention: Stephen Alfieri
Corestates Bank, N.A. 1339 Chestnut Street
Philadelphia, PA 19107
Tel: (215) 973-2562
Fax: (215) 973-6680
Attention: Mark S. Supple
Dresdner Bank AG, New York 333 South Grand Avenue
Branch and Grand Cayman Suite 1700
Branch Los Angeles, CA 90071
Tel: (213) 473-5420
<PAGE>
SCHEDULE II
Page 3
Fax: (213) 473-5450
Attention: Sid Jordan
Senior Debt Portfolio c/o Eaton Vance
24 Federal Street
Boston, MA 02110
Tel: (617) 654-8484
Fax: (617) 695-9594
Attention: Payson Swaffield
First Source Financial LLP 2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Tel: (847) 734-2064
Fax: (847) 734-7910
Attention: Kelli Marti
Fleet National Bank One Federal Street
Mail Stop: MA PF DO3C
Boston, MA 02110
Tel: (617) 346-4853
Fax: (617) 346-4806
Attention: Eric VanderMel
The Fuji Bank, Limited Two World Trade Center
New York Branch New York, NY 10048
Tel: (212) 898-2073
Fax: (212) 912-0516
Attention: Mark Hanslin
General Electric 201 High Ridge Road
Capital Corporation Stamford, CT 06927
Tel: (203) 316-7582
Fax: (203) 316-7978
Attention: Mike McGonigle
Keybank National Association 127 Public Square
6th Floor
<PAGE>
SCHEDULE II
Page 4
Cleveland, OH 44114
Tel: (216) 689-5562
Fax: (216) 689-4981
Attention: Michael Landimi
Merrill Lynch Senior Floating 800 Scudders Mill Road
Rate Fund, Inc. Plainsboro, NJ 08536
Tel: (609) 282-2092
Fax: (609) 282-2756
Attention: Anthony Clemente
The Mitsubishi Trust & Banking 801 South Figueroa Street
Corporation, Los Angeles Suite 2400
Agency Los Angeles, CA 90017
Tel: (213) 896-4658
Fax: (213) 687-4631
Attention: Rex Olson
Pilgrim America Prime Rate Trust Two Renaissance Square
Phoenix, AZ 85004
Tel: (602) 417-8257
Fax: (602) 417-8327
Attention: Tim Hunt
PNC Bank National Association 345 Park Avenue
New York, NY 10154
Tel: (212) 409-3724
Fax: (212) 409-3737
Attention: Mark Williams
Prime Income Trust c/o Dean Witter Intercapital
Two World Trade Center
New York, NY 10048
Tel: (212) 392-9034
Fax: (212) 392-5345
Attention: Peter Gewirtz
<PAGE>
SCHEDULE II
Page 5
Van Kampen American Capital One Parkview Plaza
Prime Rate Income Trust Oakbrook Terrace, IL 60181
Tel: (630) 684-6438
Fax: (603) 684-6740
Attention: Jeffrey Maillet
<PAGE>
SCHEDULE III
REAL PROPERTY
Occupant Interest Held Description
-------- ------------- -----------
Borrower *Fee Simple 333 Western Avenue
South Portland, Maine
Borrower *Fee Simple 3333 West 9000 South
West Jordan, Utah
Borrower Leasehold Lease dated November 13, 1995
between Mill Fabric Center,
lessor, and Borrower,
successor to National
Semiconductor Corporation, as
lessee, covering a portion of
a building located at 265
Western Avenue, South
Portland, Maine.
Borrower Leasehold Lease dated March __, 1997
between the Borrower and
National Semiconductor
Corporation covering building
10 at a facility owned by
National Semiconductor
Corporation located on Western
Avenue, South Portland, Maine.
Borrower Leasehold Lease dated March __, 1997
between the Borrower and
National Semiconductor
Corporation covering buildings
12 and 23 at a facility owned
by National Semiconductor
Corporation located on Western
Avenue, South Portland, Maine.
Borrower Leasehold Lease dated March __, 1997
between the Borrower and
National Semiconductor
Corporation, as owner and
Lessor, whereby the Borrower
leases a portion of each of
the facilities located at 2920
San Ysidro Way and 3697 Tahoe
Way in Santa Clara,
California.
Fairchild Semiconductor Leasehold Lease dated March 8, 1976
(Malaysia) Sdn. Bhd. under qualified (temporary)
("Fairchild Malaysia") title no. HS(D) 44, for
occupancy by Fairchild
Malaysia, successor to
National Semiconductor Penang
("NSEP"), covering the
property known as the EP1
Building located in the Bayan
Lepas Free Trade Zone, Penang,
Malaysia.
Fairchild Malaysia Leasehold Lease dated November 18, 1982,
under qualified (temporary)
title no. HS(D) 3400-MK12, for
occupancy by Fairchild
Malaysia, successor to NSEP,
covering the property known as
the EP2 Building located in
the Bayan Lepas Free Trade
Zone, Penang, Malaysia.
* Mortgaged Properties
<PAGE>
SCHEDULE III
Page 7
REAL PROPERTY
Occupant Interest Held Description
-------- ------------- -----------
Fairchild Malaysia Leasehold Lease dated May 22, 1973,
under qualified (temporary)
title no. HS(D) 19, for
occupancy by Fairchild
Malaysia, successor to NSEP,
covering the property known as
the IP Building located in the
Bayan Lepas Free Trade Zone,
Penang, Malaysia.
Fairchild Malaysia Leasehold Lease between Sri Penang
Development Sdn. Bhd., as
landlord and Fairchild
Malaysia, successor to NSEP,
as tenant, known as the "Red
Lease" covering property
located in the Bayan Lepas
Free Trade Zone, Penang,
Malaysia.
Fairchild Malaysia Leasehold Agreement for Lease dated July
14, 1988, between Sri Pinang
Development Sdn. Bhd., as
landlord and Fairchild
Malaysia, successor to NSEP,
as tenant, known as the "Blue
Lease" covering property
located in the Bayan Lepas
Free Trade Zone, Penang,
Malaysia.
Fairchild Malaysia Leasehold Agreement for Lease dated July
14, 1988, between Sri Pinang
Development Sdn. Bhd., as
landlord and Fairchild
Malaysia, successor to
National Semiconductor
Technology Sdn. Bhd., as
tenant, known as the "Yellow
Lease" covering property
located in the Bayan Lepas
Free Trade Zone, Penang,
Malaysia.
Fairchild Semiconductor Leasehold Lease Agreement dated October
Hong Kong (Holdings) 10, 1979, between Philippine
Limited ("Fairchild Hong Economic Zone Authority
Kong") (successor to Export
Processing Zone Authority),
("PEZA") as landlord, and
Fairchild Hong Kong, successor
in interest to National
Semiconductor Hong Kong
Limited, as tenant, covering
lands in the Mactan Export
Processing Zone, Cebu,
Philippines.
<PAGE>
SCHEDULE IV
EXISTING LEINS
See Attached
<PAGE>
Schedule IV
<TABLE>
<CAPTION>
===================================================================================================================================
Debtor Secured Party File No/Date Collateral
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Fairchild General Electric Credit Corporation 729329; 05/11/87 Specified leased Haworth Office System
equipment
- -----------------------------------------------------------------------------------------------------------------------------------
2. Fairchild General Electric Credit Corporation 742687; 08/03/87 Specified leased Haworth furniture and fixtures
- -----------------------------------------------------------------------------------------------------------------------------------
3. National GCA Leasing Corp. 775287; 03/29/88 Specified lease including but not limited to
various computer, manufacturing and test
equipment
- -----------------------------------------------------------------------------------------------------------------------------------
4. National Xerox Corporation 983404; 05/08/92 Xerox 5100 copier
- -----------------------------------------------------------------------------------------------------------------------------------
5. National CLG, Inc. 989921; 06/22/92 IBM 3174 - OIR Controller S/N: F0708 (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
6. National Xerox Corporation 990769; 06/25/92 Xerox 5100 copier
- -----------------------------------------------------------------------------------------------------------------------------------
7. National Hewlett-Packard Company 1029496; 05/10/93 Specified leased Hewlett-Packard equipment
- -----------------------------------------------------------------------------------------------------------------------------------
8. National CLG, Inc. 1047344; 09/17/93 IBM 6262-D22 Printer S/N: 80304 (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
9. National Digital Financial Services, a division of 1050643; 01/03/94 Specified leased (2) B2-66AMA - AE
General Electric Capital Corporation Refurbished 66AMA-AE, Vax 6000 Model 610
system and peripherals
- -----------------------------------------------------------------------------------------------------------------------------------
10. National Digital Financial Services, a division of 1086326; 07/18/94 8W512-AC Storage Work Array w/peripherals
General Electric Capital Corporation (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
11. National Digital Financial Services, a division of 1086327; 07/18/94 (1) 66AMAEB-FAX 6610 with 512MB,
General Electric Capital Corporation DEMNAM, CIXCD-AB, VMS, UNLIM, DECNET,
EF, VAX Cluster, (2) MS65-DA - Memory
Boards
- -----------------------------------------------------------------------------------------------------------------------------------
12. National Hewlett-Packard Company 1094B29; 09/22/94 Specified leased equipment pursuant to
Financing Agreement No. 4144-67173
- -----------------------------------------------------------------------------------------------------------------------------------
13. National General Electric Capital Corp. 1106784; 12/22/94 Specified leased equipment pursuant to
Equipment Schedule No. 004 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
14. National General Electric Capital Corp. 1106785; 12/22/94 Specified leased equipment pursuant to
Equipment Schedule No. 005 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
15. National General Electric Capital Corp. 1106786; 12/22/94 Specified leased equipment pursuant to
Equipment Schedule No. 006 to Master Lease
Agreement
</TABLE>
===============================================
Debtor Location
- -----------------------------------------------
1. Fairchild Me. Sec. of State
- -----------------------------------------------
2. Fairchild Me. Sec. of State
- -----------------------------------------------
3. National Me. Sec. of State
- -----------------------------------------------
4. National Me. Sec. of State
- -----------------------------------------------
5. National Me. Sec. of State
- -----------------------------------------------
6. National Me. Sec. of State
- -----------------------------------------------
7. National Me. Sec. of State
- -----------------------------------------------
8. National Me. Sec. of State
- -----------------------------------------------
9. National Me. Sec. of State
- -----------------------------------------------
10. National Me. Sec. of State
- -----------------------------------------------
11. National Me. Sec. of State
- -----------------------------------------------
12. National Me. Sec. of State
- -----------------------------------------------
13. National Me. Sec. of State
- -----------------------------------------------
14. National Me. Sec. of State
- -----------------------------------------------
15. National Me. Sec. of State
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Debtor Secured Party File No/Date Collateral
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
16. National General Electric Capital Corp. 1106787; 12/22/94 Specified leased equipment pursuant to
Equipment Schedule No. 008 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
17. National General Electric Capital Corp. 1107014; 12/27/94 Specified leased equipment pursuant to
Equipment Schedule No. 007 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
18. National General Electric Capital Corp. 1107015; 12/27/94 Specified leased equipment pursuant to
Equipment Schedule No. 001 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
19. National General Electric Capital Corp. 1107016; 12/27/94 Specified leased equipment pursuant to
Equipment Schedule No. 003 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
20. National General Electric Capital Corp. 1107099; 12/27/94 Specified leased equipment pursuant to
Equipment Schedule No. 002 to Master Lease
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
21. National Telogy, Inc. 1112240; 02/08/95 1 TEK TDS620 2Channel DSO (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
22. National Princeton Credit Corporation (assigned to 1123529; 05/08/95 2 Data Products Model 3C Typhoon Laser
NarCrown Bank of Roseland, NJ) Printers (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
23. National Hewlett-Packard Company 1127323; 06/01/95 Specified leased equipment pursuant to
Financing Agreement No. 412401804
- -----------------------------------------------------------------------------------------------------------------------------------
24. National Digital Financial Services, a division of 1129067; 06/14/95 IIS142-AF Storage Works Array with
General Electric Capital Corporation Peripherals (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
25. National Copelco Capital, Inc. 1144477; 10/10/95 One (1) Karl Suss PM & Analytical Probes; (1)
Light Tight Enclosure without Base, (1)
Vibration Isolation Table; (1) Color CCTV
System (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
26. National Copelco Capital, Inc. 1145389; 10/16/95 One (1) LTX ___________, Micromaster ____
VLSI Tester (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
27. National Copelco Capital, Inc. 1155277; 01/02/95 One Oxford Instruments LINK ISIS Series 300
Microanalysis: System (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
28. National IBM Credit Corporation 1163339; 03/08/96 All computer, information processing, and
other peripheral equipment and goods
referenced on IBM Supplement No. 250927
dated 02/21/96
</TABLE>
===================================================
Debtor Location
- ---------------------------------------------------
16. National Me. Sec. of State
- ---------------------------------------------------
17. National Me. Sec. of State
- ---------------------------------------------------
18. National Me. Sec. of State
- ---------------------------------------------------
19. National Me. Sec. of State
- ---------------------------------------------------
20. National Me. Sec. of State
- ---------------------------------------------------
21. National Me. Sec. of State
- ---------------------------------------------------
22. National Me. Sec. of State
- ---------------------------------------------------
23. National Me. Sec. of State
- ---------------------------------------------------
24. National Me. Sec. of State
- ---------------------------------------------------
25. National Me. Sec. of State
- ---------------------------------------------------
26. National Me. Sec. of State
- ---------------------------------------------------
27. National Me. Sec. of State
- ---------------------------------------------------
28. National Me. Sec. of State
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Debtor Secured Party File No/Date Collateral
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
29. National Rave Financial Services, Inc. 1168807; 04/22/96 1 RPTOSEX1-110-128-P95 Rave Power Tower
with sun Original SPAR________ 5 11OMHzMicro
SPARCD Processor and Motherboard; 1
SSOS-25-CDB-MOD Media Only Desktop (Solaris
2.5)
- -----------------------------------------------------------------------------------------------------------------------------------
30. National Hewlett-Packard Company 1170076- 04/30/96 Specified leased equipment pursuant to
Financing Agreement No. 412404996
- -----------------------------------------------------------------------------------------------------------------------------------
31. National Digital Financial Services, a division of GE 1173167; 05/21/96 Specified leased equipment described in DFS
Capital Corp. Lease Agreement No. 9543834-030 dated
05/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
32. National IBM Credit Corporation 1176402; 06/12/96 All computer information processing, and
other peripheral equipment and goods
referenced on IBM Supplement No. 260997
dated 05/14/96 (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
33. National Avnet Computer, a division of Avnet, Inc. 1178227; 06/25/96 Specified leased equipment pursuant to
Agreement No. 6595504-002
- -----------------------------------------------------------------------------------------------------------------------------------
34. National Princeton Credit Corporation (assigned to 1183041; 07/31/96 Specified leased equipment pursuant to
NorCrown Bank) Equipment Schedule No. A-2
- -----------------------------------------------------------------------------------------------------------------------------------
35. National Princeton Credit Corp. (assigned to 1194015; 10/21/96 Specified leased equipment pursuant to
NorCrown Bank) Equipment Schedule A-3
- -----------------------------------------------------------------------------------------------------------------------------------
36. National Princeton Credit Corp. (assigned to 1194916; 10/21/96 Specified leased equipment pursuant to
NorCrown Bank) Equipment Schedule A-4
- -----------------------------------------------------------------------------------------------------------------------------------
37. National IBM Credit Corporation 1195346; 10/28/96 All computer, information processing, and
other peripheral equipment and goods
referenced on IBM Supplement No. 284139
dated 09/20/96 (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
38. National Hewlett-Packard 1201479; 12/13/96 Leased computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
39. National IBM Credit Corporation 1208676; 2/13/97 Leased computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
40. Fairchild GECC Bk. 7936, Pg. 36 Haworth furniture and fixtures
- -----------------------------------------------------------------------------------------------------------------------------------
41. National CLG, Inc. Bk. 10962, Pg. 299 Computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
42. National Princeton Credit Corp. Bk. 11909, Pg. 128 Computer equipment
</TABLE>
===================================================
Debtor Location
- ---------------------------------------------------
29. National Me. Sec. of State
- ---------------------------------------------------
30. National Me. Sec. of State
- ---------------------------------------------------
31. National Me. Sec. of State
- ---------------------------------------------------
32. National Me. Sec. of State
- ---------------------------------------------------
33. National Me. Sec. of State
- ---------------------------------------------------
34. National Me. Sec. of State
- ---------------------------------------------------
35. National Me. Sec. of State
- ---------------------------------------------------
36. National Me. Sec. of State
- ---------------------------------------------------
37. National Me. Sec. of State
- ---------------------------------------------------
38. National Me. Sec. of State
- ---------------------------------------------------
39. National Me. Sec. of State
- ---------------------------------------------------
40. Fairchild Cumberland
County, ME
- ---------------------------------------------------
41. National Cumberland
County, ME
- ---------------------------------------------------
42. National Cumberland
County, ME
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Debtor Secured Party File No/Date Collateral
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
43. National Princeton Credit Corp. Bk. 12639, Pg. 186 Computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
44. National Princeton Credit Corp. Bk. 12761, Pg. 32 Computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
45. National Princeton Credit Corp. Bk. 12761, Pg. 34 Computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
46. National Princeton Credit Corp. Bk. 12800, Pg. 290 Computer equipment
- -----------------------------------------------------------------------------------------------------------------------------------
47. National Equitable Lomas Leasing 2188190, 2/30/88 Various computer, manufacturing and ____
equipment and additional property leased
under Master Equipment Lease Agt. No 1-1-
60-094833-DD dated 3/9/88
- -----------------------------------------------------------------------------------------------------------------------------------
48. National Equitable Lomas Leasing 1/18/89 Partial release of statement # 188190.
Release of property listed under Rental
Schedule Nos. 27-31, 57-78, 81-86 and 9-11
under Master Equipment Lease Agt. No. 1-1-
60-094833-00 to AT&T Credit Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
49. National Equitable Lomas Leasing 8/16/93 Continuation of 2188190
- -----------------------------------------------------------------------------------------------------------------------------------
50. National* Deutsch Bank AG Los Angeles Branch 448094; 8/2/95 Electronics equipment, computer equipment,
peripherals, office furniture and
telecommunications equipment described on
Collateral Schedule No. Dl to Master Security
Agt. dated 5/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
51. National* Deutsch Bank AG Los Angeles Branch 1/27/97 Partial release of Statement #948094.
Equipment Ref. #27 and Ref. #28 from Exhibit
1 to Collateral Schedule D1
- -----------------------------------------------------------------------------------------------------------------------------------
52. National* Tokyo Leasing (U.S.A.) Inc. 451628; 8/31/95 Various electronic equipment wherever located
described on Collateral Schedule No. T to
Master Security Agt. dated 5/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
53. National* Avnet Computer, Division of Avnet, Inc. 504198; 1/8/96 Equipment under Master Agt. Schedule
#6595504-001
- -----------------------------------------------------------------------------------------------------------------------------------
54. National* Avent Computer, Division of Avnet, Inc. 510983; 3/6/96 Equipment under Master Agt. Schedule
#6595504-02
- -----------------------------------------------------------------------------------------------------------------------------------
55. National* Avnet Computer, Division of Avnet, Inc. 510984; 3/6/96 Equipment under Master Agt. Schedule
#6595504-203
- -----------------------------------------------------------------------------------------------------------------------------------
56. National* Avnet Computer, Division of Avnet, Inc. 510985; 3/6/96 Equipment under Master Agt. Schedule
#6595504-201
- -----------------------------------------------------------------------------------------------------------------------------------
57. National* Avnet Computer, Division of Avnet, Inc. 526535; 7/3/96 Equipment under Master Agt. Schedule
#6595504-204
- -----------------------------------------------------------------------------------------------------------------------------------
58. National* Avnet Computer, Division of Avnet, Inc. 526536; 7/3/96 Equipment under Master Agt. Schedule
#6595504-205
- -----------------------------------------------------------------------------------------------------------------------------------
59. National* Avnet Computer, Division of Avnet, Inc. 526537; 7/3/96 Equipment under Master Agt. Schedule
#6595504-205
===================================================================================================================================
</TABLE>
===================================================
Debtor Location
- ---------------------------------------------------
43. National Cumberland
County, ME
- ----------------------------------------------------
44. National Cumberland
County, ME
- ----------------------------------------------------
45. National Cumberland
County, ME
- ----------------------------------------------------
46. National Cumberland
County, ME
- ----------------------------------------------------
47. National State of Utah
- ----------------------------------------------------
48. National State of Utah
- ----------------------------------------------------
49. National State of Utah
- ----------------------------------------------------
50. National* State of Utah
- ----------------------------------------------------
51. National* State of Utah
- ----------------------------------------------------
52. National* State of Utah
- ----------------------------------------------------
53. National* State of Utah
- ----------------------------------------------------
54. National* State of Utah
- ----------------------------------------------------
55. National* State of Utah
- ----------------------------------------------------
56. National* State of Utah
- ----------------------------------------------------
57. National* State of Utah
- ----------------------------------------------------
58. National* State of Utah
- ----------------------------------------------------
59. National* State of Utah
====================================================
NOTE: UNLESS MARKED WITH AN ASTERISK "*", FILINGS ARE PROTECTIVE LEASE FILINGS
ONLY. NO ATTEMPT HAS BEEN MADE TO DETERMINE WHETHER PROPERTY SUBJECT TO
LEASE FILINGS IS BEING TRANSFERRED TO FAIRCHILD
<PAGE>
SCHEDULE V
EXISTING INDEBTEDNESS
NONE
<PAGE>
SCHEDULE VI
INSURANCE
BORROWER
MINIMUM AMOUNT
REQUIRED TO BE
CORE COVERAGE'S MAINTAINED DEDUCTIBLE
Directors & Officers $15,000,000 0 Non-Ind
Executive Risk $250,000 Corp. Reimb
Reliance
Property $800,000,000 $250,000
Zurich, Royal
Cargo $50,000,000 $ 15,000
St. Paul
BORROWER AND SUBSIDIARIES OF BORROWER
MINIMUM AMOUNT
REQUIRED TO BE
CORE COVERAGE'S MAINTAINED DEDUCTIBLE
Foreign Commercial General $1,000,000 | |
Liability/Auto/Excess Liability
AIU
Foreign Voluntary Worker's $1,000,000 | |
Comp.
AIU
General Liability $2,000,000/aggregate 1) $100,000/specific
St. Paul $1,000,000/occurrence 2) $500,000/aggregate
Auto Liability & Physical Damage $1,000,000 CSL Nil
St. Paul
Worker's Compensation Statutory Coverage A 1) $250,000/specific
Hanover $1,000,000 coverage B 2) $650,000/aggregate
Umbrella/Excess Liab. $1,000,000 N/A
St. Paul, CHUBB, Reliance
Electronics Manufacturers $15,000,000 1) $100,000/specific
Errors & Omissions 2) $500,000/aggregate
St. Paul
<PAGE>
Business Interruption $800,000,000 $ 50,000 PD/BI Combined at
American guarantee Liab. (combined amount with Mfg.
Ins. Co. casualty insurance) $250,000 PD at Mfg. Sites
Royal/Sun Alliance Insurance $250,000 BI at Mfg. Sites
Co. $250,000 PD/BI on Boiler &
Machinery
5% of 100% PD value.
* As of the Effective Date, there are no policies in existence for Holdings,
except for the Executive Risk Reliance Directors and Officers' policy.
<PAGE>
SCHEDULE VII
ERISA PLANS
1. The Fairchild Personal Savings and Retirement Plan
<PAGE>
SCHEDULE VIII
SUBSIDIARIES
1. Fairchild Semiconductor (Malaysia) Sdn Bhd
2. Fairchild Semiconductor Hong Kong Limited
3. Fairchild Semiconductor Hong Kong (Holdings) Limited
4. Fairchild Semiconductor Japan K.K.
5. Fairchild Semiconductor Asia Pacific Pte Ltd.
6. Fairchild Semiconductor GmbH
7. Fairchild Semiconductor Limited
* There are no Subsidiary Guarantors
<PAGE>
SCHEDULE IX
LABOR RELATIONS
None
<PAGE>
SCHEDULE X
PROJECTIONS
<PAGE>
SCHEDULE XI
SECURITIES
1. FSC Semiconductor Corporation Stock Option Plan
2. Agreement and Plan of Recapitalization dated January 24, 1997 between
Sterling Holding Company, LLC and National Semiconductor Corporation.
3. Securities Purchase and Holders Agreement by and among Holdings, Sterling
Holding Company, LLC, National Semiconductor Corporation, and the
individuals listed as "Management Investors" on Schedule I therein.
<PAGE>
SCHEDULE XII
[ORGANIZATION CHART]
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
__________, 19__
Bankers Trust Company, as
Administrative Agent for the Banks
party to the Credit Agreement
referred to below
130 Liberty Street
New York, New York 10006
Attention: Anthony Logrippo
Ladies and Gentlemen:
The undersigned, Fairchild Semiconductor Corporation (the "Borrower"), refers to
the Credit Agreement, dated as of March 11, 1997 (as amended from time to time,
the "Credit Agreement", the terms defined therein being used herein as therein
defined), among FSC Semiconductor Corporation, the Borrower, various Banks from
time to time party thereto, you, as Administrative Agent for such Banks, Credit
Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent, and hereby gives you notice, irrevocably,
pursuant to Section 1.03(a) of the Credit Agreement, that the undersigned hereby
requests a Borrowing under the Credit Agreement, and in that connection sets
forth below the information relating to such Borrowing (the "Proposed
Borrowing") as required by Section 1.03(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is _______________.*
(ii) The aggregate principal amount of the Proposed Borrowing is
$______________.
(iii) The Proposed Borrowing is to consist of [Tranche A Term Loans]
[Tranche B Term Loans] [Revolving Loans] [Swingline Loans].
(iv) The Loans to be made pursuant to the Proposed Borrowing shall
be initially maintained as [Base Rate Loans] [Eurodollar Loans].
(v) The initial Interest Period for the Proposed Borrowing is
________ month(s).**
- ----------
* Shall be a Business Day at least one Business Day in the case of Base Rate
Loans and three Business Days in the case of Eurodollar Loans, in each case,
after the date hereof.
** To be included for a Proposed Borrowing of Eurodollar Loans.
<PAGE>
EXHIBIT A
Page 2
The undersigned hereby certifies that the following statements are
true and correct on the date hereof, and will be true and correct on the date of
the Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Documents are and will be true and correct in all material respects, both
before and after giving effect to the Proposed Borrowing and to the
application of the proceeds thereof, as though made on such date (it being
understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date); and
(B) no Default or Event of Default has occurred and is continuing,
or would result from such Proposed Borrowing or from the application of
the proceeds thereof.
Very truly yours,
FAIRCHILD SEMICONDUCTOR CORPORATION
By
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT B-1
TRANCHE A TERM NOTE
$_____________ New York, New York
March 11, 1997
FOR VALUE RECEIVED, FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to _____________________ or
its registered assigns (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Administrative Agent") located at 130 Liberty Street, New York, N.Y. 10006
on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred
to below) the principal sum of _________________________________ DOLLARS
($_____________) or, if less, the then unpaid principal amount of all Tranche A
Term Loans (as defined in the Agreement) made by the Bank pursuant to the
Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Tranche A Term Notes referred to in the
Credit Agreement, dated as of March 11, 1997, among FSC Semiconductor
Corporation, the Borrower, the lenders from time to time party thereto
(including the Bank), Bankers Trust Company, as Administrative Agent, Credit
Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof and of the other Credit
Documents (as defined in the Agreement). This Note is secured by the Security
Documents (as defined in the Agreement) and is entitled to the benefits of the
Guaranties (as defined in the Agreement). As provided in the Agreement, this
Note is subject to voluntary prepayment and mandatory repayment prior to the
Tranche A Term Loan Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
EXHIBIT B-1
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
FAIRCHILD SEMICONDUCTOR
CORPORATION
By
-----------------------------------
Title:
<PAGE>
EXHIBIT B-2
TRANCHE B TERM NOTE
$_____________ New York, New York
March 11, 1997
FOR VALUE RECEIVED, FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to _____________________ or
its registered assigns (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Administrative Agent") located at 130 Liberty Street, New York, N.Y. 10006
on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred
to below) the principal sum of ____________________________________ DOLLARS
($_____________) or, if less, the then unpaid principal amount of all Tranche B
Term Loans (as defined in the Agreement) made by the Bank pursuant to the
Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Tranche B Term Notes referred to in the
Credit Agreement, dated as of March 11, 1997, among FSC Semiconductor
Corporation, the Borrower, the lenders from time to time party thereto
(including the Bank), Bankers Trust Company, as Administrative Agent, Credit
Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof and of the other Credit
Documents (as defined in the Agreement). This Note is secured by the Security
Documents (as defined in the Agreement) and is entitled to the benefits of the
Guaranties (as defined in the Agreement). As provided in the Agreement, this
Note is subject to voluntary prepayment and mandatory repayment prior to the
Tranche B Term Loan Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
<PAGE>
EXHIBIT B-2
Page 2
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
FAIRCHILD SEMICONDUCTOR
CORPORATION
By
-----------------------------------
Title:
<PAGE>
EXHIBIT B-3
REVOLVING NOTE
$__________ New York, New York
March 11, 1997
FOR VALUE RECEIVED, FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to _____________ or its
registered assigns (the "Bank"), in lawful money of the United States of America
in immediately available funds, at the office of Bankers Trust Company (the
"Administrative Agent") located at 130 Liberty Street, New York, N.Y. 10006 on
the Revolving Loan Maturity Date (as defined in the Agreement referred to below)
the principal sum of ___________ DOLLARS ($__________) or, if less, the then
unpaid principal amount of all Revolving Loans (as defined in the Agreement)
made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of March 11, 1997, among FSC Semiconductor Corporation, the
Borrower, the lenders from time to time party thereto (including the Bank),
Bankers Trust Company, as Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, and Canadian Imperial Bank of Commerce, as Documentation
Agent (as from time to time in effect, the "Agreement"), and is entitled to the
benefits thereof and the other Credit Documents (as defined in the Agreement).
This Note is secured by the Security Documents (as defined in the Agreement) and
is entitled to the benefits of the Guaranties (as defined in the Agreement). As
provided in the Agreement, this Note is subject to voluntary prepayment and
mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in
part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
<PAGE>
EXHIBIT B-3
Page 2
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
FAIRCHILD SEMICONDUCTOR
CORPORATION
By
-----------------------------------
Title:
<PAGE>
EXHIBIT B-4
SWINGLINE NOTE
$5,000,000.00 New York, New York
March 11, 1997
FOR VALUE RECEIVED, FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or
its registered assigns (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Administrative Agent") located at 130 Liberty Street, New York, N.Y. 10006
on the Swingline Expiry Date (as defined in the Agreement referred to below) the
principal sum of FIVE MILLION DOLLARS ($5,000,000.00) or, if less, the then
unpaid principal amount of all Swingline Loans (as defined in the Agreement)
made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is the Swingline Note referred to in the Credit Agreement,
dated as of March 11, 1997 among FSC Semiconductor Corporation, the Borrower,
the lenders from time to time party thereto (including the Bank), Bankers Trust
Company, as Administrative Agent, Credit Suisse First Boston, as Syndication
Agent, and Canadian Imperial Bank of Commerce, as Documentation Agent (as from
time to time in effect, the "Agreement"), and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by the Security Documents (as defined in the Agreement) and is
entitled to the benefits of the Guaranties (as defined in the Agreement). As
provided in the Agreement, this Note is subject to voluntary prepayment and
mandatory repayment prior to the Swingline Expiry Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
EXHIBIT B-4
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
FAIRCHILD SEMICONDUCTOR
CORPORATION
By
-----------------------------------
Title:
<PAGE>
EXHIBIT C
LETTER OF CREDIT REQUEST
No. (1) Dated (2)
Bankers Trust Company, as Administrative Agent under the Credit Agreement (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
dated as of March __, 1997, among FSC Semiconductor Corporation, Fairchild
Semiconductor Corporation, the Banks from time to time party thereto, Bankers
Trust Company, as Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, and Canadian Imperial Bank of Commerce, as Documentation
Agent,
130 Liberty Street
New York, New York 10006
Attention: Anthony Logrippo
[Name and Address of applicable Issuing Bank
Attention: ______________________]
Dear Sirs:
We hereby request that [name of proposed Issuing Bank], in its
individual capacity, issue a [Standby] [Trade] Letter of Credit for the account
of the undersigned on (3) (the "Date of Issuance") in the aggregate stated
amount of (4). The requested Letter of Credit shall be denominated in Dollars.
For purposes of this Letter of Credit Request, unless otherwise
defined herein, all capitalized terms used herein which are defined in the
Credit Agreement shall have the respective meaning provided therein.
- --------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request.
(3) Date of Issuance which shall be at least five Business Days after the date
of this Letter of Credit Request (or such shorter period as is acceptable
to the respective Issuing Bank).
(4) Aggregate initial stated amount of Letter of Credit.
<PAGE>
EXHIBIT C
Page 6
The beneficiary of the requested Letter of Credit will be (5), and
such Letter of Credit will be in support of (6) and will have a stated
expiration date of (7).
We hereby certify that:
(1) the representations and warranties contained in the Credit
Documents will be true and correct in all material respects on the Date of
Issuance, both before and after giving effect to the issuance of the
Letter of Credit requested hereby (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects
only as of such specified date); and
(2) no Default or Event of Default has occurred and is continuing
nor, after giving effect to the issuance of the Letter of Credit requested
hereby, would such a Default or an Event of Default occur.
Copies of all relevant documentation with respect to the supported
transaction are attached hereto.
FAIRCHILD SEMICONDUCTOR
CORPORATION
By
-----------------------------------
Title:
- --------
(5) Insert name and address of beneficiary.
(6) Insert description of L/C Supportable Indebtedness and describe obligation
to which it relates in the case of Standby Letters of Credit and a
description of the commercial transaction which is being supported in the
case of Trade Letters of Credit.
(7) Insert last date upon which drafts may be presented which may not be later
than (i) in the case of Trade Letters of Credit, the earlier of (x) the
date which occurs 180 days after the Date of Issuance or (y) the date
which is 30 days prior to the Revolving Loan Maturity Date or (ii) in the
case of Standby Letters of Credit, the earlier of (x) the date which
occurs 12 months after the Date of Issuance, or, if any such Standby
Letter of Credit is automatically extendable for successive periods of up
to 12 months, a date not beyond the tenth Business Day prior to the
Revolving Loan Maturity Date or (y) the tenth Business Day prior to the
Revolving Loan Maturity Date.
<PAGE>
EXHIBIT D
Section 4.04(b)(ii) Certificate
Reference is hereby made to the Credit Agreement, dated as of March
11, 1997, among FSC Semiconductor Corporation, Fairchild Semiconductor
Corporation, the Banks party thereto from time to time, Bankers Trust Company,
as Administrative Agent, Credit Suisse First Boston, as Syndication Agent, and
Canadian Imperial Bank of Commerce, as Documentation Agent (the "Credit
Agreement"). Pursuant to the provisions of Section 4.04(b)(ii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF BANK]
By
-----------------------------------
Title:
<PAGE>
March 11, 1997
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
Ladies and Gentlemen:
We have acted as special counsel to FSC Semiconductor Corporation, a
Delaware corporation ("Holdings"), and Fairchild Semiconductor Corporation, a
Delaware corporation (the "Borrower"), in connection with the execution and
delivery of the Credit Agreement, dated as of March 11, 1997 (the "Credit
Agreement"), among Holdings, the Borrower, the financial institutions party
thereto (the "Banks"), Bankers Trust Company, as Administrative Agent, Credit
Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent, and the transactions contemplated thereby.
This opinion is being delivered pursuant to Section 5.03(i) of the Credit
Agreement. Unless otherwise indicated, capitalized terms used herein but not
otherwise defined herein shall have the respective meanings set forth in the
Credit Agreement.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such documents
as we have deemed necessary or appropriate as a basis for the opinions set forth
herein, including, without limitation, (a) the documents listed on Schedule I
hereto (the "Credit Documents"), (b) the documents listed on Schedule II hereto
(the "Recapitalization Documents"), (c) the documents listed on Schedule III
hereto (the "Senior Subordinated Note Documents" and together with the Credit
Documents and Recapitalization Documents, the "Documents") and (d) such other
public and corporate documents and records as we deem necessary or appropriate
in connection with this opinion.
In our examination we have assumed the genuineness of all signatures
(other than as to Holdings and the Borrower), the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. We have assumed that each party to
the Documents (other than the Borrower and Holdings) has the legal power and
authority to enter into and perform its obligations under such Documents, and
that such Documents have been duly authorized, executed and delivered by such
persons, and
<PAGE>
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
March 11, 1997
Page 2
that such Documents are the legal, valid and binding obligations of such
persons, enforceable against such persons in accordance with their terms.
Our opinions set forth herein are based on our consideration of only
those statutes, rules, regulations and judicial decisions which, in our
experience, are normally applicable to or normally relevant in connection with
transactions of the type contemplated by the Documents.
As to questions of fact not independently verified by us we have
relied, to the extent we deemed appropriate, upon representations and
certificates of officers of Holdings, the Borrower, the Borrower's Subsidiaries,
public officials and other appropriate persons. Whenever our opinion with
respect to the existence or absence of facts is indicated based on our knowledge
or awareness we are referring to the actual knowledge of the Dechert Price &
Rhoads attorneys who have given substantive attention to matters concerning the
Borrower and Holdings in connection with the transactions contemplated by the
Documents.
Based upon the foregoing, we are of the opinion that:
4. Each of the Borrower and Holdings (i) is a validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and corporate authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction set forth on Schedule IV
hereto.
5. Each of the Borrower and Holdings has the corporate power and
corporate authority to execute, deliver and perform the terms and provisions of
each of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
each of such Documents. Each of the Borrower and Holdings has duly executed and
delivered each of the Documents to which it is a party and each of such
Documents (except the Documents referred to in Section 5.13 of the Credit
Agreement with respect to which no opinion is expressed) constitutes the legal,
valid and binding obligation of each of the Borrower and Holdings enforceable
against the Borrower or Holdings as the case may be in accordance with its
terms.
6. Neither the execution, delivery or performance by the Borrower or
Holdings of the Documents to which it is a party (including, without limitation,
the granting of Liens pursuant to the documents listed on Schedule V hereto (the
"Security Documents")), nor compliance by it with the terms and provisions
thereof, (a) will contravene any provision of any New York or federal law,
statute, rule or regulation (including, without limitation, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System) or any applicable
order, writ, injunction or decree of any court or governmental instrumentality,
(b) will conflict with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the properties or assets
of the Borrower and Holdings pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or loan agreement, or any other material
agreement, contract or instrument known to us, to which either or both of the
Borrower and Holdings is a party or by which it or any of its property or assets
is bound or to which it may be subject (excluding, in the case of the
Recapitalization Documents, from the foregoing clauses (a) and (b) such
immaterial violations as shall not violate the provisions of the Credit
Agreement or otherwise be
<PAGE>
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
March 11, 1997
Page 3
reasonably expected to have (x) a material adverse effect on (I) the Transaction
or (II) the rights or remedies of the Agents or the Banks, or on the ability of
any Credit Party to perform its respective obligations to the Agents and the
Banks or (y) a Material Adverse Effect) or (c) will violate any provision of the
Certificate of Incorporation or By-Laws of the Borrower or Holdings.
7. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with (except as have been
obtained or made and except for UCC filings and recordations which will be made
after the date hereof), or exemption by, any New York or federal governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with, (a) the execution, delivery and performance
of (x) any Recapitalization Document by the Borrower or Holdings or (y) any
Credit Document or (b) the legality, validity, binding effect or enforceability
of any Credit Document.
8. To our knowledge, there are no actions, suits or proceedings
pending or threatened against the Borrower or Holdings (i) with respect to any
Credit Document or (ii) that could reasonably be expected to have a Material
Adverse Effect, and to our knowledge there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
Transaction, the occurence of any Credit Event or the performance of Holdings or
the Borrower of their respective obligations under the Credit Documents.
9. None of Holdings, the Borrower or any of their respective
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
10. None of Holdings, the Borrower or any of their respective
Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
11. (a) After giving effect to the Transaction, the authorized
capital stock of Holdings consists of 30,000,000 shares of Class A Holdings
Common Stock, 7,191,120 of which are issued and outstanding, 30,000,000 shares
of Class B Holdings Common Stock, 8,408,880 of are issued and outstanding, and
70,000 shares of Holdings Series A Preferred Stock, all of which are issued and
outstanding. Based on our review of the Certificate of Incorporation and Bylaws
of Holdings, all such outstanding shares have been duly and validly issued, are
fully paid and non-assessable and have been issued free of preemptive rights,
except for the preemptive rights set forth in the Securities Purchase and
Holders Agreement. Except as set forth on Schedule XI to the Credit Agreement,
to our knowledge Holdings does not have outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
(b) After giving effect to the Transaction, the authorized
capital stock of the Borrower consists of 1,000 shares of Borrower Common Stock,
100 of which are issued and outstanding and delivered for pledge pursuant to the
Pledge Agreement. All such outstanding shares of common stock have been duly and
validly issued, are fully paid and nonassessable and are free of preemptive
rights. To our knowledge the Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or out-
<PAGE>
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
March 11, 1997
Page 4
standing any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
12. To our knowledge, after giving effect to the Transaction,
Holdings will have no Subsidiaries other than the Borrower and its Subsidiaries.
To our knowledge as of the date hereof, after giving effect to the Transaction,
the Borrower will have no Subsidiaries other than those Subsidiaries listed on
Schedule VIII to the Credit Agreement. To our knowledge, Schedule XII to the
Credit Agreement correctly sets forth, as of the date hereof and after giving
effect to the Transaction, the ownership structure of Holdings and each of its
Subsidiaries.
13. Each of Holdings and the Borrower is the record owner of all of
the Stock and Notes (as such terms are defined in the Pledge Agreement) as
listed on Annex A and Annex B to the Pledge Agreement under its respective name.
After giving effect to the delivery to the Collateral Agent of the Pledged Stock
and Pledged Notes listed on Annex A and Annex B to the Pledge Agreement (and in
respect of the Stock of Fairchild Semiconductor GmbH, after notarization in
accordance with German law) and assuming the continued possession at all times
hereafter by the Collateral Agent of (x) such Pledged Stock and Pledged Notes in
the State of New York and (y) duly executed stock powers and endorsements
related thereto), the security interest created in favor of the Collateral Agent
under the Pledge Agreement constitutes a valid and enforceable first priority
perfected security interest in all of the right, title and interest of Holdings
or the Borrower, as the case may be, in and to such Pledged Securities and
proceeds thereof in favor of the Pledgee for the benefit of the Secured
Creditors, subject to no Liens other than Permitted Liens. No filings or
recordings are required in order to perfect the security interest created under
the Pledge Agreement so long as the Collateral Agent, as Pledgee, is in
possession of such Pledged Securities.
14. Assuming that the representation made by each of Holdings and
the Borrower in Section 2.4 of the Security Agreement with respect to the
location of its chief executive office is and remains true and correct, under
the law of the State of New York, the perfection and priority of the security
interests granted by each of Holdings and Borrower in its Receivables,
Contracts, Contract Rights and General Intangibles (as defined in the Security
Agreement) are governed by the laws of the State in which each of Holdings' and
Borrower's chief executive office is located to the extent that said
Receivables, Contracts, Contract Rights and General Intangibles consist of
"accounts" and "general intangibles" as described in the UCC as in effect in the
State of New York.
15. The recordation of the Assignment of Security Interest in U.S.
Patents and Trademarks in the form attached to the Security Agreements in the
United States Patent and Trademark Office together with filings on form UCC-1
made pursuant to the Security Agreement will be effective, under applicable law,
to perfect the security interest granted to the Collateral Agent in the
trademarks and patents covered by the Security Agreement and the recordation of
the Assignment of Security Interest in U.S. Copyrights in the form attached to
the Security Agreement with the United States Copyright Office together with
filings on form UCC-1 made pursuant to the Security Agreement will be effective
under federal law to perfect the security interest granted to the Collateral
Agent in the copyrights covered by the Security Agreement except that we express
no opinion with respect to the perfection of any security interest in mask works
of the Borrower that have been deposited in the United States Copyright Office
absent an appropriate filing by the Banks with the United States Copyright
Office.
<PAGE>
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
March 11, 1997
Page 5
16. The subordination provisions of the Senior Subordinated Notes
are enforceable against the Borrower and the holders of the Senior Subordinated
Notes, and the Loans and all other Obligations under the Credit Agreement and
the other Credit Documents (including, without limitation, under the Guaranties)
and any Interest Rate Protection Agreement or Other Hedging Agreement (except as
related to commodities hedges) with any Other Creditor (as such term is defined
in the Security Agreement) are within the definition of "Senior Indebtedness"
included in such subordination provisions.
We are members of the Bar of the State of New York and we do not
hold ourselves out as being conversant with, and express no opinion as to, the
laws of any jurisdiction other than federal laws of the United States of
America, the law of the State of New York and the General Corporation Law of the
State of Delaware. Our opinions expressed above are subject to the
qualifications and limitations that (i) the availability of certain rights and
remedies may be limited by bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium and other similar laws and
decisions relating to or affecting debtor's obligations and creditor's rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law); (ii) certain
provisions of the Documents that permit the Banks or others to take action or
make determinations, or to benefit from indemnities and similar undertakings,
may be subject to the requirement that such action be taken or such
determination be made, and that any action or inaction by the Banks and others
that may give rise to a request for payment under such undertakings be taken or
not taken, on a reasonable basis and in good faith; and (iii) certain remedial
provisions of the Documents may be limited by, or unenforceable under, the
statutes and judicial decisions of the courts of the United States of America
and other applicable jurisdictions, but, in our opinion, such statutes and
judicial decisions do not make the remedies set forth in the Documents as to
which we have opined in Paragraph 2 inadequate for the realization of the
practical benefits of the security intended to be provided thereby, except (A)
for the economic consequence of any delay which may be imposed thereby or result
therefrom and (B) that we express no opinion as to the rights of any of the
parties to the Documents to accelerate the due dates of any payment due
thereunder or to exercise other remedies available to them on the happening of a
non-material breach of any such document or agreement.
We have made no examination of and express no opinion with respect to: (i)
the title to, ownership of or rights in personal property or fixtures; (ii) the
accuracy or sufficiency of any descriptions of Collateral, or of any financing
statements intended to perfect any security interest in Collateral; (iii) the
validity or ownership of any trademarks, patents or licenses; (iv) the existence
or absence of any liens, charges or encumbrances on any Collateral; and (v)
except as expressly set forth in paragraphs 10 and 12, the perfection or the
priority of any lien or security interest.
In giving the opinion set forth in paragraph 10 above, we have assumed
that (i) the Collateral Agent has possession of certificates representing the
Pledged Stock accompanied by appropriate stock powers and possession of the
Pledged Notes duly endorsed by the payee thereof; (ii) the Collateral Agent has
no notice of any adverse claim with respect to the Pledged Stock or the Pledged
Notes as such term is used in Section 8-302 of the UCC; (iii) no part of the
Pledged Stock or the Pledged Notes is subject to a security interest that could
be perfected without possession pursuant to Sections 8-313 or 8-321 of the UCC
or that is perfected under the laws of another jurisdiction by means other than
possession, or constitutes the proceeds of any property subject to a third party
security interest; (iv) no Pledged Stock or Pledged Note is subject to a valid
claim of any person based upon wrongful transfer pursuant to Section 8-315 of
the UCC; and (v) the Pledged Stock and the Pledged Notes or the proceeds thereof
are not subject to (A) any lien of any government or any
<PAGE>
To each of the Agents and each
of the Banks party to the Credit
Agreement referred to below
March 11, 1997
Page 6
agency or instrumentality thereof, including without limitation, any federal,
state or local tax lien, (B) any claims or any federal priority statute (31
U.S.C. ss. 3713), (C) any lien arising under the Employee Retirement Income
Security Act of 1974, as amended, or (D) any lien arising by operation of law
other than under the UCC (including without limitation any attachment or
execution lien) or other lien which does not require possession to take priority
over the security interests.
Without limiting the generality of the foregoing, no opinion is expressed
as to the legality, validity, binding nature or enforceability, of (i) the
availability of specific performance or the equitable remedies for noncompliance
with any of the provisions of the Documents; (ii) any self-help provisions;
(iii) provisions in the Documents purporting to waive the effect of applicable
laws; (iv) provisions that purport to establish evidentiary standards; (v)
provisions that provide for the enforceability of the remaining terms and
provisions of the applicable Document in circumstances in which certain other
terms and provisions of such Documents are illegal or unenforceable; (vi)
provisions that provide that certain rights or obligations are absolute or
unconditional; (vii) provisions related to waivers of remedies (or the delay or
omission of enforcement of remedies), disclaimers, liability limitations or
limitations on the obligations of the Banks in circumstances in which a failure
of condition or default by the Borrower is not material; (viii) provisions
related to releases or waivers of legal or equitable rights, discharges of
defenses, or reimbursement or indemnification in circumstances in which the
person seeking reimbursement or indemnification had breached its duties under
the applicable Document, or otherwise, or itself has been negligent; or (ix)
provisions which purport to authorize any person to sign or file financing
statements without the signature of the debtor (except to the extent that a
secured party may execute and file financing statements without the signature of
the debtor under Section 9-402(2) of the UCC).
This opinion speaks only as of the date hereof. We have no
obligation to advise the addressees (or any third party) of any changes in the
law or facts that may occur after the date of this opinion.
This opinion is being furnished only to the addressees and is solely
for their benefit and the benefit of their participants and assigns in
connection with the above transaction. This opinion may not be relied upon for
any other purpose, or relied upon by any other person, firm or corporation for
any purpose, without our prior written consent.
Very truly yours,
<PAGE>
SCHEDULE I
CREDIT DOCUMENTS
1. Credit Agreement, dated as of March 11, 1997, among FSC Semiconductor
Corporation, a Delaware corporation ("Holdings"), Fairchild Semiconductor
Corporation, a Delaware corporation (the "Borrower"), the Banks party
thereto from time to time, Bankers Trust Company, as Administrative Agent
(in such capacity, the "Administrative Agent"), Credit Suisse First
Boston, as Syndication Agent (in such capacity, the "Syndication Agent"),
and Canadian Imperial Bank of Commerce, as Documentation Agent (in such
capacity, the "Documentation Agent" and, together with the Syndication
Agent and the Administrative Agent, each an "Agent" and collectively the
"Agents").
2. Tranche A Term Loan Notes dated March 11, 1997 issued by the Borrower
pursuant to the Credit Agreement to the banks originally party thereto
making Tranch A Term Loans in the aggregate principal amount of
Seventy-Five Million Dollars ($75,000,000).
3. Tranche B Term Loan Notes dated March 11, 1997 issued by the Borrower
pursuant to the Credit Agreement to the banks originally party thereto
making Tranch B Term Loans in the aggregate principal amount of Forty-Five
Million Dollars ($45,000,000).
4. Revolving Notes dated March 11, 1997 issued by the Borrower pursuant to
the Credit Agreement to the banks originally party thereto making
Revolving Loans in the aggregate principal amount of up to Seventy-Five
Million Dollars ($75,000,000).
5. Swingline Note dated March 11, 1997 issued by the Borrower in the original
principal amount of up to Five Million Dollars ($5,000,000) to Bankers
Trust Company ("Bankers Trust").
6. Pledge Agreement dated March 11, 1997 by and between the Borrower, as
Pledgor, Holdings, as an additional Pledgor, and Bankers Trust, as
Collateral Agent.
7. Security Agreement dated March 11, 1997 by and between the Borrower,
Holdings and Bankers Trust, as Collateral Agent.
8. Assignment of Security Interest in United States Trademarks and Patents
dated March 11, 1997 from the Borrower in favor of Bankers Trust, in
connection with the Security Agreement.
9. Assignment of Security Interest in United States Copyrights dated March
11, 1997 from the Borrower in favor of Bankers Trust, in connection with
the Security Agreement.
<PAGE>
SCHEDULE II
RECAPITALIZATION DOCUMENTS
1. Agreement and Plan of Recapitalization made the 24th day of January, 1997,
between Sterling Holding Company, LLC, a Delaware limited liability
company ("Sterling"), and National Semiconductor Corporation, a Delaware
corporation ("NSC").
2. Asset Purchase Agreement by and between the Borrower and NSC.
3. Securities Purchase and Holders Agreement by and among Holdings, Sterling,
NSC and the individuals and trust(s) listed as "Management Investors" on
Schedule I thereto (collectively, the "Management Investors").
4. Demand Note dated March 11, 1997 issued by the Borrower to NSC in the
principal amount of $304,312,297.
5. 11.74% Subordinated Note due 2008 dated March 11, 1997 issued by Holdings
to NSC in the principal amount of Seventy-Seven Million Dollars
($77,000,000).
6. Technology Licensing and Transfer Agreement dated March 11, 1997 by and
between NSC and the Borrower.
7. Transition Services Agreement dated March 11, 1997 by and between NSC and
the Borrower.
8. Fairchild Foundry Services Agreement dated March 11, 1997 by and between
NSC and the Borrower.
9. Revenue Side Letter dated March 11, 1997 by and between NSC and the
Borrower.
10. National Foundry Services Agreement dated March 11, 1997 by and between
NSC and the Borrower.
11. National Assembly Services Agreement dated March 11, 1997 by and between
NSC and the Borrower.
12. Fairchild Assembly Services Agreement dated March 11, 1997 by and between
NSC and the Borrower.
13. Mil/Aero Wafer and Services Agreement dated March 11, 1997 by and between
NSC and the Borrower.
14. Shared Services and Occupancy Agreement dated March 11, 1997 by and
between NSC and the Borrower covering the use by NSC and the Borrower of
the facility in Santa Clara, California owned by NSC.
15. Shared Services Agreement dated March 11, 1997 by and between NSC and the
Borrower for the facility located at South Portland Maine.
16. Shared Facilities Agreement dated March 11, 1997 by and between NSC and
the Borrower covering the shared use of certain physical assets located at
the facility in South Portland, Maine.
17. Assumption Agreement dated March 11, 1997 by and between the Borrower and
NSC.
18. Bill of Sale dated March 11, 1997 by and between NSC and the Borrower.
<PAGE>
19. Real Estate Lease dated March 11, 1997 between the Borrower, as lessor,
and NSC, as lessee, for premises located in West Jordan, Utah.
<PAGE>
SCHEDULE III
SENIOR SUBORDINATED NOTE DOCUMENTS
1. Indenture (the "Indenture") between the Borrower and United States Trust
Company of New York, as trustee, dated March 11, 1997 relating to the
issuance of the Borrower's $300,000,000 aggregate principal amount of
10-1/8% Senior Subordinated Notes Due 2007.
2. Purchase Agreement dated March 6, 1997 by and among the Borrower,
Holdings, Credit Suisse First Boston Corporation ("Credit Suisse"), BT
Securities Corporation ("BT Securities") and CIBC Wood Gundy Securities
Corp. (together with Credit Suisse and BT Securities, the "Purchasers").
3. Registration Rights Agreement dated March 6, 1997 by and among the
Borrower and the Purchasers.
<PAGE>
SCHEDULE IV
FOREIGN QUALIFICATIONS
Fairchild Semiconductor Corporation Maine
Alabama
California
Massachusetts
Texas
Utah
FSC Semiconductor Corporation none
<PAGE>
SCHEDULE V
SECURITY DOCUMENTS
1. Security Agreement dated March 11, 1997 by and between the Borrower,
Holdings and Bankers Trust, as Collateral Agent providing for, among other
things, the grant by the Borrower to Bankers Trust, for the benefit of the
Secured Creditors, a security interest in certain Collateral.
2. Assignment of Security Interest in United States Trademarks and Patents
dated March 11, 1997 from the Borrower in favor of Bankers Trust.
3. Assignment of Security Interest in United States Copyrights dated March
11, 1997 from the Borrower in favor of Bankers Trust.
4. Pledge Agreement dated March 11, 1997 by and between the Borrower, as
Pledgor, Holdings, as an additional Pledgor and Bankers Trust as
Collateral Agent.
<PAGE>
EXHIBIT F
FORM OF OFFICER'S CERTIFICATE
[NAME OF CREDIT PARTY]
Officers' Certificate
I, the undersigned, [Chairman of the Board/President/Vice
President/Treasurer] of [NAME OF CREDIT PARTY], a corporation organized and
existing under the laws of the State of Delaware (the "Company"), do hereby
certify, as such officer and not individually, that:
1. This Certificate is furnished pursuant to Section 5.04 of the
Credit Agreement, dated as of March 11, 1997, among [FSC Semiconductor
Corporation,] [Fairchild Semiconductor Corporation,] [the Company,] the Banks
from time to time party thereto, Bankers Trust Company, as Administrative Agent,
Credit Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent (such Credit Agreement, as in effect on the
date of this Certificate, being herein called the "Credit Agreement"). Unless
otherwise defined herein, capitalized terms used in this Certificate shall have
the meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers of the
Company, each holds the office of the Company set forth opposite his name and
has held such office since __________, 19__.(1) The signature written opposite
the name and title of each such officer is his correct signature.
Name (2) Office Signature
--------------- ------------- -------------
--------------- ------------- -------------
--------------- ------------- -------------
--------------- ------------- -------------
3. Attached hereto as Exhibit A is a certified copy of the
Certificate of Incorporation of the Company as filed in the Office of the
Secretary of State of the State of Delaware on ___________, 19__, together with
all amendments thereto adopted through the date hereof.
- ----------
(1) Insert a date prior to the time of any corporate action relating to the
Credit Agreement or any other Credit Document.
(2) Include name, office and signature of each officer who will sign any Credit
Document, including the officer who will sign the certification at the end of
this Certificate.
<PAGE>
EXHIBIT F
Page 2
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws of the Company which were duly adopted, are in full force and effect on
the date hereof, and have been in effect since _____________, 19__.
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on __________, 19__ [by unanimous written
consent of the Board of Directors of the Company], and said resolutions have not
been rescinded, amended or modified. Except as attached hereto as Exhibit C, no
resolutions have been adopted by the Board of Directors of the Company which
deal with the execution, delivery or performance of any of the Credit Documents
or any other Documents to which the Company is party.
[6. On the date hereof, all of the conditions in Sections 5.05,
5.06, 5.07, 5.08, 5.09, 5.15, 5.16, and 6.01 of the Credit Agreement have been
satisfied (except to the extent that any such condition is required to be
satisfactory to or determined by any Bank, the Required Banks and/or the
Agent).](3)
[6.][7.] On the date hereof, the representations and warranties
contained in the Credit Agreement and in the other Credit Documents to which the
Company is a party are true and correct in all material respects, both before
and after giving effect to each Credit Event to occur on the date hereof and the
application of the proceeds thereof (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
[7.][8.] On the date hereof, no Default or Event of Default has
occurred and is continuing under any Credit Document to which the Company is a
party or would result from the Credit Events to occur on the date hereof or from
the application of the proceeds thereof.
[8.][9.] There is no proceeding for the dissolution or liquidation
of the Company or, to the knowledge of the Company, threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
__________, 1997.
[NAME OF CREDIT PARTY]
------------------------------------
Name:
Title:
- ----------
(3) Insert bracketed item 6 in the Certificate delivered by the Borrower only.
<PAGE>
EXHIBIT F
Page 3
[NAME OF CREDIT PARTY]
I, the undersigned, [Secretary/Assistant Secretary] of the Company, do hereby
certify, as such officer and not individually, that:
1. [Name of Person making above certifications] is the duly elected
and qualified [Chairman of the Board/President/Vice President/Treasurer] of the
Company and the signature above is his genuine signature.
2. The certifications made by [name of Person making above
certifications] in Items 2, 3, 4, 5 and [8] [9] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_________, 1997.
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT G
SUBSIDIARIES GUARANTY
GUARANTY, dated as of ___________, ____ (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each, a "Guarantor" and, together with any other entity that
becomes a party hereto pursuant to Section 25 hereof, the "Guarantors"), to
BANKERS TRUST COMPANY, as Collateral Agent, for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, terms used
herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, FSC Semiconductor Corporation ("Holdings"), Fairchild
Semiconductor Corporation (the "Borrower"), various lenders party thereto from
time to time (the "Banks"), Bankers Trust Company, as Administrative Agent
(together with any successor administrative agent, the "Administrative Agent"),
Credit Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent, have entered into a Credit Agreement, dated as
of March 11, 1997 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the making of Loans to the Borrower and the
issuance of, and participation in, Letters of Credit for the account of the
Borrower, all as contemplated therein (the Banks, the Administrative Agent, the
Syndication Agent and the Documentation Agent are herein called the "Bank
Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Banks or any affiliate thereof (each such Bank or affiliate,
even if the respective Bank subsequently ceases to be a Bank under the Credit
Agreement for any reason, together with such Bank's or affiliate's successors
and assigns, if any, collectively, the "Other Creditors," and together with the
Bank Creditors, the "Secured Creditors");
WHEREAS, each Guarantor is a Subsidiary of the Borrower;
WHEREAS, it is a condition to the making of Loans and issuing of
Letters of Credit under the Credit Agreement that each Guarantor shall have
executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans by the Borrower and the issuance of Letters of Credit pursuant to the
Credit Agreement and the entering into of Interest Rate Protection Agreements or
Other Hedging Agreements and, accordingly, desires to execute this Guaranty in
order to (i) satisfy the conditions described in the preceding paragraph and
(ii) induce (x) the Banks to make Loans and issue Letters of Credit to the
<PAGE>
EXHIBIT G
Page 2
Borrower and (y) the Other Creditors to enter into Interest Rate Protection
Agreements or Other Hedging Agreements with the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Secured Creditors and hereby covenants and agrees with each
Secured Creditor as follows:
6. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees: (i) to the Bank Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Notes issued by, and the Loans made
to, the Borrower under the Credit Agreement and all reimbursement obligations
and Unpaid Drawings with respect to Letters of Credit and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Bank Creditors under the Credit Agreement (including,
without limitation, indemnities, Fees and interest thereon (including any
interest accruing after the commencement of any bankruptcy, insolvency,
receivership or similar proceeding, whether or not such interest is an allowed
claim against the debtor in any such proceeding)) and the other Credit Documents
to which the Borrower is a party, whether now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any such
other Credit Document and the due performance and compliance with the terms of
the Credit Documents by the Borrower (all such principal, interest, liabilities
and obligations under this clause (i), except to the extent consisting of
obligations or liabilities with respect to Interest Rate Protection Agreements
or Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations"); and (ii) to each Other Creditor the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
owing by the Borrower to one or more Other Creditors under any Interest Rate
Protection Agreements or Other Hedging Agreements, whether now in existence or
hereafter arising, and the due performance and compliance by the Borrower with
all terms, conditions and agreements contained therein (all such obligations and
liabilities being herein collectively called the "Other Obligations", and
together with the Credit Document Obligations are herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that
this Guaranty is a guarantee of payment and not of collection, and that the
Secured Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against such Guarantor without proceeding against any
other Guarantor, the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations.
7. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to the Secured Creditors whether or not
due or payable by the Borrower upon the occurrence in respect of the Borrower of
any of the events specified in Section 10.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Secured Creditors, or order, on demand, in lawful
money of the United States.
<PAGE>
EXHIBIT G
Page 3
8. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed Obligations
of the Borrower whether executed by such Guarantor, any other Guarantor, any
other guarantor or by any other party, and the liability of each Guarantor
hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the Borrower or by any other party, (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the Guaranteed Obligations of the Borrower, (c) any
payment on or in reduction of any such other guaranty or undertaking, (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower, (e) any payment made to any Secured Creditor on the Guaranteed
Obligations which any Secured Creditor repays the Borrower pursuant to court
order in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and each Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding, (f)
any action or inaction by the Secured Creditors as contemplated in Section 6
hereof, or (g) any invalidity, irregularity or unenforceability of all or part
of the Guaranteed Obligations or of any security therefor.
9. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower, and
a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Borrower or other circumstance which
operates to toll any statute of limitations as to the Borrower shall operate to
toll the statute of limitations as to each Guarantor.
10. Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and waives promptness, diligence, presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Administrative Agent or any
other Secured Creditor against, and any other notice to, any party liable
thereon (including such Guarantor or any other guarantor or the Borrower).
11. Any Secured Creditor may (except as shall be required by
applicable statute and cannot be waived) at any time and from time to time
without the consent of, or notice to, any Guarantor, without incurring
responsibility to such Guarantor, without impairing or releasing the obligations
of such Guarantor hereunder, upon or without any terms or conditions and in
whole or in part:
A. change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any
of the Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the guaranty
herein made shall apply to the Guaranteed Obligations as so changed,
extended, renewed or altered;
<PAGE>
EXHIBIT G
Page 4
B. sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
C. exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
D. settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
E. apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Secured Creditors
regardless of what liabilities of the Borrower remain unpaid;
F. consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Interest Rate Protection Agreements or Other Hedging
Agreements, the Credit Documents or any of such other instruments or
agreements;
G. act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against the
Borrower to recover full indemnity for any payments made pursuant to this
Guaranty; and/or
H. release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors.
12. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
13. This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Secured Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are
<PAGE>
EXHIBIT G
Page 5
cumulative and not exclusive of any rights or remedies which any Secured
Creditor would otherwise have. No notice to or demand on any Guarantor in any
case shall entitle such Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
Secured Creditor to any other or further action in any circumstances without
notice or demand. It is not necessary for any Secured Creditor to inquire into
the capacity or powers of the Borrower or any of its Subsidiaries or the
officers, directors, partners or agents acting or purporting to act on its
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
14. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the Guaranteed Obligations; and such
indebtedness of the Borrower to any Guarantor, if the Administrative Agent,
after an Event of Default has occurred and is continuing, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Secured
Creditors and be paid over to the Administrative Agent for the benefit of the
Secured Creditors on account of the Guaranteed Obligations, but without
affecting or impairing in any manner the liability of such Guarantor under the
other provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without limiting
the generality of the foregoing, each Guarantor hereby agrees with the Secured
Creditors that it will not exercise any right of subrogation which it may at any
time otherwise have as a result of this Guaranty (whether contractual, under
Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed
Obligations have been irrevocably paid in full in cash.
15. A. Each Guarantor waives any right (except as shall be required
by applicable statute or law and cannot be waived) to require the Secured
Creditors to: (i) proceed against the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party; (ii) proceed against or exhaust
any security held from the Borrower, any other Guarantor, any other guarantor of
the Borrower or any other party; or (iii) pursue any other remedy in the Secured
Creditors' power whatsoever. Each Guarantor waives (to the fullest extent
permitted by applicable law) any defense based on or arising out of any defense
of the Borrower, any other Guarantor, any other guarantor of the Borrower or any
other party other than payment in full of the Guaranteed Obligations, including,
without limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Borrower or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Secured Creditors
may, at their election, foreclose on any security held by the Administrative
Agent, the Collateral Agent or the other Secured Creditors by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Secured Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor waives
any defense arising out of any such election by the Secured Creditors, even
though such election operates to impair or extinguish any
<PAGE>
EXHIBIT G
Page 6
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
B. Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Secured Creditors shall have
no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
16. The Secured Creditors agree that this Guaranty may be enforced
only by the action of the Administrative Agent or the Collateral Agent, in each
case acting upon the instructions of the Required Banks (or, after the date on
which all Credit Document Obligations have been paid in full, the holders of at
least a majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Guaranty or to realize upon the security to be granted by the Security
Documents, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent or the Collateral Agent or the holders of
at least a majority of the outstanding Other Obligations, as the case may be,
for the benefit of the Secured Creditors upon the terms of this Guaranty and the
Security Documents. The Secured Creditors further agree that this Guaranty may
not be enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
17. In order to induce the Banks to make Loans and issue Letters of
Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
A. Such Guarantor (i) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged
and presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction
where the conduct of its business requires such qualification except for
failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
B. Such Guarantor has the corporate power and authority to execute,
deliver and perform the terms and provisions of this Guaranty and each
other Credit Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by
it of each such Credit Document. Such Guarantor has duly executed and
delivered this Guaranty and each other Credit Document to which it is a
party, and each such Credit Document constitutes the legal, valid and
binding
<PAGE>
EXHIBIT G
Page 7
obligation of such Guarantor enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law).
C. Neither the execution, delivery or performance by such Guarantor
of this Guaranty or any other Credit Document to which it is a party, nor
compliance by it with the terms and provisions hereof and thereof, (i)
will contravene any provision of any applicable law, statute, rule or
regulation, or any applicable order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict with or result
in any breach of any of the terms, covenants, conditions or provisions of,
or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except pursuant to the
Security Documents) upon any of the property or assets of such Guarantor
or any of its Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, credit agreement, or any other
material agreement or other instrument to which such Guarantor or any of
its Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation or by-laws (or equivalent
organizational documents) of such Guarantor or any of its Subsidiaries.
D. No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (except as have been
obtained or made), or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance
of this Guaranty or any other Credit Document to which such Guarantor is a
party or (ii) the legality, validity, binding effect or enforceability of
this Guaranty or any other Credit Document to which such Guarantor is a
party.
E. There are no actions, suits or proceedings (private or
governmental) pending or, to the best knowledge of such Guarantor,
threatened (i) with respect to any Credit Documents to which such
Guarantor is a party or (ii) with respect to such Guarantor that could
reasonably be expected to (a) have a Material Adverse Effect or (b)
materially and adversely affect the rights or remedies of the Secured
Creditors or the ability of such Guarantor to perform its respective
obligations to the Secured Creditors hereunder and under the other Credit
Documents to which it is a party.
18. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Commitments and all Interest Rate
Protection Agreements or Other Hedging Agreements and when no Note or Letter of
Credit remains outstanding and all Guaranteed Obligations have been paid in
full, such Guarantor shall take, or will refrain from taking, as the case may
be, all actions that are necessary to be taken or not taken so that no violation
of any provision, covenant or agreement contained in Section 8 or 9 of the
Credit Agreement, and so that no Default or Event of Default, is caused by the
actions of such Guarantor or any of its Subsidiaries.
<PAGE>
EXHIBIT G
Page 8
19. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of each Secured Creditor in
connection with the enforcement of this Guaranty and any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Secured Creditors).
20. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and either (x) the Required Banks (or to the
extent required by Section 13.12 of the Credit Agreement, with the written
consent of each Bank) at all times prior to the time on which all Credit
Document Obligations have been paid in full or (y) the holders of at least a
majority of the outstanding Other Obligations at all times after the time on
which all Credit Document Obligations have been paid in full; provided, that any
change, waiver, modification or variance affecting the rights and benefits of a
single Class (as defined below) of Secured Creditors (and not all Secured
Creditors in a like or similar manner) shall require the written consent of the
Requisite Creditors (as defined below) of such Class of Secured Creditors (it
being understood that the addition or release of any Guarantor hereunder shall
not constitute a change, waiver, discharge or termination affecting any
Guarantor other than the Guarantor so added or released). For the purpose of
this Guaranty the term "Class" shall mean each class of Secured Creditors, i.e.,
whether (x) the Bank Creditors as holders of the Credit Document Obligations or
(y) the Other Creditors as the holders of the Other Obligations. For the purpose
of this Guaranty, the term "Requisite Creditors" of any Class shall mean each of
(x) with respect to the Credit Document Obligations, the Required Banks (or to
the extent required by Section 13.12 of the Credit Agreement, each Bank) and (y)
with respect to the Other Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
21. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents and Interest Rate Protection Agreements or Other
Hedging Agreements has been made available to its principal executive officers
and such officers are familiar with the contents thereof.
22. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agreement or Other
Hedging Agreement continuing after any applicable grace period), each Secured
Creditor is hereby authorized at any time or from time to time, without notice
to any Guarantor or to any other Person, any such notice being expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by such Secured
Creditor to or for the credit or the account of such Guarantor but in any event
excluding assets held in trust for any such Person, against and on account of
the obligations and liabilities of such Guarantor to such Secured Creditor under
this Guaranty, irrespective of whether or not such Secured Creditor shall have
made any demand hereunder and although said obligations, liabilities, deposits
or claims, or any of them, shall be contingent or unmatured. Each Secured
Creditor acknowledges and agrees
<PAGE>
EXHIBIT G
Page 9
that the provisions set forth in this Section 17 are subject to the sharing
provisions set forth in Section 13.06 of the Credit Agreement.
23. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at its address set forth opposite its signature
below and (iii) in the case of any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Guarantor; or in any case at
such other address as any of the Persons listed above may hereafter notify the
others in writing.
24. If claim is ever made upon any Secured Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected in good faith by
such payee with any such claimant (including the Borrower), then and in such
event each Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or other instrument evidencing any liability of the Borrower, and such
Guarantor shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
25. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Guaranty or any other Credit Document to which any
Guarantor is a party may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York, and, by
execution and delivery of this Guaranty, each Guarantor hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
irrevocably designates, appoints and empowers Corporation Service Company with
offices on the date hereof at 500 Central Avenue, Albany, New York 12206 as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. If for any reason such designee, appointee and agent shall cease to
be available to act as such, each Guarantor agrees to designate a new designee,
appointee and agent in the State of New York on the terms and for the purposes
of this provision satisfactory to the Administrative Agent. Each Guarantor
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such Guarantor at
its address set forth opposite its signature below, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right of
any of the Secured Creditors to serve process in any other manner permitted by
<PAGE>
EXHIBIT G
Page 10
law or to commence legal proceedings or otherwise proceed against each Guarantor
in any other jurisdiction.
(B) Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Credit Document to which such Guarantor is a party brought in the courts
referred to in clause (A) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that such action or proceeding brought
in any such court has been brought in an inconvenient forum.
(C) EACH GUARANTOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF
THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
26. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of (except to Holdings or any of its
Subsidiaries) or liquidated in compliance with the requirements of Section 9.02
of the Credit Agreement (or such sale or other disposition or liquidation has
been approved in writing by the Required Banks) and the proceeds of such sale,
disposition or liquidation are applied in accordance with the provisions of the
Credit Agreement, to the extent applicable, such Guarantor shall be released
from this Guaranty and this Guaranty shall, as to each such Guarantor or
Guarantors, terminate, and have no further force or effect (it being understood
and agreed that the sale of one or more Persons that own, directly or
indirectly, all of the capital stock or partnership interests of any Guarantor
shall be deemed to be a sale of such Guarantor for the purposes of this Section
21).
27. Each Guarantor hereby confirms that it is its intention that
this Guaranty not constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar
Federal or state law. To effectuate the foregoing intention, each Guarantor
hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such
Guarantor shall be limited to such amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
rights to contribution pursuant to any agreement providing for an equitable
contribution among such Guarantor and the other Guarantors, result in the
Guaranteed Obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent transfer or conveyance.
28. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Administrative
Agent.
<PAGE>
EXHIBIT G
Page 11
29. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense, and on the same basis as payments
are made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement.
30. It is understood and agreed that any Subsidiary of the Borrower
that is required to execute a counterpart of this Guaranty after the date hereof
pursuant to the Credit Agreement shall automatically become a Guarantor
hereunder by executing a counterpart hereof and delivering the same to the
Administrative Agent.
* * *
<PAGE>
EXHIBIT G
Page 12
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address: [SUBSIDIARY GUARANTOR],
as a Guarantor
Attention:
Telephone No.: By
Facsimile No.: --------------------------------
Title:
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative
Agent and Collateral Agent
By
-----------------------------------------------------------------------------
Title:
<PAGE>
EXHIBIT H
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of March 11, 1997 (as amended, modified
or supplemented from time to time, this "Agreement") made by each of the
undersigned (each a "Pledgor" and, together with any other entity that becomes a
party hereto pursuant to Section 23 hereof, the "Pledgors"), to BANKERS TRUST
COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, capitalized
terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, FSC Semiconductor Corporation ("Holdings"), Fairchild
Semiconductor Corporation (the "Borrower"), various lenders from time to time
party thereto (the "Banks"), Bankers Trust Company, as Administrative Agent
(together with any successor administrative agent, the "Administrative Agent"),
Credit Suisse First Boston, as Syndication Agent (the "Syndication Agent"), and
Canadian Imperial Bank of Commerce, as Documentation Agent (the "Documentation
Agent"), have entered into a Credit Agreement, dated as of March 11, 1997 (the
"Credit Agreement"), providing for the making of Loans and the issuance of, and
participation in, Letters of Credit as contemplated therein (as used herein, the
term "Credit Agreement" means the Credit Agreement described above in this
paragraph, as the same may be amended, modified, extended, renewed, replaced,
restated or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring the Indebtedness under such
agreement or any successor agreements) (the Banks, the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Pledgee are herein called the
"Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Banks or any affiliate thereof (each such Bank or affiliate,
even if the respective Bank subsequently ceases to be a Bank under the Credit
Agreement for any reason, together with such Bank's or affiliate's successors
and assigns, if any, collectively, the "Other Creditors," and together with the
Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to Section 14 of the Credit Agreement, Holdings
has guaranteed to the Secured Creditors the payment when due of all the
Guaranteed Obligations as described therein;
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guaranteed to the Secured Creditors the
payment when due of all Guaranteed Obligations as described therein;
<PAGE>
EXHIBIT H
Page 2
WHEREAS, it is a condition to the making of Loans and the issuance
of Letters of Credit under the Credit Agreement that each Pledgor shall have
executed and delivered this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement and the
entering into of Interest Rate Protection Agreements or Other Hedging Agreements
and, accordingly, each Pledgor desires to enter into this Agreement in order to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Pledgor, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor hereby makes the following representations and
warranties to the Pledgee for the benefit of the Secured Creditors and hereby
covenants and agrees with the Pledgee for the benefit of the Secured Creditors
as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) of such Pledgor to the
Bank Creditors, whether now existing or hereafter incurred under, arising
out of, or in connection with the Credit Agreement and the other Credit
Documents to which such Pledgor is a party (including without limitation
(x) in the case of the Borrower, all such obligations and indebtedness of
the Borrower under the Credit Agreement and (y) in the case of each other
Pledgor, all such obligations and indebtedness under the Guaranty to which
such Pledgor is a party) and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained in the
Credit Agreement and such other Credit Documents (all such obligations and
liabilities under this clause (i), except to the extent consisting of
obligations or indebtedness with respect to Interest Rate Protection
Agreements or Other Hedging Agreements, being herein collectively called
the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) owing by such Pledgor to
the Other Creditors under, or with respect to, any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest
Rate Protection Agreement or Other Hedging Agreement is now in existence
or hereafter arising, and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained therein
(all such obligations and liabilities described in this clause (ii) being
herein collectively called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral (to the extent provided for in the Credit Documents);
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(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of such
Pledgor referred to in clauses (i), (ii) and (iii) above, after an Event
of Default (as such term is defined in the Security Agreement) shall have
occurred and be continuing, the reasonable expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys' fees and court
costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement.
All such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean (x) with respect to corporations incorporated under
the laws of the United States or any State or territory thereof (each a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time owned by any Pledgor of any Foreign Corporation, provided that, subject to
Section 8.15 of the Credit Agreement, such Pledgor shall not be required to
pledge hereunder, and nothing herein shall be deemed to constitute a pledge
hereunder of, more than 65% of the total combined voting power of all classes of
capital stock of any Foreign Corporation entitled to vote; (ii) the term "Notes"
shall mean all promissory notes from time to time issued to, or held by, each
Pledgor; and (iii) the term "Securities" shall mean all of the Stock and Notes.
Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary
of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto;
(ii) the Stock held by such Pledgor consists of the number and type of shares of
the stock of the corporations as described in Annex A hereto; (iii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex A hereto; (iv) the Notes held by
such Pledgor consist of the promissory notes described in Annex B hereto where
such Pledgor is listed as the Lender; (v) such Pledgor is the holder of record
and sole beneficial owner of the Stock and the Notes held by such Pledgor and
there exist no options or preemption rights in respect of any of such Stock; and
(vi) on the date hereof, such Pledgor owns no other Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations of such Pledgor and for the
purposes set forth in Section 1 hereof, each Pledgor hereby (i) grants to the
Pledgee a security interest in all of the Collateral (as defined herein) owned
by such Pledgor, (ii) pledges and deposits as security with the Pledgee the
Securities owned by such Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank by such Pledgor in
the case of Notes and accompanied by undated stock powers duly executed in blank
by such Pledgor (and accompanied by
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any transfer tax stamps required in connection with the pledge of such
Securities) in the case of Stock, or such other instruments of transfer as are
reasonably acceptable to the Pledgee and (iii) hypothecates, mortgages, charges
and sets over to the Pledgee all of such Pledgor's right, title and interest in
and to such Securities (and in and to the certificates or instruments evidencing
such Securities), to be held by the Pledgee upon the terms and conditions set
forth in this Agreement.
3.2. Subsequently Acquired Securities. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will promptly
thereafter pledge and deposit such Securities (or certificates or instruments
representing such Securities) as security with the Pledgee and deliver to the
Pledgee certificates or instruments therefor, duly endorsed in blank in the case
of such Notes, and accompanied by undated stock powers duly executed in blank by
such Pledgor (and accompanied by any transfer tax stamps required in connection
with the pledge of such Securities) in the case of such Stock, or such other
instruments of transfer as are reasonably acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by a principal
executive officer of such Pledgor describing such Securities and certifying that
the same has been duly pledged with the Pledgee hereunder. Subject to Section
8.15 of the Credit Agreement, no Pledgor shall be required at any time to pledge
hereunder any Stock which is more than 65% of the total combined voting power of
all Classes of Capital Stock of any Foreign Subsidiary entitled to vote.
3.3. Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the relevant
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York Uniform Commercial Code, if applicable). Each Pledgor further agrees to
take such actions as the Pledgee deems reasonably necessary or desirable to
effect the foregoing and to permit the Pledgee to exercise any of its rights and
remedies hereunder.
3.4. Definitions of Pledged Stock; Pledged Notes; Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock;" all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged
Securities;" and the Pledged Securities, together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, are hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or
assigned in blank or in favor of the Pledgee or any nominee or nominees of the
Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
shall have occurred and be continuing an Event of Default, each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities owned by it, and to give consents, waivers or
ratifications in respect thereof, provided, that no vote shall be cast or
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EXHIBIT H
Page 5
any consent, waiver or ratification given or any action taken which would
violate or be inconsistent with any of the terms of this Agreement, the Credit
Agreement, any other Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement (collectively, the "Secured Debt Agreements"). All
such rights of each Pledgor to vote and to give consents, waivers and
ratifications shall cease in case an Event of Default has occurred and is
continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall
have occurred and be continuing an Event of Default, all cash dividends and
distributions payable in respect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the respective Pledgor. The
Pledgee shall be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional stock or other securities (other than
cash) paid or distributed by way of dividend or otherwise, as the case may
be, in respect of the Pledged Stock;
(ii) all other or additional stock or other securities paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(iii) all other or additional stock or other securities or property
which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 hereof shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of such Pledgor and shall be
promptly paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF EVENTS OF DEFAULT. If there shall have
occurred and be continuing an Event of Default, then and in every such case, the
Pledgee shall be entitled to (i) exercise all of the rights, powers and remedies
(whether vested in it by this Agreement, any other Secured Debt Agreement or by
law) for the protection and enforcement of its rights in respect of the
Collateral, (ii) exercise all the rights and remedies of a secured party under
the Uniform Commercial Code and (iii) without limitation, exercise the following
rights, which each Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
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(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so); and
(e) at any time and from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time
or place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Pledgee
in its absolute discretion may determine, provided that at least 10 days'
prior notice of the time and place of any such sale shall be given to such
Pledgor. The Pledgee shall not be obligated to make any such sale of
Collateral regardless of whether any such notice of sale has theretofore
been given. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale, unless prohibited by
applicable law, the Pledgee on behalf of the Secured Creditors may bid for
and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Pledgee nor any other Secured
Creditor shall be liable for failure to collect or realize upon any or all
of the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Pledgee provided for in this Agreement or any other Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. No notice to or demand
on any Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the
rights of the Pledgee or any other Secured Creditor to any other or further
action in any circumstances without notice or demand. The Secured Creditors
agree that this Agreement may be enforced only by the action of the Pledgee
acting upon the instructions of the Required Banks (or, after the date on which
all Credit Document Obligations have been paid in full, the holders of at least
the majority of the outstanding Other Obligations) and that no other
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EXHIBIT H
Page 7
Secured Creditor shall have any right individually to seek to enforce or to
enforce this Agreement or to realize upon the security to be granted hereby, it
being understood and agreed that such rights and remedies may be exercised by
the Pledgee or the holders of at least a majority of the outstanding Other
Obligations, as the case may be, for the benefit of the Secured Creditors upon
the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Pledgee hereunder, shall be applied to the payment of the
Obligations in the manner provided in Section 7.4 of the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor and their respective successors, assigns, employees, agents and
servants (individually an "Indemnitee," and collectively the "Indemnitees") from
and against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all costs and expenses, including reasonable
attorneys' fees, in each case growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other Secured Debt Agreement (but excluding any claims, demands,
losses, judgments and liabilities or expenses to the extent incurred by reason
of gross negligence or willful misconduct of such Indemnitee). In no event shall
the Pledgee be liable, in the absence of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Agreement other
than to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of any Pledgor under this
Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the Uniform Commercial Code or other applicable
law such financing statements, continuation statements and other documents in
such offices as the Pledgee may deem necessary and wherever required by law in
order to perfect and preserve the Pledgee's security interest in the Collateral
and hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
such Pledgor where permitted
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Page 8
by law, and agrees to do such further acts and things and to execute and deliver
to the Pledgee such additional conveyances, assignments, agreements and
instruments as the Pledgee may reasonably require or deem necessary to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's discretion
to take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed by each Secured Creditor that
by accepting the benefits of this Agreement each such Secured Creditor
acknowledges and agrees that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and in Section 12 of the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the terms of the Credit Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PLEDGORS. Each Pledgor represents, warrants and covenants that (i) it is the
legal, record and beneficial owner of, and has good and marketable title to, all
Pledged Securities pledged by it hereunder, subject to no Lien (except the Lien
created by this Agreement and other Permitted Liens); (ii) it has full corporate
power, authority and legal right to pledge all the Pledged Securities pledged by
it pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law); (iv) no
consent of any other party (including, without limitation, any stockholder or
creditor of such Pledgor or any of its Subsidiaries) and no consent, license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with (except as have been obtained or made),
any governmental authority is required to be obtained by such Pledgor in
connection with the execution, delivery or performance of this Agreement, the
validity or enforceability of this Agreement, the perfection or enforceability
of the Pledgee's security interest in the Collateral or except for compliance
with or as may be required by applicable securities laws, the exercise by the
Pledgee of any of its rights or remedies provided herein; (v) the execution,
delivery and performance of this Agreement by such Pledgor will not violate any
provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, applicable to such Pledgor, or of the certificate of incorporation or
by-laws (or equivalent organizational documents) of such Pledgor or
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of any securities issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, lease, deed of trust, loan agreement, credit agreement or
other material agreement, contract, or instrument to which such Pledgor or any
of its Subsidiaries is a party or which purports to be binding upon such Pledgor
or any of its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition of (or the obligation to create or impose)
any lien or encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries except as contemplated by this Agreement; (vi) all the shares of
Stock have been duly and validly issued, are fully paid and non-assessable and
are subject to no options to purchase or similar rights; (vii) each of the
Pledged Notes constitutes, or when executed by the obligor thereof will
constitute, the legal, valid and binding obligation of such obligor, enforceable
in accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in equity or
at law); and (viii) the pledge, assignment and delivery to the Pledgee of the
Securities (other than uncertificated securities) pursuant to this Agreement
creates a valid and perfected first priority Lien in the Securities, and the
proceeds thereof, subject to no other Lien or to any agreement purporting to
grant to any third party a Lien on the property or assets of the Pledgor which
would include the Securities. Each Pledgor covenants and agrees that it will
defend the Pledgee's right, title and security interest in and to the Securities
and the proceeds thereof against the claims and demands of all persons
whomsoever in accordance with the Credit Documents; and such Pledgor covenants
and agrees that it will have like title to and right to pledge any other
property at any time hereafter pledged to the Pledgee as Collateral hereunder
and will likewise defend the right thereto and security interest therein of the
Pledgee and the Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement;
(iii) any furnishing of any additional security to the Pledgee or its assignee
or any acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to any Pledgor or any Subsidiary
of any Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not
such Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing an Event of Default then, and in every such case, upon receipt by any
Pledgor from the Pledgee of a written request or requests that such Pledgor
cause any registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of the
Pledged Stock, such Pledgor as soon as practicable and at its expense will cause
such registration
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Page 10
to be effected (and be kept effective) and will cause such qualification and
compliance to be declared effected (and be kept effective) as may be so
requested and as would permit or facilitate the sale and distribution of such
Pledged Stock, including, without limitation, registration under the Securities
Act of 1933, as then in effect (or any similar statute then in effect),
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with any other government requirements,
provided, that the Pledgee shall furnish to such Pledgor such information
regarding the Pledgee as such Pledgor may reasonably request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept advised in writing as
to the progress of each such registration, qualification or compliance and as to
the completion thereof, will furnish to the Pledgee such number of prospectuses,
offering circulars or other documents incident thereto as the Pledgee from time
to time may reasonably request, and will indemnify the Pledgee, each other
Secured Creditor and all others participating in the distribution of such
Pledged Stock against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been caused by an untrue statement or
omission based upon information furnished in writing to such Pledgor by the
Pledgee or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, and such Pledged Securities or the part thereof to be sold shall not,
for any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale, and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion, in
good faith deems reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below), this Agreement and the security interest created hereby shall terminate
(provided that all indemnities set forth herein including, without limitation,
in Section 11 hereof shall survive any such termination), and the Pledgee, at
the request and expense of any Pledgor, will execute and deliver to such Pledgor
a proper instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
of the Collateral as has not theretofore been sold or
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Page 11
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee or any of its sub-agents hereunder. As
used in this Agreement, "Termination Date" shall mean the date upon which the
Total Commitments and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding (and all Loans have been repaid in full), all Letters of Credit have
been terminated and all Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold (except to
Holdings or any of its Subsidiaries) in connection with a sale permitted by
Section 9.02 of the Credit Agreement or otherwise released pursuant to the
Credit Agreement or at the direction of the Required Banks (or all Banks if
required by Section 13.12 of the Credit Agreement) and the proceeds of such sale
or sales or from such release are applied in accordance with the provisions of
Section 4.02 of the Credit Agreement, to the extent required to be so applied,
the Pledgee, at the request and expense of any Pledgor, will duly assign,
transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral (and releases therefor) as is
then being (or has been) so sold or released and has not theretofore been
released pursuant to this Agreement.
(c) At any time that a Pledgor desires that the Pledgee assign,
transfer and deliver Collateral (and releases therefor) as provided in Section
18(a) or (b) hereof, it shall deliver to the Pledgee a certificate signed by an
executive officer of such Pledgor stating that the release of the respective
Collateral is permitted pursuant to such Section 18(a) or (b).
(d) The Pledgee shall have no liability whatsoever to any other
Secured Creditor as the result of any release of Collateral by it in accordance
with this Section 18.
19. NOTICES, ETC. All notices and communications hereunder shall be
sent or delivered by mail, telex, telecopy or overnight courier service and all
such notices and communications shall, when mailed, telexed, telecopied or sent
by overnight courier, be effective when deposited in the mails or delivered to
the overnight courier, prepaid and properly addressed for delivery on such or
the next Business Day, or sent by telex or telecopier, except that notices and
communications to the Pledgee shall not be effective until received by the
Pledgee. All notices and other communications shall be in writing and addressed
as follows:
(a) if to any Pledgor, at the address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telephone No.: (212) 250-4886
Telecopier No.: (212) 250-7218
Attention: Anthony Logrippo
<PAGE>
EXHIBIT H
Page 12
(c) if to any Bank Creditor, either (x) to the Administrative Agent,
at the address of the Administrative Agent specified in the Credit
Agreement or (y) at such address as such Bank Creditor shall have
specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to the Pledgors and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of either (x) the Required Banks (or all of
the Banks, to the extent required by Section 13.12 of the Credit Agreement) at
all times prior to the time on which all Credit Document Obligations have been
paid in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full); provided, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class (as defined below)
of Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall also require the written consent of the Requisite Creditors (as defined
below) of such affected Class. For the purpose of this Agreement, the term
"Class" shall mean each class of Secured Creditors, i.e., whether (i) the Bank
Creditors as holders of the Credit Document Obligations or (ii) the Other
Creditors as the holders of the Other Obligations. For the purpose of this
Agreement, the term "Requisite Creditors" of any Class shall mean each of (i)
with respect to the Credit Document Obligations, the Required Banks and (ii)
with respect to the Other Obligations, the holders of 51% of all obligations
outstanding from time to time under the Interest Rate Protection Agreements or
Other Hedging Agreements.
21. MISCELLANEOUS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of and be enforceable by each of the parties hereto and its successors
and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement
are for purposes of reference only and shall not limit or define the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one instrument. In
the event that any provision of this Agreement shall prove to be invalid or
unenforceable, such provision shall be deemed to be severable from the other
provisions of this Agreement which shall remain binding on all parties hereto.
22. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
23. ADDITIONAL PLEDGORS. It is understood and agreed that no
Domestic Subsidiaries of the Borrower exist on the date hereof. Any such
Subsidiary established
<PAGE>
EXHIBIT H
Page 13
or created after the date hereof and that is required to execute a counterpart
of this Agreement pursuant to the Credit Agreement shall automatically become a
Pledgor hereunder by executing a counterpart hereof and delivering the same to
the Pledgee.
* * *
<PAGE>
EXHIBIT H
Page 14
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Addresses:
333 Western Avenue FSC SEMICONDUCTOR CORPORATION,
South Portland, ME 04106 as a Pledgor
Telephone No.: (207) 775-8755
Telecopier No.: (207) 761-6020
Attention: Dan Boxer By
---------------------------------
Title:
333 Western Avenue FAIRCHILD SEMICONDUCTOR
South Portland, ME 04106 CORPORATION,
Telephone No.: (207) 775-8755 as a Pledgor
Telecopier No.: (207) 761-6020
Attention: Dan Boxer
By
---------------------------------
Title:
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 as Pledgee
Telephone No.: (212) 250-4886
Facsimile No.: (212) 250-7218
Attention: Anthony Logrippo By
---------------------------------
Title:
<PAGE>
ANNEX A
to
Pledge Agreement
LIST OF STOCK
I. FSC Semiconductor Corporation
Percentage of
Outstanding Shares
Name of Issuing Number of of
Corporation Type of Shares Shares Capital Stock
- ----------- -------------- ------ -------------
Fairchild Semiconductor Common par value 100 100%
Corporation $.01 per share
II. Fairchild Semiconductor Corporation
Percentage of
Outstanding Shares
Name of Issuing Number of of
Corporation Type of Shares Shares Capital Stock
- ----------- -------------- ------ -------------
<PAGE>
ANNEX B
to
Pledge Agreement
LIST OF NOTES
I. FSC Semiconductor Corporation
Principal Amount Maturity Date
Obligor (if any) (if any)
- ------- -------- --------
II. Fairchild Semiconductor Corporation
Principal Amount Maturity Date
Obligor (if any) (if any)
- ------- -------- --------
<PAGE>
EXHIBIT I
================================================================================
SECURITY AGREEMENT
among
FSC SEMICONDUCTOR CORPORATION,
FAIRCHILD SEMICONDUCTOR CORPORATION,
CERTAIN SUBSIDIARIES OF
FAIRCHILD SEMICONDUCTOR CORPORATION,
and
BANKERS TRUST COMPANY,
as Collateral Agent
================================================================================
Dated as of March 11, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I SECURITY INTERESTS...................................... 2
1.1. Grant of Security Interests................................. 2
1.2. Power of Attorney........................................... 3
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS............................................. 3
2.1. Necessary Filings........................................... 3
2.2. No Liens.................................................... 4
2.3. Other Financing Statements.................................. 4
2.4. Chief Executive Office; Records............................. 4
2.5. Location of Inventory and Equipment......................... 5
2.6. Recourse.................................................... 5
2.7. Trade Names; Change of Name................................. 6
ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS.......................... 6
3.1. Additional Representations and Warranties................... 6
3.2. Maintenance of Records...................................... 7
3.3. Direction to Account Debtors; Contracting Parties; etc...... 7
3.4. Modification of Terms; etc.................................. 8
3.5. Collection.................................................. 8
3.6. Instruments................................................. 8
3.7. Assignors Remain Liable Under Receivables................... 9
3.8. Assignors Remain Liable Under Contracts..................... 9
3.9. Further Actions............................................. 9
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS................ 10
4.1. Additional Representations and Warranties................... 10
4.2. Licenses and Assignments.................................... 10
4.3. Infringements............................................... 10
4.4. Preservation of Marks....................................... 11
4.5. Maintenance of Registration................................. 11
4.6. Future Registered Marks..................................... 11
4.7. Remedies.................................................... 11
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS,
COPYRIGHTS AND TRADE SECRETS.......................... 12
5.1. Additional Representations and Warranties................... 12
5.2. Licenses and Assignments.................................... 12
5.3. Infringements............................................... 12
5.4. Maintenance of Patents or Copyrights........................ 13
5.5. Prosecution of Patent or Copyright Application.............. 13
(i)
<PAGE>
5.6. Other Patents or Copyrights................................. 13
5.7. Remedies.................................................... 13
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL.................... 14
6.1. Protection of Collateral Agent's Security................... 14
6.2. Warehouse Receipts Non-negotiable........................... 14
6.3. Further Actions............................................. 14
6.4. Financing Statements........................................ 15
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT............ 15
7.1. Remedies; Obtaining the Collateral Upon Default............. 15
7.2. Remedies; Disposition of the Collateral..................... 17
7.3. Waiver of Claims............................................ 17
7.4. Application of Proceeds..................................... 18
7.5. Remedies Cumulative......................................... 21
7.6. Discontinuance of Proceedings............................... 21
ARTICLE VIII INDEMNITY............................................... 22
8.1. Indemnity................................................... 22
8.2. Indemnity Obligations Secured by Collateral; Survival....... 23
ARTICLE IX DEFINITIONS............................................. 23
ARTICLE X MISCELLANEOUS........................................... 28
10.1. Notices.................................................... 28
10.2. Waiver; Amendment.......................................... 29
10.3. Obligations Absolute....................................... 29
10.4. Successors and Assigns..................................... 30
10.5. Headings Descriptive....................................... 30
10.6. Governing Law.............................................. 30
10.7. Assignor's Duties.......................................... 30
10.8. Termination; Release....................................... 31
10.9. Counterparts............................................... 32
10.10. Severability.............................................. 32
10.11. The Collateral Agent...................................... 32
10.12. Benefit of Agreement...................................... 32
10.13. Additional Assignors...................................... 32
ANNEX A Schedule of Chief Executive Offices and
Other Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade and Fictitious Names
ANNEX D Schedule of Marks
ANNEX E Schedule of Patents and Applications
ANNEX F Schedule of Copyrights and Applications
(ii)
<PAGE>
ANNEX G Assignment of Security Interest in United
States Trademarks and Patents
ANNEX H Assignment of Security Interest in
United States Copyrights
(iii)
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 11, 1997, among each of the
undersigned (each an "Assignor" and, together with any other entity that becomes
a party hereto pursuant to Section 10.13 hereof, the "Assignors") and Bankers
Trust Company, as Collateral Agent (the "Collateral Agent"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, FSC Semiconductor Corporation ("Holdings"), Fairchild
Semiconductor Corporation (the "Borrower"), various lenders from time to time
party thereto (the "Banks"), Bankers Trust Company, as Administrative Agent
(together with any successor administrative agent, the "Administrative Agent"),
Credit Suisse First Boston, as Syndication Agent (the "Syndication Agent") and
Canadian Imperial Bank of Commerce, as Documentation Agent (the "Documentation
Agent") have entered into a Credit Agreement, dated as of the date hereof (the
"Credit Agreement"), providing for the making of Loans and the issuance of, and
participation in, Letters of Credit, as contemplated therein (as used herein,
the term "Credit Agreement" means the Credit Agreement described above in this
paragraph as the same may be amended, modified, extended, renewed, replaced,
restated or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring the Indebtedness under such
agreement or any successor agreement) (the Banks, the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Collateral Agent are herein
called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Banks or any affiliate thereof (each such Bank or affiliate,
even if the respective Bank subsequently ceases to be a Bank under the Credit
Agreement for any reason, together with such Bank's or affiliate's successors
and assigns, if any, collectively, the "Other Creditors," and together with the
Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to Section 14 of the Credit Agreement, Holdings
has guaranteed to the Secured Creditors the payment when due of all Guaranteed
Obligations as described therein;
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guaranteed to the Secured Creditors the
payment when due of all Guaranteed Obligations as described therein;
<PAGE>
EXHIBIT I
Page 3
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit under the Credit Agreement that each Assignor
shall have executed and delivered this Agreement; and
WHEREAS, each Assignor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement and the
entering into of Interest Rate Protection Agreements or Other Hedging Agreements
and, accordingly, each Assignor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Assignor, the receipt and sufficiency of which are hereby
acknowledged, each Assignor hereby makes the following representations and
warranties to the Collateral Agent for the benefit of the Secured Creditors and
hereby covenants and agrees with the Collateral Agent for the benefit of the
Secured Creditors as follows:
ARTICLE 31.
SECURITY INTERESTS
A. Grant of Security Interests. 1. As security for the prompt and
complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority (subject only to
Permitted Liens existing on the date hereof or otherwise having priority under
applicable law) in all of the right, title and interest of such Assignor in, to
and under all of the following, whether now existing or hereafter from time to
time acquired: (i) each and every Receivable, (ii) all Contracts, together with
all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment,
(v) all Marks, together with the registrations and right to all renewals
thereof, and the goodwill of the business of such Assignor symbolized by the
Marks, (vi) all Patents and Copyrights, and all reissues, renewals or extensions
thereof, (vii) all computer programs of such Assignor and all intellectual
property rights therein and all other proprietary information of such Assignor,
including, but not limited to, trade secrets, (viii) all other Goods, General
Intangibles, Chattel Paper, Documents, Instruments and other assets of such
Assignor, (ix) the Cash Collateral Account and all moneys, securities and
Instruments deposited or required to be deposited in such Cash Collateral
Account and (x) all Proceeds and products of any and all of the foregoing (all
of the above, collectively, the "Collateral").
2. The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
<PAGE>
EXHIBIT I
Page 4
B. Power of Attorney. Each Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of such Assignor or otherwise) to act, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys due
or to become due to such Assignor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or take any action or institute any proceedings which the
Collateral Agent may deem to be necessary or advisable to protect the interests
of the Secured Creditors, which appointment as attorney is coupled with an
interest.
ARTICLE 32.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
A. Necessary Filings. All filings, registrations and recordings in
any jurisdiction in the U.S. (other than filings or recordings in respect of
vehicles for which a filing under the UCC will fail to perfect a security
interest) necessary or appropriate to create, preserve and perfect the security
interest granted by such Assignor to the Collateral Agent hereby in respect of
the Collateral have been accomplished or will be accomplished within 10 Business
Days from the date hereof and upon such filings, registrations or recordations,
the security interest granted to the Collateral Agent pursuant to this Agreement
in and to the Collateral creates a perfected security interest therein prior to
the rights of all other Persons therein (subject only to Permitted Liens
existing on the date hereof or otherwise having priority under applicable law)
and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction in the United States to perfected security interests, in each case
to the extent that the Collateral consists of the type of property in which a
security interest may be perfected by filing a financing statement under the
Uniform Commercial Code as enacted in any relevant jurisdiction in the United
States or in the United States Patent and Trademark Office or the United States
Copyright Office.
B. No Liens. Such Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any other Person (other than Permitted
Liens), and such Assignor shall defend the Collateral to the extent of its
rights therein against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
C. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than in respect of Permitted Liens), and so long
as the Total Commitment has not been terminated or any Letter of
<PAGE>
EXHIBIT I
Page 5
Credit or Note remains outstanding or any of the Obligations remain unpaid or
any Interest Rate Protection Agreement or Other Hedging Agreement remains in
effect or any Obligations are owed with respect thereto, such Assignor will not
execute or authorize to be filed in any public office any financing statement
(or similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security
interests granted hereby by such Assignor or as permitted by the Credit
Agreement.
D. Chief Executive Office; Records. The chief executive office of
such Assignor is located, as of the date hereof, at the address or addresses
indicated on Annex A hereto for such Assignor. Such Assignor will not move its
chief executive office except to such new location as such Assignor may
establish in accordance with the last sentence of this Section 2.4. The
originals of all documents evidencing all Receivables and Contract Rights and
Trade Secret Rights of such Assignor and the only original books of account and
records of such Assignor relating thereto are, and will continue to be, kept at
such chief executive office, at one or more of the other record locations set
forth on Annex A hereto or at such new locations as such Assignor may establish
in accordance with the last sentence of this Section 2.4. All Receivables and
Contract Rights of such Assignor are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above or such new
location established in accordance with the last sentence of this Section 2.4.
No Assignor shall establish new locations for such offices until (i) it shall
have given to the Collateral Agent not less than 15 days' prior written notice
of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Collateral Agent may
reasonably request, (ii) with respect to such new location, it shall have taken
all action, reasonably satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect and
(iii) the Collateral Agent shall have received evidence that all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
E. Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by each Assignor is located at one of the locations
shown on Annex B hereto for such Assignor. Each Assignor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Annex B hereto,
or such new location as such Assignor may establish in accordance with the last
sentence of this Section 2.5. Any Assignor may establish a new location for
Inventory and Equipment if (i) it shall have given to the Collateral Agent not
less than 15 days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Collateral Agent may request, (ii) with respect to such new
location, it shall have taken all action reasonably satisfactory to the
Collateral Agent to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and in
full force and effect (provided that to the extent that inventory (including
work-in-process) is temporarily in transit or held pending the completion or
sale thereof at any new location, such Assignor shall not be required to take
any action otherwise required by this clause (ii)) and (iii) the Collateral
Agent shall have received evidence that all other actions
<PAGE>
EXHIBIT I
Page 6
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
F. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other
Credit Documents, in the Interest Rate Protection Agreements or Other Hedging
Agreements and otherwise in writing in connection herewith or therewith.
G. Trade Names; Change of Name. No Assignor has or operates in any
jurisdiction under, or in the preceding 12 months has had or has operated in any
jurisdiction under, any trade names, fictitious names or other names except its
legal name and such other trade or fictitious names as are listed on Annex C
hereto for such Assignor. No Assignor shall change its legal name or assume or
operate in any jurisdiction under any trade, fictitious or other name except
those names listed on Annex C hereto for such Assignor and new names established
in accordance with the last sentence of this Section 2.7. No Assignor shall
assume or operate in any jurisdiction under any new trade, fictitious or other
name until (i) it shall have given to the Collateral Agent not less than 15
days' prior written notice of its intention so to do, clearly describing such
new name and the jurisdictions in which such new name shall be used and
providing such other information in connection therewith as the Collateral Agent
may request, (ii) with respect to such new name, it shall have taken all action
to maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) the Collateral Agent shall have received evidence that all
other actions (including, without limitation, the payment of all filing fees and
taxes, if any, payable in connection with such filings) have been taken, in
order to perfect (and maintain the perfection and priority of) the security
interest granted hereby.
ARTICLE 33.
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
A. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that each such Receivable, and all records, papers and
documents delivered to the Collateral Agent relating thereto (if any) are what
they purport to be, and that all papers and documents (if any) relating thereto
(i) will represent the genuine, legal, valid and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by the respective account
debtor arising out of the performance of labor or services or the sale or lease
and delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the account debtor
named therein (other than copies created for general accounting purposes), (iii)
will evidence true and valid obligations, and, to such Assignor's knowledge,
enforceable in accordance with their respective terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy,
<PAGE>
EXHIBIT I
Page 7
insolvency, reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law) and (iv) will be in compliance and will conform
in all material respects with all applicable federal, state and local laws and
applicable laws of any relevant foreign jurisdiction.
B. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense accurate and complete records of its Receivables and
Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and such Assignor will make the same available to the
Collateral Agent for inspection, on such Assignor's premises and at such
Assignor's own cost and expense, from time to time as the Collateral Agent may
reasonably request. Upon the occurrence and during the continuance of an Event
of Default, at the request of the Collateral Agent, such Assignor shall, at its
own cost and expense, deliver all tangible evidence of its Receivables and
Contract Rights (including, without limitation, all documents evidencing the
Receivables and all Contracts) and such books and records to the Collateral
Agent or to its representatives (copies of which evidence and books and records
may be retained by such Assignor). Upon the occurrence and during the
continuance of an Event of Default, if the Collateral Agent so directs, such
Assignor shall legend, in form and manner satisfactory to the Collateral Agent,
its Receivables and the Contracts, as well as books, records and documents (if
any) of such Assignor evidencing or pertaining to such Receivables and Contracts
with an appropriate reference to the fact that such Receivables and Contracts
have been assigned to the Collateral Agent and that the Collateral Agent has a
security interest therein.
C. Direction to Account Debtors; Contracting Parties; etc. Upon the
occurrence and during the continuance of an Event of Default, if the Collateral
Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on
account of the Receivables and Contracts to be made directly to the Cash
Collateral Account, (y) that the Collateral Agent may, at its option, directly
notify the obligors with respect to any Receivables and/or under any Contracts
to make payments with respect thereto as provided in the preceding clause (x)
and (z) that the Collateral Agent may enforce collection of any such Receivables
and Contracts and may adjust, settle or compromise the amount of payment
thereof, in the same manner and to the same extent as such Assignor. Without
notice to or assent by any Assignor, the Collateral Agent may apply any or all
amounts then in, or thereafter deposited in, the Cash Collateral Account in the
manner provided in Section 7.4 of this Agreement. The costs and expenses
(including attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor.
D. Modification of Terms; etc. Except in the ordinary course of
business and except as may be permitted by and in accordance with the provisions
of the Credit Agreement, no Assignor shall rescind or cancel any indebtedness
evidenced by any Receivable or under any Contract, or modify any term thereof or
make any adjustment with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or Contract, or interest therein, without the
prior written consent of the Collateral Agent. Each Assignor will duly fulfill
all obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Collateral Agent in the Receivables or Contracts.
<PAGE>
EXHIBIT I
Page 8
E. Collection. Each Assignor shall cause to be collected from the
account debtor named in each of its Receivables or obligor under any Contract,
as and when due (including, without limitation, amounts which are delinquent,
such amounts to be collected in accordance with generally accepted lawful
collection procedures) any and all amounts owing under or on account of such
Receivable or Contract, and apply promptly upon receipt thereof all such amounts
as are so collected to the outstanding balance of such Receivable or under such
Contract, except that, prior to the occurrence of an Event of Default, any
Assignor may allow in the ordinary course of business as adjustments to amounts
owing under its Receivables and Contracts (i) an extension or renewal of the
time or times of payment, or settlement for less than the total unpaid balance,
which such Assignor finds appropriate in accordance with reasonable business
judgment and (ii) a refund or credit due as a result of returned or damaged
merchandise or improperly performed services or for other reasons which such
Assignor finds appropriate in accordance with reasonable business judgment. The
reasonable costs and expenses (including, without limitation, attorneys' fees)
of collection, whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor.
F. Instruments. If any Assignor owns or acquires any Instrument,
such Assignor will within 10 Business Days notify the Collateral Agent thereof,
and upon request by the Collateral Agent will promptly deliver such Instrument
(other than checks payable to any Assignor and processed in the ordinary course
of business) to the Collateral Agent appropriately endorsed to the order of the
Collateral Agent as further security hereunder.
G. Assignors Remain Liable Under Receivables. Anything herein to the
contrary notwithstanding, the Assignors shall remain liable under each of the
Receivables to observe and perform all of the conditions and obligations to be
observed and performed by them thereunder, all in accordance with the terms of
any agreement giving rise to such Receivables. Neither the Collateral Agent nor
any other Secured Creditor shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Collateral Agent or any other Secured
Creditor of any payment relating to such Receivable pursuant hereto, nor shall
the Collateral Agent or any other Secured Creditor be obligated in any manner to
perform any of the obligations of any Assignor under or pursuant to any
Receivable (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by them
or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to them or to which they may be entitled at any
time or times.
H. Assignors Remain Liable Under Contracts. Anything herein to the
contrary notwithstanding, the Assignors shall remain liable under each of the
Contracts to observe and perform all of the conditions and obligations to be
observed and performed by them thereunder, all in accordance with and pursuant
to the terms and provisions of each Contract. Neither the Collateral Agent nor
any other Secured Creditor shall have any obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by the
Collateral Agent or any other Secured Creditor of any payment relating to such
contract pursuant hereto, nor shall the
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Collateral Agent or any other Secured Creditor be obligated in any manner to
perform any of the obligations of any Assignor under or pursuant to any
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any performance by any party under any Contract, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to them or to which they may
be entitled at any time or times.
I. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE 34.
SPECIAL PROVISIONS CONCERNING TRADEMARKS
A. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use the Marks listed in Annex D hereto for such Assignor and that
said listed Marks include all United States marks and applications for
registrations of United States marks in the United States Patent and Trademark
Office that such Assignor owns or uses in connection with its business as of the
date hereof and that said registrations are valid, subsisting and have not been
cancelled. Each Assignor represents and warrants that it owns, is licensed to
use or otherwise has the right to use all material Marks that it uses. Each
Assignor further warrants that it is aware of no third party claim that any
aspect of such Assignor's present or contemplated business operations infringes
or will infringe any trademark, service mark or trade name. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use all U.S. trademark registrations and applications listed in
Annex D hereto and that said registrations are valid, subsisting, have not been
cancelled and that such Assignor is not aware of any third-party claim that any
of said registrations is invalid or unenforceable, or is not aware that there is
any reason that any of said registrations is invalid or unenforceable, or is not
aware that there is any reason that any of said applications will not pass to
registration. Each Assignor hereby grants to the Collateral Agent an absolute
power of attorney to sign, upon the occurrence and during the continuance of an
Event of Default, any document which may be required by the United States Patent
and Trademark Office in order to effect an absolute assignment of all right,
title and interest of such Assignor in each Mark, and record the same.
B. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any right under any Mark absent prior written approval of the
Collateral Agent.
C. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent
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information that may be available with respect to, any party who such Assignor
believes is infringing or diluting or otherwise violating in any material
respect any of such Assignor's rights in and to any significant Mark, or with
respect to any party claiming that such Assignor's use of any significant Mark
violates in any material respect any property right of that party. Each Assignor
further agrees, unless otherwise agreed by the Collateral Agent, to prosecute
any Person infringing any significant Mark owned by such Assignor in accordance
with reasonable business practices.
D. Preservation of Marks. Each Assignor agrees to use its
significant Marks in interstate commerce during the time in which this Agreement
is in effect, sufficiently to preserve such Marks as trademarks or service marks
under the laws of the United States.
E. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required to maintain trademark
registrations, including but not limited to affidavits of use and applications
for renewals of registration in the United States Patent and Trademark Office
for all of its significant registered Marks, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Collateral Agent.
F. Future Registered Marks. If any Mark registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate, such Assignor shall deliver to the Collateral Agent
a copy of such certificate, and an assignment for security in such Mark, to the
Collateral Agent and at the expense of such Assignor, confirming the assignment
for security in such Mark to the Collateral Agent hereunder, the form of such
security to be substantially the same as the form hereof.
G. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks and the goodwill of the
business associated therewith, together with all trademark rights and rights of
protection to the same, vested in the Collateral Agent for the benefit of the
Secured Creditors, in which event such rights, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged
and notarized and record said absolute assignment with the applicable agency;
(ii) take and use or sell the Marks and the goodwill of such Assignor's business
symbolized by the Marks and the right to carry on the business and use the
assets of such Assignor in connection with which the Marks have been used; (iii)
in connection with the exercise of any of the other remedies provided for in
this Agreement or any other Security Document, direct such Assignor to refrain,
in which event such Assignor shall refrain, from using the Marks in any manner
whatsoever, directly or indirectly, and, if requested by the Collateral Agent,
change such Assignor's corporate name to eliminate therefrom any use of any
Mark; and (iv) direct such Assignor to execute such other and further documents
that the Collateral Agent may reasonably request to further confirm the
foregoing and to transfer ownership of the Marks and registrations and any
pending trademark application in the United States Patent and Trademark Office
to the Collateral Agent.
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ARTICLE 35.
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
A. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner or licensee of all
rights in (i) all United States trade secrets and proprietary information
necessary to operate the business of such Assignor (the "Trade Secret Rights"),
(ii) the Patents listed in Annex E hereto for such Assignor and that said
Patents include all United States patents and applications for United States
patents that such Assignor owns as of the date hereof and (iii) the Copyrights
listed in Annex F hereto for such Assignor and that said Copyrights constitute
all the United States copyrights registered with the United States Copyright
Office and applications to United States copyrights that such Assignor now owns.
Each Assignor further warrants that it has no knowledge of any third party claim
that any aspect of such Assignor's present or contemplated business operations
infringes or will infringe any patent or any copyright or such Assignor has
misappropriated any trade secret or proprietary information. Each Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of any Event of Default, any
document which may be required by the United States Patent and Trademark Office
or United States Copyright Office, as the case may be, in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
B. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement, each Assignor hereby agrees not to divest itself of any right
under any Patent or Copyright absent prior written approval of the Collateral
Agent.
C. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe in any significant
Patent or Copyright or to any claim that the practice of any significant Patent
or the use of any significant Copyright violates any property right of a third
party, or with respect to any misappropriation of any significant Trade Secret
Right or any claim that practice of any significant Trade Secret Right violates
any property right of a third party. Each Assignor further agrees, absent
direction of the Collateral Agent to the contrary, diligently to prosecute any
Person infringing any significant Patent or Copyright or any Person
misappropriating any significant Trade Secret Right to the extent that such
Assignor reasonably believes that such infringement is material to its business.
D. Maintenance of Patents or Copyrights. At its own expense, each
Assignor shall make timely payment of all post-issuance fees required to
maintain in force rights under each significant Patent or Copyright, absent
prior written consent of the Collateral Agent.
E. Prosecution of Patent or Copyright Application. At its own
expense, each Assignor shall diligently prosecute all applications for (i)
significant Patents listed in Annex E hereto and (ii) significant Copyrights
listed in Annex F hereto, in each case for such Assignor.
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F. Other Patents or Copyrights. Within 30 days of the acquisition or
issuance of a Patent or Copyright or of filing of an application for a Patent or
Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of
said certificate or registration of, or application for, said Patent or
Copyright, as the case may be, with an assignment for security as to such Patent
or Copyright, as the case may be, to the Collateral Agent and at the expense of
such Assignor, confirming the assignment for security, the form of such
assignment for security to be substantially the same as the form attached
hereto.
G. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof to
execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) in connection with the exercise of
any of the other remedies provided for in this Agreement or any other Security
Document, take and practice or sell the Patents and Copyrights; (iii) in
connection with the exercise of any of the other remedies provided for in this
Agreement or any other Security Document, direct such Assignor to refrain, in
which event such Assignor shall refrain, from practicing the Patents and
Copyrights directly or indirectly; and (iv) direct such Assignor to execute such
other and further documents as the Collateral Agent may request further to
confirm the foregoing and to transfer ownership of the Patents and Copyrights to
the Collateral Agent for the benefit of the Secured Creditors.
ARTICLE 36.
PROVISIONS CONCERNING ALL COLLATERAL
A. Protection of Collateral Agent's Security. Each Assignor will do
nothing to impair the rights of the Collateral Agent in the Collateral (other
than (i) as a result of Equipment which is temporarily in transit or held
pending repair thereof or (ii) as otherwise permitted under the Credit
Documents). Each Assignor will at all times keep its Inventory and Equipment
insured in favor of the Collateral Agent, at such Assignor's own expense to the
extent and in the manner provided in the Credit Agreement; all policies or
certificates with respect to such insurance (and any other insurance maintained
by such Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction
for the benefit of the Collateral Agent (including, without limitation, by
naming the Collateral Agent as additional insured or loss payee), (ii) shall
state that such insurance policies shall not be cancelled or revised without at
least 30 days' prior written notice thereof by the insurer to the Collateral
Agent and (iii) shall provide that the respective insurers irrevocably waive any
and all rights of subrogation with respect to the Collateral Agent and the
Secured Creditors. The Collateral Agent shall, at the time such proceeds of such
insurance are distributed to the Secured Creditors, apply such proceeds in
accordance with Section 7.4 hereof (it being understood that the receipt and
distribution of such proceeds shall be subject to the provisions of Section 4.02
of the Credit Agreement). Each Assignor assumes all liability and responsibility
in connection with the Collateral acquired by it and the liability of such
Assignor to pay the Obligations shall in no way
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be affected or diminished by reason of the fact that such Collateral may be
lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to
such Assignor.
B. Warehouse Receipts Non-negotiable. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such Assignor shall request that such
warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as
such term is used in Section 7-104 of the Uniform Commercial Code as in effect
in any relevant jurisdiction or under other relevant law).
C. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
reasonably deems appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
D. Financing Statements. Each Assignor agrees to execute and deliver
to the Collateral Agent such financing statements, in form reasonably acceptable
to the Collateral Agent, as the Collateral Agent may from time to time request
or as are necessary or desirable in the opinion of the Collateral Agent to
establish and maintain a valid, enforceable and first priority perfected
security interest, subject only to Permitted Liens, in the Collateral as
provided herein and in the other rights and security contemplated hereby all in
accordance with the Uniform Commercial Code as enacted in any and all relevant
jurisdictions or any other relevant law. Each Assignor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Assignor hereby authorizes the Collateral Agent to file any such financing
statements without the signature of such Assignor where permitted by law.
ARTICLE 37.
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
A. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
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(ii) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and
the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to
the Collateral Agent and may exercise any and all remedies of such
Assignor in respect of such Collateral;
(iii) withdraw all moneys, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Assignor to sell, assign or otherwise liquidate any or
all of the Collateral or any part thereof, and, in each case, take
possession of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral Agent
in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or
places so designated by the Collateral Agent and there delivered to
the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by
the Collateral Agent as provided in Section 7.2 hereof;
(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents and Copyrights included in the Collateral for
such term and on such conditions and in such manner as the Collateral
Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Administrative Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Banks (or, after the date on which all Credit
Document Obligations have been paid in full, the holders of at least the
majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Collateral Agent or the holders of at least a
majority of the outstanding Other Obligations, as the case maybe, for the
benefit of the Secured Creditors upon the terms of this Agreement.
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B. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. To the extent permitted by any such
requirement of law, the Collateral Agent and the other Secured Creditors may bid
for and become the purchaser of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to the relevant
Assignor. If, under mandatory requirements of applicable law, the Collateral
Agent shall be required to make disposition of the Collateral within a period of
time which does not permit the giving of notice to the relevant Assignor as
hereinabove specified, the Collateral Agent need give such Assignor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law. Each Assignor agrees to do or cause to
be done all such other acts and things as may be reasonably necessary to make
such sale or sales of all or any portion of the Collateral valid and binding and
in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
C. Waiver of Claims. Except as otherwise provided in this Agreement,
EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION
OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, and each
Assignor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by the Collateral Agent's taking of
possession of any of the Collateral except any damages which are the
direct result of the Collateral Agent's gross negligence or willful
misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
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(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
D. Application of Proceeds. 1. All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or
Additional Security Documents require proceeds of collateral under such Security
Documents to be applied in accordance with the provisions of this Agreement, the
Pledgee or Mortgagee under such other Security Document) upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Collateral Agent hereunder, shall be applied as follows:
a. first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
b. second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Primary Obligations shall be paid to the Secured Creditors as provided in
Section 7.4(e) hereof, with each Secured Creditor receiving an amount
equal to its outstanding Primary Obligations or, if the proceeds are
insufficient to pay in full all such Primary Obligations, its Pro Rata
Share (as defined below) of the amount remaining to be distributed;
c. third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations shall be paid to the Secured Creditors
as provided in Section 7.4(e) hereof, with each Secured Creditor receiving
an amount equal to its outstanding Secondary Obligations or, if the
proceeds are insufficient to pay in full all such Secondary Obligations,
its Pro Rata Share of the amount remaining to be distributed; and
d. fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i), (ii) and (iii) and following the
termination of this Agreement pursuant to Section 10.8 hereof, to the
relevant Assignor or, to the extent directed by such Assignor or a court
of competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
2. For purposes of this Agreement, (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the
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case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Document Obligations, all principal of, and interest on, all Loans, all
Unpaid Drawings theretofore made (together with all interest accrued thereon),
and the aggregate Stated Amounts of all Letters of Credit issued under the
Credit Agreement, and all Fees and (ii) in the case of the Other Obligations,
all amounts due under the Interest Rate Protection Agreements or Other Hedging
Agreements (other than indemnities, fees (including, without limitation,
attorneys' fees) and similar obligations and liabilities) and (z) "Secondary
Obligations" shall mean all Obligations other than Primary Obligations.
3. When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations (with the amount to be
applied by any Secured Creditor to its Primary Obligations to be applied (x)
first, to interest and (y) second, to any other Primary Obligations) and (ii)
second, to their Secondary Obligations. If any payment to any Secured Creditor
of its Pro Rata Share of any distribution would result in overpayment to such
Secured Creditor, such excess amount shall instead be distributed in respect of
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
the other Secured Creditors, with each Secured Creditor whose Primary
Obligations or Secondary Obligations, as the case may be, have not been paid in
full to receive an amount equal to such excess amount multiplied by a fraction
the numerator of which is the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of such Secured Creditor and the denominator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of all Secured Creditors entitled to such distribution.
4. Each of the Secured Creditors agrees and acknowledges that if the
Bank Creditors are to receive a distribution on account of undrawn amounts with
respect to Letters of Credit issued under the Credit Agreement (which shall only
occur after all outstanding Loans and Unpaid Drawings with respect to such
Letters of Credit have been paid in full), such amounts shall be paid to the
Administrative Agent under the Credit Agreement and held by it, for the equal
and ratable benefit of the Bank Creditors, as cash security for the repayment of
Obligations owing to the Bank Creditors as such. If any amounts are held as cash
security pursuant to the immediately preceding sentence, then upon the
termination of all outstanding Letters of Credit, and after the application of
all such cash security to the repayment of all Obligations owing to the Bank
Creditors after giving effect to the termination of all such Letters of Credit,
if there remains any excess cash, such excess cash shall be returned by the
Administrative Agent to the Collateral Agent for distribution in accordance with
Section 7.4(a) hereof.
5. Except as set forth in Section 7.4(c) hereof, all payments
required to be made to the Bank Creditors hereunder shall be made to the
Administrative Agent under the Credit Agreement for the account of the Bank
Creditors and all payments required to be made to the Other Creditors hereunder
shall be made directly to the respective Other Creditor.
6. For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other Creditors for
a determination (which the Administrative Agent, each Other Creditor and the
Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Obligations owed to the Bank Creditors or
the Other Creditors,
<PAGE>
EXHIBIT I
Page 18
as the case may be. Unless it has actual knowledge (including by way of written
notice from a Bank Creditor or an Other Creditor) to the contrary, the
Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Collateral Agent, in acting
hereunder, shall be entitled to assume that (x) no Secondary Obligations are
owing to any Bank Creditor or Other Creditor and (y) no Interest Rate Protection
Agreement or Other Hedging Agreement, or Other Obligations in respect thereof,
are in existence.
7. It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the sums referred to in
clause (a) of this Section 7.4 with respect to the relevant Assignor.
E. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements, the other
Credit Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover expenses, including attorneys' fees, and the amounts thereof shall be
included in such judgment.
F. Discontinuance of Proceedings. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the relevant
Assignor, the Collateral Agent and each holder of any of the Obligations shall
be restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and
all rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.
ARTICLE 38.
INDEMNITY
A. Indemnity. 1. Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective succes-
<PAGE>
EXHIBIT I
Page 19
sors, permitted assigns, employees, agents and servants (hereinafter in this
Section 8.1 referred to individually as "Indemnitee," and collectively as
"Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
costs, expenses or disbursements (including attorneys' fees and expenses) (for
the purposes of this Section 8.1 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement,
any other Credit Document or any other document executed in connection herewith
or therewith or in any other way connected with the administration of the
transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or willful misconduct of such Indemnitee. Each
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, damage, injury, penalty, claim, demand, action,
suit or judgment, the relevant Assignor shall assume full responsibility for the
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify the relevant Assignor of any such assertion of which such Indemnitee has
knowledge.
2. Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Collateral.
3. Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Credit Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement, or any other Credit Document.
4. If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
<PAGE>
EXHIBIT I
Page 20
B. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and the payment of all other
Obligations and notwithstanding the discharge thereof.
ARTICLE 39.
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Administrative Agent" shall have the meaning provided in the
recitals to this Agreement.
"Agreement" shall mean this Security Agreement, as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Banks" shall have the meaning provided in the recitals to this
Agreement.
"Borrower" shall have the meaning provided in the recitals to this
Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of
this Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
<PAGE>
EXHIBIT I
Page 21
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreement or Other Hedging Agreement), but excluding any contract to
the extent that the terms thereof prohibit (after giving effect to any approvals
or waivers) the assignment of, or granting a security interest in, such contract
(it being understood and agreed, however, that notwithstanding the foregoing,
all rights to payment for money due or to become due pursuant to any such
excluded contract shall be subject to the security interests created by this
Agreement).
"Copyrights" shall mean any United States or foreign copyright owned
by any Assignor, including any registrations of any Copyrights, in the United
States Copyright Office or the equivalent thereof in any foreign country, as
well as any application for a United States copyright registration now or
hereafter made with the United States Copyright Office by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals
to this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time,
or both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
<PAGE>
EXHIBIT I
Page 22
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any
United States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration of any trademarks
and service marks, or the equivalent thereof in any foreign country, in the
United States Patent and Trademark Office and any trade dress including logos
and/or designs used by any Assignor in the United States or any foreign country.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document to which it is a party and the due
performance and compliance by each Assignor with the terms of each such Credit
Document (all such obligations and liabilities under this clause (i), except to
the extent consisting of obligations or indebtedness with respect to Interest
Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations"); (ii) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of each Assignor now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging
Agreement with the Secured Creditors including, in the case of Assignors other
than the Borrower, all obligations of such Assignor under the Guaranty to which
such Assignor is a party in respect of Interest Rate Protection Agreements or
Other Hedging Agreements (all such obligations and liabilities under this clause
(ii) being herein collectively called the "Other Obligations"); (iii) any and
all sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of any Assignor referred to in clauses (i) and (ii) above, after
an Event of Default shall have occurred and be continuing, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
<PAGE>
EXHIBIT I
Page 23
"Other Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which
any Assignor now or hereafter has title and any divisions or continuations
thereof, as well as any application for a United States or foreign patent now or
hereafter made by any Assignor.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Receivables" shall mean any "account" as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Requisite Creditors" shall have the meaning provided in Section
10.2 of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
<PAGE>
EXHIBIT I
Page 24
"Secured Creditors" shall have the meaning provided in the recitals
to this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8
of this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
ARTICLE 40.
MISCELLANEOUS
A. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
1. if to any Assignor, at its address set forth opposite its
signature below;
2. if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Telephone No.: (212) 250-4886
Telecopier No.: (212) 250-7218
Attention: Anthony Logrippo
3. if to any Bank Creditor (other than the Collateral Agent), at
such address as such Bank Creditor shall have specified in the Credit
Agreement;
4. if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
B. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby and the
Collateral Agent (with the consent of either (x) the Required Banks or, to the
extent required by Section 13.12 of the Credit Agreement, all of the Banks, at
all times prior to the time on which all Credit Document Obligations have been
paid in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full); provided, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class of Secured
<PAGE>
EXHIBIT I
Page 25
Creditors (and not all Secured Creditors in a like or similar manner) shall also
require the written consent of the Requisite Creditors of such Class of Secured
Creditors. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of
the Credit Document Obligations or (y) the Other Creditors as the holders of the
Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Banks and (y) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
C. Obligations Absolute. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; (c) any
renewal, extension, amendment or modification of or addition or supplement to or
deletion from any Credit Document or any Interest Rate Protection Agreement or
Other Hedging Agreement or any security for any of the Obligations; (d) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such agreement or instrument including, without limitation, this
Agreement; (e) any furnishing of any additional security to the Collateral Agent
or its assignee or any acceptance thereof or any release of any security by the
Collateral Agent or its assignee; or (f) any limitation on any party's liability
or obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement or
any term thereof; whether or not any Assignor shall have notice or knowledge of
any of the foregoing.
D. Successors and Assigns. This Agreement shall be binding upon each
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and each other Secured Creditor and their respective successors
and assigns; provided, that no Assignor may transfer or assign any or all of its
rights or obligations hereunder without the prior written consent of the
Collateral Agent. All agreements, statements, representations and warranties
made by each Assignor herein or in any certificate or other instrument delivered
by such Assignor or on its behalf under this Agreement shall be considered to
have been relied upon by the Secured Creditors and shall survive the execution
and delivery of this Agreement, the other Credit Documents and the Interest Rate
Protection Agreements or Other Hedging Agreements regardless of any
investigation made by the Secured Creditors or on their behalf.
E. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
F. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
G. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations,
<PAGE>
EXHIBIT I
Page 26
if any, assumed by it with respect to the Collateral and the Collateral Agent
shall not have any obligations or liabilities with respect to any Collateral by
reason of or arising out of this Agreement, nor shall the Collateral Agent be
required or obligated in any manner to perform or fulfill any of the obligations
of any Assignor under or with respect to any Collateral.
H. Termination; Release. 1. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Commitments and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding (and all Loans have been repaid in full), and all Letters of Credit
have been terminated and all Obligations then owing have been paid in full.
2. In the event that any part of the Collateral is sold (except to
Holdings or any of its Subsidiaries) in connection with a sale permitted by
Section 9.02 of the Credit Agreement or otherwise released at the direction of
the Required Banks (or all Banks if required by Section 13.12 of the Credit
Agreement) and the proceeds of such sale or sales or from such release are
applied in accordance with the provisions of Section 4.02 of the Credit
Agreement, to the extent required to be so applied, such Collateral will be sold
free and clear of the Liens created by this Agreement and the Collateral Agent,
at the request and expense of the relevant Assignor, will duly assign, transfer
and deliver to such Assignor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and has not theretofore been released pursuant to this Agreement and
will promptly execute and deliver to such Assignor a proper instrument or
instruments (including UCC termination statements on form UCC-3) acknowledging
the release of such Collateral pursuant to this Agreement.
3. At any time that an Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 10.8(a) or (b), as the case may be, it shall
deliver to the Collateral Agent a certificate signed by an executive officer of
such Assignor stating that the release of the respective Collateral is permitted
pursuant to such Section 10.8(a) or (b), as the case may be.
4. The Collateral Agent shall have no liability whatsoever to any
other Secured Creditor as a result of any release of Collateral by it in
accordance with this Section 10.8.
I. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
<PAGE>
EXHIBIT I
Page 27
J. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
K. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and Section 12 of the Credit
Agreement. The Collateral Agent shall act hereunder and thereunder on the terms
and conditions set forth herein and in Section 12 of the Credit Agreement.
L. Benefit of Agreement. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of and be enforceable by each of the parties hereto and its
successors and assigns.
M. Additional Assignors. It is understood and agreed that no
Domestic Subsidiaries of the Borrower exist on the date hereof. Any such
Subsidiary established or created after the date hereof and that is required to
execute a counterpart of this Agreement pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
Addresses:
333 Western Avenue FSC SEMICONDUCTOR CORPORATION,
South Portland, ME 04106 as an Assignor
Telephone No.: (207) 775-8755
Telecopier No.: (207) 761-6020
Attention: Dan Boxer By
----------------------------
Title:
333 Western Avenue FAIRCHILD SEMICONDUCTOR
South Portland, ME 04106 CORPORATION, as an Assignor
Telephone No.: (207) 775-8755
Telecopier No.: (207) 761-6020
Attention: Dan Boxer By
----------------------------
Title:
BANKERS TRUST COMPANY,
as Collateral Agent
130 Liberty Street
New York, New York 10006 By
Telephone No.: (212) 250-4886 ----------------------------
Telecopier No.: (212) 250-7218 Title:
Attention: Anthony Logrippo
<PAGE>
ANNEX A
to
SECURITY AGREEMENT
SCHEDULE OF CHIEF EXECUTIVE OFFICES
AND OTHER RECORD LOCATIONS
<PAGE>
ANNEX B
to
SECURITY AGREEMENT
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
<PAGE>
ANNEX C
to
SECURITY AGREEMENT
SCHEDULE OF TRADE AND FICTITIOUS NAMES
<PAGE>
ANNEX D
to
SECURITY AGREEMENT
SCHEDULE OF MARKS
<PAGE>
ANNEX E
to
SECURITY AGREEMENT
SCHEDULE OF PATENTS AND APPLICATIONS
<PAGE>
ANNEX F
to
SECURITY AGREEMENT
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
<PAGE>
ANNEX G
to
SECURITY AGREEMENT
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of
which are hereby acknowledged, [Name of Assignor], a __________ corporation (the
"Assignor") with principal offices at ____________________________, hereby
assigns and grants to Bankers Trust Company, as Collateral Agent, with principal
offices at 130 Liberty Street, New York, New York 10006 (the "Assignee"), a
security interest in (i) all of the Assignor's right, title and interest in and
to the United States trademarks, trademark registrations and trademark
applications (the "Marks") set forth on Schedule A attached hereto, (ii) all of
the Assignor's right, title and interest in and to the United States patents and
pending patent applications (the "Patents") set forth on Schedule B attached
hereto, in each case together with (iii) all Proceeds (as such term is defined
in the Security Agreement referred to below) and products of the Marks and
Patents, (iv) the goodwill of the businesses with which the Marks are associated
and (v) all causes of action arising prior to or after the date hereof for
infringement of any of the Marks and Patents or unfair competition regarding the
same.
THIS ASSIGNMENT OF SECURITY INTEREST is made to secure the
satisfactory performance and payment of all the Obligations of the Assignor, as
such term is defined in the Security Agreement among the Assignor, the other
assignors from time to time party thereto and the Assignee, dated as of March
11, 1997 (as amended from time to time, the "Security Agreement"). Upon the
occurrence of the Termination Date (as defined in the Security Agreement), the
Assignee shall, upon such satisfaction, execute, acknowledge, and deliver to the
Assignor an instrument in writing releasing the security interest in the Marks
and Patents acquired under this Assignment of Security Interest.
This Assignment of Security Interest has been granted in conjunction
with the security interest granted to the Assignee under the Security Agreement.
The rights and remedies
<PAGE>
ANNEX G
Page 2
of the Assignee with respect to the security interest granted herein are without
prejudice to, and are in addition to those set forth in the Security Agreement,
all terms and provisions of which are incorporated herein by reference. In the
event that any provisions of this Assignment of Security Interest are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Security Interest as of the ____ day of _________, 199__.
[NAME OF ASSIGNOR], Assignor
By_____________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Collateral Agent, Assignee
By_____________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 199_, before me personally came
_________________________ who, being by me duly sworn, did state as follows:
that [s]he is _______________ of [Name of Assignor], that [s]he is authorized to
execute the foregoing Assignment of Security Interest on behalf of said
corporation and that [s]he did so by authority of the Board of Directors of said
corporation.
-------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 199_, before me personally came
_____________________________ who, being by me duly sworn, did state as follows:
that [s]he is __________________ of Bankers Trust Company, that [s]he is
authorized to execute the foregoing Assignment of Security Interest on behalf of
said corporation and that [s]he did so by authority of the Board of Directors of
said corporation.
-------------------------
Notary Public
<PAGE>
SCHEDULE A
MARK REG. NO. REG. DATE
<PAGE>
SCHEDULE B
PATENT PATENT NO. ISSUE DATE
<PAGE>
ANNEX H
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Assignor], a _______________ corporation (the
"Assignor"), having its chief executive office at , ________________________ ,
is the owner of all right, title and interest in and to the United States
copyrights and associated United States copyright registrations and applications
for registration set forth in Schedule A attached hereto;
WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its
principal offices at 130 Liberty Street, New York, New York 10006 (the
"Assignee"), desires to acquire a security interest in, and lien upon, all of
Assignor's right, title and interest in and to Assignor's copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Assignor is willing to assign and grant to the Assignee
a security interest in, and lien upon, the copyrights and copyright
registrations and applications therefor described above.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, and subject to the terms and
conditions of the Security Agreement, dated as of March 11, 1997, made by the
Assignor, the other assignors from time to time party thereto and the Assignee
(as amended from time to time, the "Security Agreement"), the Assignor hereby
assigns and grants to the Assignee a security interest in, and lien upon, all of
Assignor's right, title and interest in and to Assignor's copyrights and
copyright registrations and applications therefor set forth in Schedule A
attached hereto (the "Copyrights"), together with (i) all Proceeds (as such term
is defined in the Security Agreement referred to below) of the
<PAGE>
ANNEX H
Page 2
Copyrights, and (ii) all causes of action arising prior to or after the date
hereof for infringement of any Copyright.
This Assignment of Security Interest is made to secure the
satisfactory performance and payment of all Obligations (as such term is defined
in the Security Agreement) of the Assignor and shall be effective as of the date
of the Security Agreement. Upon the occurrence of the Termination Date (as such
term is defined in the Security Agreement), the Assignee shall, upon such
satisfaction, execute, acknowledge, and deliver to Assignor an instrument in
writing releasing the security interest in the Copyrights acquired under this
Assignment of Security Interest.
This Assignment of Security Interest has been granted in conjunction
with the security interest granted to the Assignee under the Security Agreement.
The rights and remedies of the Assignee with respect to the security interest
granted herein are without prejudice to, and are in addition to those set forth
in the Security Agreement, all terms and provisions of which are incorporated
herein by reference. In the event that any provisions of this Assignment are
deemed to conflict with the Security Agreement, the provisions of the Security
Agreement shall govern.
<PAGE>
ANNEX H
Page 3
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Security Interest at New York, New York as of the __ day of ____________, 199_.
[NAME OF ASSIGNOR], Assignor
By_______________________________
Name:
Title:
BANKERS TURST COMPANY,
as Collateral Agent, Assignee
By_______________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ________, 199_ before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Assignor], that [s]he is authorized to execute
the foregoing Assignment of Security Interest on behalf of said corporation and
that [s]he did so by authority of the Board of Directors of said corporation.
----------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ________, 199_ before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
_______________ of Bankers Trust Company, that [s]he is authorized to execute
the foregoing Assignment of Security Interest on behalf of said corporation and
that [s]he did so by authority of the Board of Directors of said corporation.
---------------------------------
Notary Public
<PAGE>
SCHEDULE A
COPYRIGHTS
REGISTRATION PUBLICATION
NUMBERS DATE COPYRIGHT TITLE
<PAGE>
EXHIBIT J
FORM OF CONSENT LETTER
[Letterhead of Agent for Service of Process]
[Date]
To the Agent and the
Banks party to the
Credit Agreement referred
to below:
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of March 11,
1997, among FSC Semiconductor Corporation ("Holdings"), Fairchild Semiconductor
Corporation (the "Borrower"), the various Banks from time to time party thereto,
Bankers Trust Company, as Administrative Agent (the "Administrative Agent"),
Credit Suisse First Boston, as Syndication Agent and Canadian Imperial Bank of
Commerce, as Documentation Agent (as such Credit Agreement may be modified,
supplemented or amended from time to time, the "Credit Agreement").
Each of Holdings and the Borrower, pursuant to Section 13.08 of the
Credit Agreement, and each Subsidiary Guarantor pursuant to Section 20 of the
Subsidiaries Guaranty has irrevocably designated, appointed and empowered the
undersigned, Corporation Service Company, with offices currently located at 500
Central Avenue, Albany, New York 12206, as its authorized designee, appointee
and agent to receive, accept and acknowledge for and on its behalf, and in
respect of its property, service of any and all legal process, summons, notices
and documents which may be served in any such legal action or proceeding with
respect to the Credit Agreement or any other Credit Document (as defined in the
Credit Agreement) in the courts of the State of New York or of the United States
of America for the Southern District of New York.
The undersigned hereby informs you that it irrevocably accepts such
appointment as agent as set forth in the above-referenced Sections of the
respective Credit Documents and agrees with you that the undersigned (i) shall
inform the Administrative Agent promptly in writing of any change of its address
in the State of New York, (ii) shall perform its obligations as such process
agent in accordance with the provisions of such Sections and (iii) shall forward
promptly to Holdings or the Borrower, as the case may be, any legal process
received by the undersigned in its capacity as process agent.
<PAGE>
EXHIBIT J
Page 2
As process agent, the undersigned, and its successor or successors,
agree to discharge the above-mentioned obligations and will not refuse
fulfillment of such obligations under the above-referenced Sections of the
respective Credit Documents.
Very truly yours,
CORPORATION SERVICE COMPANY
By_______________________________
Title:
<PAGE>
EXHIBIT K
OFFICER'S SOLVENCY CERTIFICATE
I, the undersigned, Chief Financial Officer of [FSC Semiconductor
Corporation] [and] [Fairchild Semiconductor Corporation], do hereby certify on
behalf of [FSC Semiconductor Corporation] [and] [Fairchild Semiconductor
Corporation] that:
1. This Certificate is furnished to the Agents and the Banks
pursuant to Section 5.17 of the Credit Agreement, dated as of March 11, 1997
among FSC Semiconductor Corporation ("Holdings"), Fairchild Semiconductor
Corporation (the "Borrower"), various lenders from time to time party thereto
(the "Banks"), Bankers Trust Company, as Administrative Agent (together with any
successor administrative agent, the "Administrative Agent"), Credit Suisse First
Boston, as Syndication Agent (the "Syndication Agent") and Canadian Imperial
Bank of Commerce, as Documentation Agent (the "Documentation Agent" and,
together with the Administrative Agent and the Syndication Agent, collectively,
the "Agents") (such Credit Agreement, as in effect on the date of this
Certificate, being herein called the "Credit Agreement"). Unless otherwise
defined herein, capitalized terms used in this Certificate shall have the
meanings set forth in the Credit Agreement.
2. For purposes of this Certificate, the terms below shall have the
following definitions:
(a) "Fair Value"
The amount at which the assets, in their entirety, of Holdings and
its Subsidiaries (on a consolidated basis) and the Borrower (on a
stand-alone basis), as applicable, would change hands between a
willing buyer and a willing seller, within a commercially reasonable
period of time, each having reasonable knowledge of the relevant
facts, with neither being under any compulsion to act.
(b) "Present Fair Saleable Value"
The amount that could be obtained by an independent willing seller
from an independent willing buyer if the assets of Holdings and its
Subsidiaries (on a consolidated basis) and the Borrower (on
<PAGE>
EXHIBIT K
Page 2
a stand-alone basis), as applicable, are sold with reasonable
promptness under normal selling conditions in a current market.
(c) "New Financing"
The Indebtedness incurred or to be incurred by Holdings and its
Subsidiaries under the Credit Documents (assuming the full
utilization by the Borrower of the Total Commitments under the
Credit Agreement) and the other Documents and all other financings
contemplated by the Documents, in each case after giving effect to
the Transaction and the incurrence of all financings contemplated
therewith.
(d) "Stated Liabilities"
The recorded liabilities (including contingent liabilities) that
would be recorded in accordance with generally accepted accounting
principles ("GAAP") of Holdings and its Subsidiaries (on a
consolidated basis) and the Borrower (on a stand-alone basis), in
each case at March 11, 1997 after giving effect to the Transaction,
determined in accordance with GAAP consistently applied, together
with, (x) the net change in long-term debt (including current
maturities) between May 26, 1996 and the date hereof and (y) without
duplication, the amount of all New Financing.
(e) "Identified Contingent Liabilities"
The maximum estimated amount of liabilities reasonably likely to
result from pending litigation, asserted claims and assessments,
guaranties, uninsured risks (after taking into account the effect of
any indemnity therefor and the likelihood of payment thereunder) and
other contingent liabilities of each of Holdings and its
Subsidiaries (on a consolidated basis) and the Borrower (on a
stand-alone basis), as applicable, after giving effect to the
Transaction (exclusive of such contingent liabilities to the extent
reflected in Stated Liabilities), as set forth on Annex A hereto.
<PAGE>
EXHIBIT K
Page 3
(f) "Will be able to pay its Stated Liabilities and Identified
Contingent Liabilities, as they mature"
For the period from the date hereof through March 11, 2003, each of
Holdings and its Subsidiaries (on a consolidated basis) and the
Borrower (on a stand-alone basis), as applicable, will have
sufficient assets and cash flow to pay their respective Stated
Liabilities and Identified Contingent Liabilities as those
liabilities mature or otherwise become payable.
(g) "Does not have Unreasonably Small Capital"
For the period from the date hereof through March 11, 2003, each of
Holdings and its Subsidiaries (on a consolidated basis) and the
Borrower (on a stand-alone basis), as applicable after consummation
of the Transaction and all Indebtedness (including the Loans) being
incurred or assumed and Liens created by the Borrower and its
Subsidiaries in connection therewith, is a going concern and has
sufficient capital to ensure that it will continue to be a going
concern.
3. For purposes of this Certificate, I, or officers of the Borrower
under my direction and supervision, have performed the following procedures as
of and for the periods set forth below.
(a) I have reviewed the financial statements (including the pro forma
financial statements) and Projections referred to in Sections
7.05(a) and (d) of the Credit Agreement.
(b) I have made inquiries of certain officials of Holdings and its
Subsidiaries, who have responsibility for financial and accounting
matters regarding (i) the existence and amount of Identified
Contingent Liabilities associated with the business of Holdings and
its Subsidiaries and (ii) whether the unaudited combined balance
sheets and related combined statements of operations referred to in
Section 7.05(a) of the Credit Agreement are in conformity with GAAP
applied on a basis substantially consistent with that of the audited
financial statements as at May 26, 1996.
<PAGE>
EXHIBIT K
Page 4
(c) I have knowledge of and have reviewed to my satisfaction the Credit
Documents and the other Documents, and the respective Schedules and
Exhibits thereto.
(d) With respect to Identified Contingent Liabilities, I:
1. inquired of certain officials of Holdings and its
Subsidiaries, who have responsibility for legal, financial and
accounting matters as to the existence and estimated liability
with respect to all contingent liabilities known to them;
2. confirmed with officers of Holdings and its Subsidiaries that,
to the best of such officers' knowledge, (i) all appropriate
items were included in Stated Liabilities or the listing of
Identified Contingent Liabilities and that (ii) the amounts
relating thereto were the maximum estimated amount of
liabilities reasonably likely to result therefrom as of the
date hereof; and
3. I hereby certify that, to the best of my knowledge, Annex A
hereto constitutes a true and complete list of all material
liabilities that may arise from any pending litigation,
asserted claims and assessments, guarantees, uninsured risks
(after taking into account the effect of any indemnity
therefor and the likelihood of payment thereunder) and other
contingent liabilities of Holdings and its Subsidiaries
(exclusive of such contingent liabilities to the extent
reflected in Stated Liabilities), and with respect to each
such item sets forth the estimable maximum liability with
respect thereto.
(e) I have examined the Projections relating to Holdings and its
Subsidiaries which have been previously delivered to the Banks and
considered the effect thereon of any changes since the date of the
preparation thereof on the results projected therein. After such
review, I hereby certify that in my opinion the Projections are
reasonable and attainable, and that the Projections support the
conclusions contained in paragraph 4 below.
<PAGE>
EXHIBIT K
Page 5
(f) I have made inquiries of certain officers of Holdings and its
Subsidiaries who have responsibility for financial reporting and
accounting matters regarding whether they were aware of any events
or conditions that, as of the date hereof, would cause either of
Holdings and its Subsidiaries (on a consolidated basis) or the
Borrower (on a stand-alone basis), after giving effect to the
Transaction and the related financing transactions (including the
incurrence of the New Financing), to (i) have assets with a Fair
Value or Present Fair Saleable Value that are less than the sum of
Stated Liabilities and Identified Contingent Liabilities; (ii) have
Unreasonably Small Capital; or (iii) not be able to pay its Stated
Liabilities and Identified Contingent Liabilities as they mature or
otherwise become payable.
4. Based on and subject to the foregoing, I hereby certify on behalf
of each of Holdings and its Subsidiaries (on a consolidated basis) and the
Borrower (on a stand-alone basis) that, after giving effect to the Transaction
and the related financing transactions (including the incurrence of the New
Financing), it is my informed opinion that (a) the Fair Value and Present Fair
Saleable Value of the assets of each of Holdings and its Subsidiaries (on a
consolidated basis) and the Borrower (on a stand-alone basis) exceed its Stated
Liabilities and Identified Contingent Liabilities; (b) each of Holdings and its
Subsidiaries (on a consolidated basis) and the Borrower (on a stand-alone basis)
does not have Unreasonably Small Capital; and (c) each of Holdings and its
Subsidiaries (on a consolidated basis) and the Borrower (on a stand-alone basis)
will be able to pay its Stated Liabilities and Identified Contingent
Liabilities, as they mature or otherwise become payable.
<PAGE>
EXHIBIT K
Page 6
IN WITNESS WHEREOF, I have hereto set my hand this ___ day of March,
1997.
[FSC SEMICONDUCTOR
CORPORATION]
[FAIRCHILD SEMICONDUCTOR
CORPORATION]
By__________________________
Title:
<PAGE>
ANNEX A
IDENTIFIED CONTINGENT LIABILITIES
Pursuant to the Asset Purchase Agreement dated March 11, 1997 between the
Borrower and National Semiconductor Corporation, the Borrower assumed the
following contingent liabilities:
1. Heather Baker v. National Semiconductor Corporation, Cumberland County,
Maine Superior Court, Case No. CV-95-1171. Claim for approximately
$300,000 resulting from termination of independent contractor in South
Portland.
2. Mark Fortin v. National Semiconductor Corporation, Maine Human Rights
Commission, Charge No. E96-0210. Claim for approximately $300,000
regarding termination of employment; alleging discrimination.
3. Paul Filarowski v. National Semiconductor Corporation, Boston Area Office
of EEOC, Charge No. 161970014. Claim for approximately $300,000 in
connection with termination of employment; alleging age discrimination.
4. Empire Computer & Components, Inc. v. Pioneer Technology Group, Santa
Clara, California Superior Court, Case No. CV-75-5410. Claim for
approximately $2.1 million against National Semiconductor Corporation
("National") distributor ("Distributor") for breach of contract. National
has agreed to indemnify Distributor. On October 8, 1996, the plaintiff
served a verified notice on the defendant that plaintiff was striking from
its complaint for $10 million for loss of business reputation.
<PAGE>
EXHIBIT L
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date: _______ __, 19__
Reference is made to the Credit Agreement described in Item 2 of
Annex I hereto (as such Credit Agreement may hereafter be amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"). Unless defined
in Annex I hereto, terms defined in the Credit Agreement are used herein as
therein defined. _____________________ (the "Assignor") and _________________
(the "Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations under the Credit Agreement relating to
the facilities listed in Item 4 of Annex I hereto, including, without
limitation, [(v) in the case of any assignment of all or any portion of the
Total Tranche A Term Loan Commitment, all rights and obligations with respect to
the Assigned Share of such Total Tranche A Term Loan Commitment,](1) [(w) in the
case of any assignment of all or any portion of the Tranche B Term Loan
Commitment, all rights and obligations with respect to the Assigned Share of
such Total Tranche B Term Loan Commitment,](2) (x) in the case of any assignment
of outstanding Tranche A Term Loans, all rights and obligations with respect to
the Assigned Share of such Tranche A Term Loans, (y) in the case of any
assignment of outstanding Tranche B Term Loans, all rights and obligations with
respect to the Assigned Share of such outstanding Tranche B Term Loans, and (z)
in the case of any assignment of all or any portion of the Total Revolving Loan
Commitment, all rights and obligations with respect to the Assigned Share of
such Total Revolving Loan Commitment and of any outstanding Revolving
- ----------
(1) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Total Tranche A Term Loan Commitment.
(2) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Total Tranche B Term Loan Commitment.
<PAGE>
EXHIBIT L
Page 2
Loans and Letters of Credit. After giving effect to such sale and assignment,
the Assignee's Revolving Loan Commitment[, Tranche A Term Loan Commitment](3) [,
Tranche B Term Loan Commitment](4) and the amount of the outstanding Term Loans
owing to the Assignee will be as set forth in Item 4 of Annex I hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the other Credit Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or the
other Credit Documents or any other instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Holdings, the Borrower
or any of its Subsidiaries or the performance or observance by Holdings, the
Borrower or any of its Subsidiaries of any of their obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption Agreement; (ii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Assignor or any other Bank or Agent 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 the Credit Agreement;
(iii) confirms that it is an Eligible Transferee under Section 13.04(b) of the
Credit Agreement; (iv) appoints and authorizes the Administrative Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Administrative Agent and the Collateral Agent, as the case may
be, by the terms thereof, together with such powers as are reasonably incidental
thereto; [and] (v) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement
- ----------
(3) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Total Tranche A Term Loan Commitment.
(4) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Total Tranche B Term Loan Commitment. 5 Include if
the Assignee is organized under the laws of a jurisdiction outside of the United
States.
<PAGE>
EXHIBIT L
Page 3
are required to be performed by it as a Bank[; and (vii) to the extent legally
entitled to do so, attaches the forms described in Section 13.04(b) of the
Credit Agreement](5).
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative Agent.
This Assignment and Assumption Agreement shall be effective, unless otherwise
specified in Item 5 of Annex I hereto (the "Settlement Date"), upon the receipt
of the consent of the Administrative Agent to the extent required by Section
13.04(b) of the Credit Agreement, receipt by the Administrative Agent of the
administrative fee referred to in such Section 13.04(b), and the registration of
the transfer as provided by Section 13.17 of the Credit Agreement.
5. Upon the Settlement Date of this Assignment and Assumption
Agreement, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Bank thereunder and under the other Credit Documents and (ii)
the Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement and the other Credit Documents except with respect to
indemnification provisions under the Credit Agreement (including without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06).
6. It is agreed that the Assignee shall be entitled to (x) all
interest on the Assigned Share of the Loans at the rates specified in Item 6 of
Annex I; (y) all Commitment Commission (if applicable) on the Assigned Share of
the Total Revolving Loan Commitment and/or Total Term Loan Commitment (if not
theretofore terminated) at the rate specified in Item 7 of Annex I hereto; and
(z) all Letter of Credit Fees (if applicable) on the Assignee's participation in
all Letters of Credit at the rate specified in Item 8 of Annex I hereto, which,
in each case, accrue on and after the Settlement Date, such interest and, if
applicable, Commitment Commission and Letter of Credit Fees, to be paid by the
Administrative Agent directly to the Assignee. It is further agreed that all
payments of principal made on the Assigned Share of the Loans which occur on and
after the Settlement Date will be paid directly by the Administrative Agent to
the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor
an amount specified by the Assignor in writing which represents the Assigned
Share of the principal amount of the respective Loans made by the Assignor
pursuant to the
- ----------
(5) Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE>
EXHIBIT L
Page 4
Credit Agreement which are outstanding on the Settlement Date, and which are
being assigned hereunder. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Settlement Date directly between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
EXHIBIT L
Page 5
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
Accepted this ____ day [NAME OF ASSIGNOR]
of _______, 19__ as Assignor
By
-----------------------------
Title:
[NAME OF ASSIGNEE]
as Assignee
By
-----------------------------
Title:
Acknowledged:
BANKERS TRUST COMPANY
as Administrative Agent
By
--------------------------------
Title:
<PAGE>
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Fairchild Semiconductor Corporation.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of March 11, 1997 among FSC Semiconductor
Corporation, Fairchild Semiconductor Corporation, the Banks party
thereto from time to time, Bankers Trust Company, as Administrative
Agent, Credit Suisse First Boston, as Syndication Agent, and
Canadian Imperial Bank of Commerce, as Documentation Agent .
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
<TABLE>
<CAPTION>
[Total [Total Outstanding Outstanding
Tranche A Tranche B Principal of Principal of Revolving
Term Loan Term Loan Tranche A Tranche B Loan
Commitment Commitment Term Term Commitment
---------- ---------- ----- ---- ----------
Loans Loans
----- -----
<S> <C> <C> <C> <C> <C>
a. Aggregate Amount for all
Banks $---------- $---------- $---------- $---------- $---------
b. Assigned Share _________% _________% _________% _________% _________%
c. Amount of Assigned Share $________] $________] $__________ $__________ $_________
(6) (7) -
</TABLE>
- --------
(6) This column should be deleted in the case of Assignment and Assumption
Agreements executed after the termination of the Total Tranche A Term Loan
Commitment.
(7) This column should be deleted in the case of Assignment and Assumption
Agreements executed after the termination of the Total Tranche B Term Loan
Commitment.
<PAGE>
Annex I
Page 2
5. Settlement Date:
6. Rate of Interest As set forth in Section 1.08
to the Assignee: of the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)(8)
7. Commitment As set forth in Section 3.01(a) of the Credit
Commission to Agreement (unless otherwise agreed to by the
the Assignee: Assignor and the Assignee)(9)
8. Letter of Credit As set forth in Section 3.01(b)
Fees to the of the Credit Agreement (unless
Assignee: otherwise agreed to by the Assignor
and the Assignee)(10)
- ----------
(8) The Borrower and the Administrative Agent shall direct the entire amount of
the interest to the Assignee at the rate set forth in Section 1.08 of the Credit
Agreement, with the Assignor and Assignee effecting the agreed upon sharing of
the interest through payments by the Assignee to the Assignor.
(9) Insert "Not Applicable" in lieu of text if no portion of the Total Revolving
Loan Commitment is being assigned. The Borrower and the Administrative Agent
shall direct the entire amount ofthe Commitment Commission to the Assignee at
the rate set forth in Section 3.01(a) of the Credit Agreemenmt, with the
Assignor and the Assignee effecting the agreed upon sharing of Commitment
Commission through payment by the Assignee to the Assignor.
(10) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, the Borrower and the
Administrative Agent shall direct the entire amount of the Letter of Credit Fees
to the Assignee at the rate set forth in Section 3.10(b) of the Credit
Agreement, with the Assignor and the Assignee effecting the agreed upon sharing
of Letter of Credit Fees through payment by the Assignee to the Assignor.
<PAGE>
Annex I
Page 3
9. Notice:
ASSIGNOR:
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
Senior Debt Portfolio
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
---------------------
---------------------
---------------------
Attention:
Reference:
<PAGE>
Annex I
Page 4
ASSIGNEE:
---------------------
---------------------
---------------------
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
----------------------- ----------------------
----------------------- ----------------------
(Print Name and Title) (Print Name and Title)
<PAGE>
EXHIBIT M
SUBORDINATION PROVISIONS
Each promissory note evidencing Indebtedness (as defined in the
Credit Agreement to which this Exhibit M is attached) incurred by Fairchild
Semiconductor Corporation, a Delaware corporation, (the "Borrower") or any of
its Domestic Subsidiaries, owing to any of the Borrower's Foreign Subsidiaries
shall have the following subordination provisions attached as Annex A thereto,
and shall include in the text of such promissory note the language: "THE
INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE AND JUNIOR IN RIGHT OF
PAYMENT TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN ANNEX A HERETO) TO THE EXTENT
PROVIDED IN ANNEX A."
ANNEX A
TO PROMISSORY NOTE
- --------------------------------------------------------------------------------
Section 1.01. Subordination of Liabilities. [Name of Company] (the
"Company"), for itself, its successors and assigns, covenants and agrees and
each holder of the promissory note to which this Annex A is attached (the
"Note") by its acceptance thereof likewise covenants and agrees that the payment
of the principal of, and interest on, and all other amounts owing in respect of,
the Note is hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, to the prior payment in full of Senior Indebtedness (as
defined in Section 1.07) in cash. The provisions of this Annex A shall
constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior Indebtedness,
and such holders are hereby made obligees hereunder to the same extent as if
their names were written herein as such, and they and/or each of them may
proceed to enforce such provisions.
Section 1.02. Company Not to Make Payments with Respect to Notes in
Certain Circumstances. (a) Upon the maturity of any Senior Indebtedness
(including interest thereon or fees or any other amounts owing in respect
thereof), whether at stated maturity, by acceleration or otherwise, all
principal thereof and premium, if any, and interest thereon or fees or any other
amounts owing in respect thereof, in each case to the extent due and owing at
such time, shall first be paid in full in cash, or such payment duly provided
for in cash or in a manner satisfactory
<PAGE>
EXHIBIT M
Page 2
to the holder or holders of such Senior Indebtedness, before any payment is made
on account of the principal of (including installments thereof), or interest on,
or any amount otherwise owing in respect of, the Note. Each holder of the Note
hereby agrees that, so long as an Event of Default (as defined below), or event
which with notice or lapse of time or both would constitute an Event of Default,
in respect of any Senior Indebtedness exists, it will not ask, demand, sue for,
or otherwise take, accept or receive, any amounts owing in respect of the Note.
As used herein, the term "Event of Default" shall mean any Event of Default,
under and as defined in, the relevant documentation governing any Senior
Indebtedness which has arisen as a result of the failure to make any payments
with respect to Senior Indebtedness or as a result of any bankruptcy, insolvency
or similar proceeding with respect to the Company, and in any event shall
include any payment default with respect to any Senior Indebtedness.
(b) In the event that notwithstanding the provisions of the
preceding subsection (a) of this Section 1.02, the Company shall make any
payment on account of the principal of, or interest on, or amounts otherwise
owing in respect of, the Note at a time when payment is not permitted by said
subsection (a), such payment shall be held by the holder of the Note, in trust
for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness or their representative or representatives under
the agreements pursuant to which the Senior Indebtedness may have been issued,
as their respective interests may appear, for application pro rata to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash in accordance with the terms of such
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness. Without in any way
modifying the provisions of this Annex A or affecting the subordination effected
hereby, if such notice is not given, the Company shall give the holder of the
Note prompt written notice of any maturity of Senior Indebtedness after which
such Senior Indebtedness remains unsatisfied.
Section 1.03. Note Subordinated to Prior Payment of all Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Company. Upon 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 otherwise):
<PAGE>
EXHIBIT M
Page 3
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash or in a manner
satisfactory to the holder or holders of such Senior Indebtedness of
the principal thereof, premium, if any, and interest (including,
without limitation, all interest accruing after the commencement of
any bankruptcy, insolvency, receivership or similar proceeding at
the rate provided in the governing documentation whether or not such
interest is an allowed claim in such proceeding) and all other
amounts due thereon before the holder of the Note is entitled to
receive any payment on account of the principal of or interest on or
any other amount owing in respect of the Note;
(b) any payment or distributions of assets of the Company of
any kind or character, whether in cash, property or securities to
which the holder of the Note would be entitled except for the
provisions of this Annex A, shall be paid by the liquidating trustee
or agent or other person making such payment or distribution,
whether a trustee or agent, directly to the holders of Senior
Indebtedness or their representative or representatives under the
agreements pursuant to which the Senior Indebtedness may have been
issued, to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section 1.03, any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by the holder of the Note
on account of principal of, or interest or other amounts due on, the
Note before all Senior Indebtedness is paid in full in cash or in a
manner satisfactory to the holder or holders of such Senior
Indebtedness, or effective provisions made for its payment, such
payment or distribution shall be received and held in trust for and
shall be paid over to the holders of the Senior Indebtedness
remaining unpaid or unprovided for or their representative or
representatives under the agreements pursuant to which the Senior
Indebtedness may have been issued, for application to the payment of
such Senior Indebtedness until all such Senior Indebtedness shall
have been paid in full in cash or in a manner satisfactory to the
holder or holders of such Senior Indebtedness, after giving effect
to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
<PAGE>
EXHIBIT M
Page 4
Without in any way modifying the provisions of this Annex A or
affecting the subordination effected hereby, if such notice is not given, the
Company shall give prompt written notice to the holder of the Note of 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 otherwise).
Section 1.04. Subrogation. Subject to the prior payment in full of
all Senior Indebtedness in cash, the holder of the Note shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Note shall be paid in full, and for the purpose
of such subrogation no payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the holder of
the Note by virtue of this Annex A which otherwise would have been made to the
holder of the Note, shall be deemed to be payment by the Company to or on
account of the Senior Indebtedness, it being understood that the provisions of
this Annex A are and are intended solely for the purpose of defining the
relative rights of the holder of the Note, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
Section 1.05. Obligation of the Company Unconditional. Nothing
contained in this Annex A or in the Note is intended to or shall impair, as
between the Company and the holder of the Note, the obligation of the Company,
which is absolute and unconditional, to pay to the holder of the Note the
principal of and interest on the Note as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holder of the Note and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the holder of the Note from exercising all remedies otherwise
permitted by applicable law, subject to the rights, if any, under this Annex A
of the holders of Senior Indebtedness in respect of cash, property, or
securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Annex A, the
holder of the Note shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other person making any distribution to the
holder of the Note, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other
<PAGE>
EXHIBIT M
Page 5
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 Annex A.
Section 1.06. Subordination Rights not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by an 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 and
provisions of the Note, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of the Senior
Indebtedness may, without in any way affecting the obligations of the holder of
the Note with respect thereto, at any time or from time to time and in their
absolute discretion, change the manner, place or terms of payment of, change or
extend the time of payment of, or renew or alter, any Senior Indebtedness, or
amend, modify or supplement any agreement or instrument governing or evidencing
such Senior Indebtedness or any other document referred to therein, or exercise
or refrain from exercising any other of their rights under the Senior
Indebtedness including, without limitation, the waiver of a default thereunder
and the release of any collateral securing such Senior Indebtedness, all without
notice to or assent from the holder of the Note.
Section 1.07. Senior Indebtedness. (a) The term "Senior
Indebtedness" shall mean all Obligations (as defined below) (i) of the Borrower
and/or its Subsidiaries (as defined below) under, or with respect to, the Credit
Agreement (as defined below) and any renewal, extension, restatement or
refunding thereof and (ii) of the Borrower and/or its Subsidiaries in respect of
all Interest Rate Protection or Other Hedging Agreements (as defined below) with
Other Creditors (as defined below).
(b) As used in this Agreement, the terms set forth below shall have
the respective meanings provided below:
"Credit Agreement" shall mean the Credit Agreement, dated as of
March 11, 1997, among [the Company] [Fairchild Semiconductor Corporation], FSC
Semiconductor Corporation, various financial institutions from time to time
party thereto (the "Banks"), Bankers Trust Company, as Administrative Agent,
Credit Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of
<PAGE>
EXHIBIT M
Page 6
Commerce, as Documentation Agent, together with the related documents thereto
(including, without limitation, the term loans and revolving loans thereunder,
any guarantees and security documents), as same may be amended, modified,
extended, renewed, replaced, restated, supplemented or refinanced from time to
time, and including any agreement extending the maturity of, refinancing or
restructuring all or any portion of, the indebtedness under such agreement or of
any successor agreements.
"Interest Rate Protection Agreement" shall have the meaning provided
in the Credit Agreement.
"Obligations" shall mean any principal, interest, premium,
penalties, fees, expenses, indemnities and other liabilities and obligations
payable under the documentation governing any Senior Indebtedness (including,
without limitation, all interest accruing after the commencement of any
bankruptcy, insolvency, receivership or similar proceeding at the rate provided
in the governing documentation, whether or not such interest is an allowed claim
in such proceeding).
"Other Creditors" shall mean any Bank or Affiliate thereof which
enters into, or which participates in, the extension of Interest Rate Protection
Agreements or Other Hedging Agreements (even if the respective Bank ceases to be
a Bank under the Credit Agreement for any reason) and their subsequent assigns,
if any, in all such cases in their capacity as creditors with respect to
Interest Rate Protection or Other Hedging Agreements.
"Other Hedging Agreement" shall have the meaning provided in the
Credit Agreement.
"Subsidiary" shall have the meaning provided in the Credit
Agreement.
<PAGE>
Exhibit 10.15
Quit rent has been
changed from RM 2,402
to Rm. 4,966-00 pursuant
to Section 101 of the
National Land Code
commencing form 1st
January 1994 (Penang)
P.U. No. 18 dated 28th
April 1994)
quit rent has been ENGLISH TRANSLATION
changed from RM992-00
to RM2, 483-00 pursuant (amended) (N.L.C. 20A)
to Section 101 of the
National Land Code National Land Code
commencing from 1st
January 1984 (Penang) Form 11A
P.U. No. 38 dated
22nd December 1983) (Section 177)
(Qualified Title Corresponding to Registry Title)
Q.T. Register : District of SOUTH WEST Q.T. (R) No. 19
State of PENANG
DOCUMENT OF QUALIFIED TITLE
CATEGORY OF LANDUSE: /INDUSTRY
*Mukim 12
L.O. No. PDBP.609/41/72
*Lease for a term of sixty (60) years Provisional Area 1.14 acres-49659 sq.
ft.
Expiring on 21st May 2033 Annual Rent $992-00
(PTG/PM/BD/26(2))
SPECIAL CONDITIONS OF QUALIFIED TITLE
1. This title is subject to the provisions of the National Land Code and to
the all the express conditions and restrictions:
(a) that is, the alienation herein is Delete (a), (b)
approved subject to the aforesaid, (c) as appropriate
see the letter numbered PTG/PM/BD/26(2)
(c) enclosure herein
2. In the plan of the land below, the To be used for the
boundaries shown in red, not having been purpose of
established by survey, are provisional only. amalgamation only
Sketch Plan The land described above is
held by the proprietor for the
time being named in the record
of proprietorship below.
Registered this 22nd May 1973
Seal of the Registrar
of Land Titles, Penang
..........
Registrar
<PAGE>
National Land Code
commencing from 1st
January 1994
(Penang) P.U. No. 18
dated 28th April 1994)
quit rent has been ENGLISH TRANSLATION
changed from RM992-00
to RM2, 483-00 (N.L.C. 20A)
pursuant to Section National Land Code
101 of the National
Land Code commencing Form 11A
from 1st January
1984 (Penang) P.U.
No. 38 dated 22nd
December 1983)
(Section 177)
(Qualified Title Corresponding to Registry Title)
Q.T. Register: District of SOUTH WEST Q.T. (R) No. 19
State of PENANG
DOCUMENT OF QUALIFIED TITLE
CATEGORY OF LANDUSE: /INDUSTRY
*Mukim 12
L.O. No. PDBP.609/41/72
*Lease for a term of sixty (60) years Provisional Area 1.14 acres-49659 sq.
ft.
Expiring on 21st May 2033 Annual Rent $992-00
(PTG/PM/BD/26(2))
SPECIAL CONDITIONS OF QUALIFIED TITLE
1. This title is subject to the provisions of the National Land Code and to
the all the express conditions and restrictions:
(a) that is, the alienation Delete (a), (b)
herein is approved subject to (c) as appropriate
the aforesaid, see the letter
numbered PTG/PM/BD/26(2)
(b) enclosure herein To be used for the purpose of
amalgamation only
2. In the plan of the land below, the boundaries shown in red, not having been
established by survey, are provisional only.
Sketch Plan The land described above is held by the
proprietor for the time being named in
the record of proprietorship below.
Registered this 22nd May 1973
Seal of the Registrar
of Land Titles, Penang
Registrar
<PAGE>
Issue document of title issued this 22nd
May 1973
Seal of the Registrar
of Land Titles, Penang
.
Pendaftar
To be completed when the title is issued in continuation
Date of first alienation
No. of original title (final or qualified)
No. of immediately preceding title (if different from above)
<PAGE>
RECORD OF PROPRIETORSHIP, OF DEALINGS
AND OF OTHER MATTERS AFFECTING TITLE
PENANG DEVELOPMENT CORPORATION
No longer in force
Seal of the Registrar
of Land Titles, Penang
Land Transfer Presentation No. 70/76
Volume No. 179 Folio No. 13
All/ share of the land belonging to
PENANG DEVELOPMENT CORPORATION
is transferred to :
Transferee Share
NS Electronics Sdn. Bhd. ALL
Registered on 6th January
1976 at 2.44 a.m./p.m.
Seal of the Registrar
of land Titles, Penang
Payment of RM60-00 for
certified copy had
been paid vide Receipt
no. 1021 dated 17/1/97
Certified Copy
Legal Seal
<PAGE>
RECORD OF PROPRIETORSHIP, OF DEALINGS
AND OF OTHER MATTERS AFFECTING TITLE
ENCLOSURE "A"
Express Conditions :
(i) The proprietor shall within two years from the date of alienation or
within such further term as may be approved by the State Authority
erect a factory building or buildings on the land hereby alienated in
accordance with the plan approved by the local authority and shall
maintain the building or buildings so erected to the satisfaction of
the Collector of Land Revenue, Balik Pulau.
(ii) The proprietor shall treat, dispose of, or caused to be treated and
disposed of trade effluents in a manner to the satisfaction of the
Collector of Land Revenue, Balik Pulau.
(iii) The proprietor shall pay and discharge all taxes, rates, assessments
and charges whatsoever which may be payable for the time being in
respect of the land hereby alienated or any part thereof, levied by
the Rural District Council, Penang Island, or any other authority.
(iv) The proprietor shall ensure that 25% of the employees engaged in the
business for which the land is hereby alienated shall be Malays.
Restrictions in Interest
(i) The land hereby alienated shall not be transferred, charged, leased,
subleased or otherwise in any manner dealt with or disposed of without
the written sanction of the State Authority.
<PAGE>
Quit rent has been changed from RM 2,402
to Rm. 4,966-00 pursuant to Section 101
of the National Land Code commencing
form 1st January 1994 (Penang) P.U. No.
18 dated 28th April 1994)
quit rent has been changed ENGLISH TRANSLATION
from RM992-00 to RM2,
483-00 pursuant to National Land Code (N.L.C. 20A)
Section 101 of the National
Land Code commencing from Form 11A
1st January 1984 (Penang)
P.U. No. 38 dated
22nd December 1983)
(Section 177)
(Qualified Title Corresponding to Registry Title)
Q.T. Register: District of SOUTH WEST Q.T. (R) No. 44
State of PENANG
DOCUMENT OF QUALIFIED TITLE
CATEGORY OF LANDUSE: INDUSTRY
*Town/Mukim 12
*Grant in perpetuity L.O. No. PDBP.609/41/72
*Lease for a term of sixty (60) years Provisional Area approximately 5 acres
Expiring on 7th May 2036 Annual Rent $4,350-00 (PTG/PM/BD/53(52)
PTBP/PM/3/74)
SPECIAL CONDITIONS OF QUALIFIED TITLE
1. This title is subject to the provisions of the National Land Code and to
the all the express conditions and restrictions:
EXPRESS CONDITIONS
(i) The Proprietor shall within two years from the date of alienation or
within such further term as may be approved by the State Authority
erect a factory building or buildings on the land hereby alienated in
accordance with the plan approved by the local authority and shall
maintain the building or buildings so erected to the satisfaction of
the State Authority.
(ii) The Proprietor shall treat, dispose of, or caused to be treated and
disposed of trade effluents in a manner to the satisfaction of the
State Authority.
(iii) The Proprietor shall pay and discharge all taxes, rates, assessments
and charges whatsoever which may be payable for the time being in
respect of the land hereby alienated or any part thereof, levied by
the Rural District Council, Penang.
(iv) The Proprietor shall ensure that 30% of the employees engaged in the
business for which the land is hereby alienated shall be Malays.
RESTRICTIONS IN INTEREST
(i) The land hereby alienated shall not be transferred, charged, leased,
subleased or otherwise in any manner dealt with or disposed of without
the written sanction of the State Authority.
The land hereby alienated shall not be subdivided.
To be used 2. In the plan of the land below, the boundaries shown in red, not
having for the been established by survey, are provisional only.
purpose of
amalgamation only
<PAGE>
Sketch Plan
The land described above is held Issue document of title issued this
by the proprietor for the time being 8th March 1976
named in the record of proprietorship
below.
Registered this 8th March 1976
Seal of the Registrar Seal of the Registrar
of Land titles, Penang of Land Titles, Penang
Illegible Illegible
Registrar Registrar
To be completed when the title is issued in continuation
<PAGE>
RECORD OF PROPRIETORSHIP, OF DEALINGS
AND OF OTHER MATTERS AFFECTING TITLE
A/share of land is leased
by National Semiconductor
Sdn. Bhd. To Tenaga Nasional
Berhad for 30 years commence-
ing on 5th January 199 to
4th January 2023
Registered on 16th August
1994 at 2:45p.m.
Seal of the Registrar
of Land Titles, Penang
Land Transfer Presentation No. 11688/79
Volume No. 290 Folio No. 38
All/ share of the land belonging to
MALAYSIAN INDUSTRIAL ESTATES SENDIRAN BERHAD is transferred to :
Transferee Share
N.S. ELECTRONIC SD. BHD. ALL
Registered on 21st September
1979 at 10.42 a.m./
Seal of the Registrar
of Land Titles, Penang
Change of Name Volume 84 Folio 118
name N.S. Electronics Sdn. Bhd. Is
changed to as follows:
National Semiconductor Sdn. Bhd.
Registered on 16th August 1994 at
2.45/p.m.
Seal of the Registrar
of Land Titles, Penang
<PAGE>
Quit rent has been changed ENGLISH TRANSLATION
from RM. . . to RM22,515-00
pursuant to Section 101 of ISSUE DOCUMENT
the National Land Code OF TITLE
commencing form 1st (N.L.C. 20A-Pin. 2/76)
January 1994 (Penang) National Land Code
P.U. No. 18 dated 28th
April 1994) Form 11A
Section 177)
(Qualified Title Corresponding to Registry Title)
Q.T. Register : District of SOUTH WEST Q.T. (R) No. 3400-Mk 12
State of PENANG
DOCUMENT OF QUALIFIED TITLE
CATEGORY OF LANDUSE: INDUSTRY
*Town/Village//Mukim 12
*Grant in Perpetuity L.O. No. 215
*Lease for a term of sixty (60) years Provisional Area 5.16864 acres.
Expiring on 17th November 2042 Annual Rent $1,497-50 $4,567-50
PTG/PM/BD/62/A(4) PTBP/A/17/81
SPECIAL CONDITIONS OF QUALIFIED TITLE
1. This title is subject to the provisions of the National Land Code and to the
following express conditions and restrictions :
EXPRESS CONDITIONS
(i) The subsequent proprietor registered after the Penang Development
Corporation shall within two years from the date of alienation or within
such further term as may be approved by the State Authority erect a
factory building or buildings on the land hereby alienated in accordance
with the plan approved by the local authority and shall maintain the
building or buildings so erected to the satisfaction of the State
Authority.
(ii) The subsequent proprietor registered after the Penang Development
Corporation shall treat, dispose of, or caused to be treated and disposed
of trade effluents in a manner to the satisfaction of the State Authority.
(iii) The subsequent proprietor registered after the Penang Development
Corporation shall pay and discharge all taxes, rates, assessments and
charges whatsoever which may be payable for the time being in respect of
the land hereby alienated or any part thereof, levied by the Penang
Municipal Council.
(iv) The subsequent proprietor registered after the Penang Development
Corporation shall ensure that 30% of the employees engaged in the
business for which the land is hereby alienated shall be Mmalays.
Payment of RM60-00 for certified copy had been paid vide Receipt no. 1021
dated 17/7/97 Certified copy
RESTRICTIONS IN INTEREST
(i) The land hereby alienated shall not be transferred, charged, leased,
subleased or otherwise in any manner dealt with or disposed of without
the subleased or otherwise in any manner dealt with or disposed of
without the written sanction of the State Authority.
(ii) The land hereby alienated shall not be subdivided.
<PAGE>
2. In the Plan of the land below, the boundaries shown in red, not having been
established by survey, are provisional only.
Sketch Plan
The land described above is held Issue document of title issued
by the proprietor for the time being this 18th November 1982
named in the record of proprietorship
below.
Registered on 18th November 1982
Seal of the Registrar Seal of the Registrar
of Land Titles, Penang of Land Titles, Penang
Illegible Illegible
......... .......
Registrar Registrar
To be completed when the title is issued in continuation
Date of first alienation -
No. of original title (final or qualified) -
No. of immediately preceding title (if different from above)
<PAGE>
RECORD OF PROPRIETORSHIP, OF DEALINGS
AND OF OTHER MATTERS AFFECTING TITLE
No longer in force
Seal of the Registrar
of Land Titles, Penang
Transfer of Land Presentation No. 6679/83
Volume No. 417 Folio No. 198
All/ share of the land belonging to
PENANG DEVELOPMENT CORPORATION
is transferred to :
Transferee Share
- ---------- -----
NATIONAL SEMICONDUCTOR
SENDIRIAN BERHAD ALL
Registered on 9th June 1983
at 10.43 a.m.
Seal of the Registrar
of Land Titles, Penang
<PAGE>
DATED THIS DAY OF 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALASIA) SADN BHD
(the "Purchase")
SALE AND PURCHASE AGREEMENT
<PAGE>
CONTENTS
NO DESCRIPTION PAGE
- -- ----------- ----
1. AGREEMENT SALE.................................................. 2
2. AGREEMENT UNCONDITIONAL......................................... 2
3. PAYMENT OF TOTAL PURCHASE....................................... 2
4. CLOSING DATE.................................................... 2
5. THE PURCHASER'S SOLICITORW OBLIGATION IN RESPECT
OF THE RETENTION SUM.......................................... 3
6. RETENTION SUM................................................... 3
7. COMPLIANCE WITH THE REAL PROPERTY GAIN TAX ACT 1976............. 4
8. EXECUTION OF TRANSFER........................................... 4
9. TENANCY......................................................... 4
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS...................... 4
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR............ 5
12. INDEMNITY....................................................... 6
13. ACQUISITION..................................................... 6
14. CAVEAT.......................................................... 6
15. TIME............................................................ 6
16. COSTS........................................................... 7
17. NOTICE.......................................................... 7
18. SUCCESSORS, ETC. BOUND.......................................... 7
19. GOVERNING LAW................................................... 7
20. MASTER ASSET PURCHASE AGREEMENT................................. 7
EXECUTION....................................................... 8
<PAGE>
THIS AGREEMENT is made this day of 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial Zone,
11900 Bayan Lepas, Penang, Malaysia (the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD a private limited company
incorporated in Malaysia and having its registered office at No. 16-2B, Second
Floor, Jalan 1/76D, Desa Panda, 55100 Kuala Lumpur (the "Purchaser") of the
other part.
WHEREAS:
(A) The Vendor is the registered proprietor of all that piece of land held
under H.S.(D) 3400 Mk12 PT 215, Mukim 12 Daerah Barat Daya, Penang,
measuring approximately an area of 5.16864 acres (hereinafter referred to
as the "Said Property").
(B) The document of title to the Said Property is endorsed with express
conditions and/or restrictions-in-interest
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Said Property subject to the conditions of title express or implied
affecting the same but otherwise free from all encumbrances and with an
existing tenancy on one storey of a two storey building situated on the
Said Property with Dynacraft Industries Sdn Bhd pursuant to a tenancy
agreement dated 20 January 1996 (the "Tenancy") at the total purchase
price of price of Ringgit Thirty Three Million Five Hundred Thousand only
(RM33,500,000) (hereinafter referred to as the "Total Purchase Price")
subject to the terms and conditions hereinafter appearing.
<PAGE>
NOW IT IS HEREBY AGREED as follows:
1. AGREEMENT FOR SALE
Subject to the provisions of this Agreement, the Vendor shall sell and
the Purchaser shall purchase the Said Property subject to the conditions
of title express or implied affecting the same but otherwise free from
all encumbrances and with vacant possession at the Total Purchase Price
and upon the terms and subject to the conditions herein contained.
2. AGREEMENT UNCONDITIONAL
The Agreement shall be unconditional.
3. PAYMENT OF TOTAL PURCHASE PRICE
3.1 The Total Purchase Price shall be paid by the Purchaser to the Vendor on
11 March 1997 (the "Closing Date").
3.2 All moneys paid to the Vendor pursuant to this Agreement are paid on the
condition that they shall become repayable to the Purchaser if the
Transfer (as hereinafter defined) cannot be registered for any reason
whatsoever due to the Purchaser's default.
In such event, the Vendor hereby agrees to refund all the said moneys
upon the expiry of seven (7) days from the date of receipt by the Vendor
of a notice from the Purchaser requesting for such refund, failing which
the Vendor shall in addition pay to the Purchaser interest thereon at the
rate often per centum (10%) per annum, calculated from the day next after
the expiry of the said seven (7) days to the date of receipt by the
Purchaser of such payment based on a three hundred and sixty-five (365)
day year on the actual number of days elapse, such interest to be payable
together with the said moneys.
4. CLOSING DATE
4.1 Upon payment buy the Purchaser of the Total Purchase Price on or before
the expiry of the Closing Date, the Vendor shall deliver or cause to be
delivered to the Purchaser's Solicitors:
(a) the valid and registerable memorandum of transfer of the Said
Property from the Vendor in favour of the Purchaser (hereinafter
referred to as the "Transfer");
(b) all other relevant documents including the issue document of title
to the Said Property to effect the registration of the Purchaser as
the proprietor of the Said Property; and
(c) the latest receipts for payment of all quit rent and assessment
payable in respect of the Said Property.
<PAGE>
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RETENTION SUM
Shearn Delamore, of 6 Floor Wisma Penang Gardeb, No. 42 Jalan Sultan
Ahmad Shab 10050, Penang (the "Purchaser's Solicitors") shall be paid by
the Vendor on the Closing Date, such sum (hereinafter referred to as the
"Retention Sum") as shall be required to be retained by Purchaser
pursuant to the provisions of the Real Property Gains Tax Act 1976 or
any amendment, re-enactment or re-certification htereof (hereinafter
referred to as the "Act").
6. RENTION SUM
The Retention Sum shall be deposited by the Purchaser's Solicitors with a
bank or other financial institution (hereinafter referred to as the
"Bank") and placed on fixed deposit in the name of the Purchaser's
Solicitors for period of one (1) month each. The Purchaser's Solicitors
shall, and the parties hereto hereby authorize them to do so, pay to the
Director-General of the Inland Revenue Board, Malaysia, out of the
Retention Sum and all interest earned thereon such sum as may be deemed
by requisition as defined in the Act served on the Purchaser or the
Vendor pursuant to the Act unless the Purchaser's Solicitors shall have
received a notice of clearance from the Director-General to the effect
that no real property gains tax is payable or that the said tax as
assessed by the Director-General has been paid, as the case may be, in
which event the Retention Sum shall be released forthwith to the Vendor
by the Purchaser's Solicitors together with all interest earned thereon
upon receipt of such notice of clearance from the Director-General.
PROVIDED FURTHER that if the sale and purchase hereunder of the Said
Property shall be rescinded in accordance with the provisions of this
Agreement, the Purchaser's Solicitors shall unless the Purchaser
otherwise direct immediately cause the Retention Sum together with all
interest earned thereon to be withdrawn from fixed deposit upon
withdrawal immediately pay the same (after deduction or any penalty
levied by the Bank for early withdrawal) to the Purchaser.
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976
7.1 Each party hereto hereby covenants and undertakes with the other party
hereto:
(a) to duly submit such notifications and execute and do all documents
acts and things on each of their part to be executed and done under
the Act; and
(b) to indemnify and save harmless the other party hereto against all
liabilities penalties actions proceedings demands and costs
resulting from their respective default if any in complying with the
Act.
7.2 Without prejudice to the generality of the foregoing, the Vendor hereby
undertakes that it will bear and pay all taxes if any chargeable under
the Act on the disposal of the Said Property (if any) and keep the
Purchaser, their successors-in-title, assigns and persons deriving title
thereunder indemnified in respect thereof.
8. EXECUTION OF TRANSFER
The parties hereto shall simultaneously with the execution of this
Agreement, execute the Transfer and deliver the same to the Purchaser's
Solicitors to present the same to the Collector of Stamp Duty for
adjudication as to the stamp duty chargeable thereon.
<PAGE>
9. TENANCY
The Said Property shall be sold subject to the Tenancy.
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS
All quit rent and assessment charges payable in respect of the Said
Property shall be apportioned as at the Closing Date, as the case may be,
and any sum due by virtue of such apportionment shall be paid or allowed
as the case may be on the date of apportionment. PROVIDED ALWAYS that
the Vendor shall indemnify the Purchaser, their successors-in-title,
assigns and persons deriving title thereunder in respect of all penalties
fines and damages which may arise as a result of any late payments or
defaults in payment by the Vendor in respect of such quit rent and
assessment charges if such are incurred prior to the date of
apportionment.
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR
11.1 Subject to Clause 9, as at the date hereof, the Vendor hereby covenants,
undertakes, warrants and represents to and with the Purchaser that:
(a) the Vendor has the power and authority to enter into this Agreement
and to do all acts and things on its part to be done and performed
pursuant hereto;
(b) the Said Property is free from all encumbrances and to the best of
this knowledge and belief no impediment exists which would impede,
prevent, affect or obstruct the registration of the Transfer of the
Said Property from the Vendor to the Purchaser;
(c) there are no rates, charges, taxes or other outgoings which are in
arrears and outstanding in respect of the Said Property;
(d) all express and implied conditions of title to the Said Property
have been complied with;
(e) there are no subsisting sale and purchase agreements in respect of
the Said Property or any part thereof between the Vendor and any
third party or parties;
(f) the Vendor shall not hereafter save with consent of the Purchaser
mortgage, charge, transfer, sell, convey or otherwise deal with the
Said Property so as to encumber, encroach upon or divest the
Purchaser of its rights, title and interest to the Said Property.
11.2 The Vendor further covenants, warrants and undertakes to and with the
Purchaser that all warranties and undertakings on his part herein
contained will be fulfilled down to and will be true and correct at
completion in all respects as if they had been entered into afresh at
completion.
11.3 Notwithstanding the completion of the sale and purchase hereunder, all
covenants, warranties, undertakings and obligations, given hereunder or
undertaken herein shall continue hereafter to subsist for so long as may
be necessary to give effect to each and every one of them in accordance
with the terms hereof.
<PAGE>
12. INDEMNITY
The Vendor shall indemnify the Purchaser, its successors-in-title and
assigns against all losses, claims, damages and costs suffered or
otherwise incurred by the Purchaser arising out of or resulting from any
misrepresentation or breach of warranty or covenant of the Vendor as
herein set out and against all liability in respect of any taxes fees or
charges payable in respect of the Said Property prior to the Closing Date
under any Act of Parliament or any instrument rule or order made under
any Act of Parliament or any regulation bye-law or instrument of any
local authority or of any statutory or other appropriate body.
13. ACQUISITION
The Vendor hereby warrants and undertakes to the Purchase that as at the
date of execution of this Agreement there has not been any acquisition of
the Said Property or any part thereof and that the same is not subject to
any acquisition or intended acquisition by any governmental statutory
urban or municipal authority and that no advertisement in the Government
Gazette of such intention has been published pursuant to the Land
Acquisition Act 1960 or any amendment re-enactment or re-certification
hereof.
14. CAVEAT
The Purchaser shall be entitled at any time after the execution of this
Agreement at its own cost and expense to lodge with the appropriate
authorities a private caveat against any dealing with the Said Property
until the registration of the Transfer in favour of the Purchaser.
PROVIDED THAT in the event this Agreement is terminated pursuant to the
provisions hereof, the Purchaser shall at its own cost and expense
withdraw the aforesaid private caveat PROVIDED FURTHER THAT for the
purpose of effecting the registration of the Transfer the Purchaser shall
at its own cost and expense withdraw the aforesaid private caveat.
15. TIME
Time is of the essence of this Agreement.
16. COSTS
Each party shall bear its own solicitor's costs in respect of the sale
and purchase hereunder. The parties shall bear in equal proportion the
expenses of all stamp and registration fees together with such other
disbursements of and incidental to the registration of the Transfer of
the Said Property.
17. NOTICE
Any notice or request with reference to this Agreement shall be in
writing and shall be deemed to have been sufficiently served or given for
all purposes herein on the respective parties hereto if left by hand, or
sent by facsimile, telex, telegram or prepaid registered post to the
party to whom it is addressed at the address above stated or to such
address as the addressee party may notify to the other in writing or to
their respective solicitors or agents duly authorised and shall in the
case of a notice or request sent by facsimile be deemed to have been
served on the day of the transmission of such notice or communication
provided such day is a business day and if it is not, such notice or
communication shall be deemed to be served on the next succeeding
business day and
<PAGE>
confirmation of transmission is received or registered and a confirmation
of the facsimile is sent by prepaid registered post. Any notice or
communication sent by telex, telegram or prepaid registered post shall be
deemed to have been given a the time when it ought in the ordinary course
of transmission or post have been received.
18. SUCCESSORS, ETC. BOUND
This Agreement shall be binding upon the respective heirs, personal
representatives, successors-in-title and permitted assigns of the parties
hereto.
19. GOVERNING LAW
The validity, interpretation and performance of this Agreement shall be
interpreted in accordance with the laws of Malaysia.
20. MASTER ASSET PURCHASE AGREEMENT
This Agreement is entered into to fulfill the terms of the Asset Purchase
Agreement between National Semiconductor Corporation and Fairchild
Semiconductor Corporation dated the same date hereof (the "Master Asset
Purchase Agreement"). If there shall be any inconsistency between the
provisions of this Agreement and the Master Asset Purchase Agreement, the
provisions of the Master Asset Purchase Agreement shall prevail.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands hereunder.
The Vendor
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
Signed by )
for and on behalf of )
in the presence of )
<PAGE>
DATED THIS DAY OF 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD
(the "Purchaser")
SALE AND PURCHASE AGREEMENT
<PAGE>
CONTENTS
NO DESCRIPTION PAGE
- --- ------------ ----
1. AGREEMENT FOR SALE 2
2. AGREEMENT UNCONDITIONAL 2
3. PAYMENT OF TOTAL PURCHASE 2
4. CLOSING DATE 2
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT
OF THE RETENTION SUM 3
6. RETENTION SUM 3
7. COMPLIANCE WITH THE REAL PROPERTY GAIN TAX ACT 1976 4
8. EXECUTION OF TRANSFER 4
9. TENANCY 4
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS 4
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR 5
12. INDEMNITY 6
13. ACQUISITION 6
14. CAVEAT 6
15. TIME 6
16. COSTS 7
17. NOTICE 7
18. SUCCESSORS, ETC. BOUND 7
19. GOVERNING LAW 7
20. MASTER ASSET PURCHASE AGREEMENT 7
EXECUTION 7
<PAGE>
THIS AGREEMENT is made this day of 1997.
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial
Zone, 11900 Bayan Lepas, Penang, Malaysia (the "Vendor").
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD a private limited company
incorporated in Malaysia and having its registered office at No. 16-2B,
Second Floor, Jalan 1/76D, Desa Pandan, 55100 Kuala Lumpur (the
"Purchaser") of the other part.
WHEREAS:
(A) The Vendor is the registered proprietor of all that piece of land held under
H.S. (D) 19 No. PT PDBP, 609/41/72, Mukim 12 Daerah Barat Daya, Penang,
measuring approximately an area of 1.14 acres (hereinafter referred to as
the "Said Property").
(B) The document of title to the Said Property is endorsed with express
conditions and/or restrictions-in-interest.
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Said Property subject to the conditions of title express or implied
affecting the same but otherwise free from all encumbrances and with vacant
possession at the total purchase price of Ringgit Three Million Five
Hundred and Fifty Thousand only (RM3,550,000) (hereinafter referred to as
the "Total Purchase Price") subject to the terms and conditions
hereinafter appearing.
NOW IT IS HEREBY AGREED as follows:-
1. AGREEMENT FOR SALE
Subject to the provisions of this Agreement, the Vendor shall sell and
the Purchaser shall purchase the Said Property subject to the
conditions of title express or implied affecting the same but
otherwise free from all encumbrances and with vacant possession at
the Total Purchase Price and upon the terms and subject to the
conditions herein contained.
2. AGREEMENT UNCONDITIONAL
This Agreement shall be unconditional.
3. PAYMENT OF TOTAL PURCHASE PRICE
3.1 The Total Purchase Price shall be paid by the Purchaser to the Vendor
on 11 March 1997 (the "Closing Date").
<PAGE>
3.2 All moneys paid to the Vendor pursuant to this Agreement are paid on
the condition that they shall become repayable to the Purchaser if the
Transfer (as hereinafter defined) cannot be registered for any reason
whatsoever not due to the Purchaser's default.
In such event, the Vendor hereby agrees to refund all the said
moneys upon the expiry of seven (7) days from the date of receipt by
the Vendor of a notice from the Purchaser requesting for such refund,
failing which the Vendor shall in addition pay to the Purchaser
interest thereon at the rate often per centum (10%) per annum,
calculated from the day next after the expiry of the said seven (7)
days to the date of receipt by the Purchaser of such payment based on
a three hundred and sixty-five (365) day year on the actual number of
days elapsed, such interest to be payable together with the said
moneys.
4. CLOSING DATE
4.1 Upon payment by the Purchaser of the Total Purchaser Price
on or before the expiry of the Closing Date, the Vendor shall deliver
or cause to be delivered to the Purchaser's Solicitors:-
(a) the valid and registerable memorandum of transfer of the Said
Property from the Vendor in favour of the Purchaser (hereinafter
referred to as the "Transfer");
(b) all other relevant documents including the issue document of
title to the Said Property to effect the registration of the
Purchaser as the proprietor of the Said Property; and
(c) the latest receipts for payments of all quit rent and assessment
payable in respect of the Said Property.
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RENTENTION SUM
Shearn Delamore, of 6 Floor Wisma Penang Garden, No. 42 Jalan
Sultan Ahmad Shah 10050, Penang (the "Purchaser's Solicitors")
shall be paid by the Vendor on the Closing Date, such sum
(hereinafter referred to as the "Retention Sum") as shall be
required to be retained by the Purchaser pursuant to the provisions
of the Real Property Gains Tax Act 1976 or any amendment,
re-enactment or re-certification thereof (hereinafter referred to
as the "Act").
6. RETENTION SUM
6.1. The Retention Sum shall be deposited by the Purchaser's Solicitors
with a bank or other financial institution (hereinafter referred to
as the "Bank") and placed on fixed deposit in the name of the
Purchaser's Solicitors for periods of one (1) month each. The
Purchaser's Solicitors shall, ad the parties hereto hereby authorise
them to do so, pay to the Director-General of the Inland Revenue
Board, Malaysia, out of the Retention Sum and all interest earned
thereon such sum as may be demanded by requisition as defined in the
Act served on the Purchaser or the Vendor pursuant to the Act unless
the Purchaser's Solicitors shall have received a notice of clearance
from the Director-General to the effect that no real property gains
tax is payable or that the said tax as assessed by the
Director-General has been paid, as the case may be, in which event the
Retention Sum shall be released forthwith to the Vendor by the
Purchaser's Solicitors together with all interests earned thereon upon
receipt of such notice of clearance from the Director-General.
PROVIDED
<PAGE>
FURTHER that if the sale and purchase hereunder of the Said
Property shall be rescinded in accordance with the provisions of
this Agreement, the Purchaser's Solicitors shall unless the
Purchaser otherwise direct immediately cause the Retention Sum
together with all interest earned thereon to be withdrawn from
fixed deposit and upon withdrawal immediately pay the same (after
deduction or any penalty levied by the Bank for early withdrawal)
to the Purchaser.
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976
7.1 Each party hereto covenants and undertakes with the other party
hereto:-
(a) to duly submit such notifications and execute and do all
documents acts and things on each of their part to be executed
and done under the Act, and
(b) to indemnify and save harmless the other party hereto against all
liabilities penalties actions proceedings demands and costs
resulting from their respective default if any in complying with
the Act.
7.2 Without prejudice to the generality of the foregoing, the
Vendor hereby undertakes that it will bear and pay all taxes if any
chargeable under the Act on the disposal of the Said Property (if
any) and keep the Purchaser, their successors-in-title, assigns and
persons deriving title thereunder indemnified in respect thereof.
8. EXECUTION OF TRANSFER
The parties hereto shall simultaneously with the execution of this
Agreement, execute the Transfer and deliver the same to the
Purchaser's Solicitors to present the same to the Collector of
Stamp Duty for adjudication as to the stamp duty chargeable thereon.
9. VACANT POSSESSION
Vacant possession of the Said Property shall be delivered by the
Vendor to the Purchaser upon receipt of the Total Purchase Price by
the Purchaser's Solicitors in accordance with Clause 3 hereof.
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS
All quit rent and assessment charges payable in respect of the Said
Property shall be apportioned as at the date of delivery of vacant
possession of the Said Property and any sums due by virtue of such
apportionment shall be paid or allowed as the case may be on the
date of apportionment. PROVIDED ALWAYS that the Vendor shall
indemnify the Purchaser, their successors-in-title, assigns and
persons deriving title thereunder in respect of all penalties fines
and damages which may arise as a result of any late payments or
defaults in payment by the Vendor in respect of such quit rent and
assessment charges if such are incurred prior to the date of
apportionment.
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR
11.1 As at the date hereof, the Vendor hereby covenants, undertakes,
warrants and represents to and with the Purchase that:-
(a) the Vendor has the power and authority to enter into this
Agreement and to do all acts and things on its part to be done
and performed pursuant hereto;
<PAGE>
(b) the Said Property is free from all encumbrances and
to the best of this knowledge and belief no impediment exists
which would impede, prevent, affect or obstruct the registration
of the Transfer of the Said Property from the Vendor to the
Purchaser.
(c) there are no rates, charges, taxes or other outgoings which are
in arrears and outstanding in respect of the Said Property.
(d) all express and implied conditions of title to the Said Property
have been complied with;
(e) there are no subsisting sale and purchase agreements in respect
of the Said Property or any part thereof between the Vendor and
any third party or parties;
(f) there are no other party or parties with any valid or legal claim
interest or benefit in the Said Property or any part thereof;
(g) the Vendor shall not hereafter save with the consent of the
Purchaser mortgage, charge, transfer, sell, convey or otherwise
deal with the Said Property so as to encumber, encroach upon or
divest the Purchaser of its rights, title and interest to the
Said Property.
11.2 The Vendor further covenants, warrants and undertakes to
and with Purchaser that all warranties and undertakings on his part
herein contained will be fulfilled down to and will be true and
correct at completion in all respects as if they had been entered
into afresh at completion.
11.3 Notwithstanding the completion of the sale and purchase
hereunder, all covenants, warranties, undertakings and obligations
given hereunder or undertaken herein shall continue hereafter to
subsist for so long as may be necessary to give effect to each and
every one of them in accordance with the terms hereof.
12. INDEMNITY
The Vendor shall indemnify the Purchaser, its successors-in-title
and assigns against all losses, claims, damages and costs suffered
or otherwise incurred by the Purchaser arising out of or resulting
from any misrepresentation or breach of warranty or covenant of the
Vendor as herein set out and against all liability in respect of
any taxes fees or charges payable in respect of the Said Property
prior to the date of delivery of vacant possession of the Said
Property referred to in Clause 9 hereof under any Act of Parliament
or any instrument rule or order made under any Act of Parliament or
any regulation bye-law or instrument of any local authority or of
any statutory or other appropriate body.
13. ACQUISITION
13.1 The Vendor hereby warrants and undertakes to the Purchase
that as at the date of execution of this Agreement there has not
been any acquisition of the Said Property or any part thereof and
that the same is not subject to any acquisition or intended
acquisition by any governmental statutory urban or municipal
authority and that no advertisement in the Government Gazette of
such intention has been published pursuant to the Land Acquisition
Act 1960 or any amendment re-enactment or re-certification hereof.
14. CAVEAT
<PAGE>
The Purchaser shall be entitled at any time after the execution of
this Agreement at its own cost and expense to lodge with the
appropriate authorities a private caveat against any dealing with
the Said Property until the registration of the Transfer in favor
of the Purchaser. PROVIDED THAT in the event this Agreement is
terminated pursuant to the provisions hereof, the Purchaser shall
at its own cost and expense withdraw the aforesaid private caveat
PROVIDED FURTHER THAT for the purpose of effecting the registration
of the Transfer the Purchaser shall at its own cost and expense
withdraw the aforesaid private caveat.
15. TIME
Time is of the essence of this Agreement.
16. COSTS
Each party shall bear its own solicitor's costs in respect of the sale
and purchase hereunder. The parties shall bear in equal proportion,
the expenses of all stamp and registration fees together with such
other disbursements of and incidental to the registration of the
Transfer of the Said Property.
17. NOTICE
Any notice or request with reference to this Agreement shall be in
writing and shall be deemed to have been sufficiently served or
given for all purposes herein on the respective parties hereto if
left by hand or sent by facsimile, telex, telegram or prepaid
registered post to the party to whom it is addressed at the address
above stated or to such address as the addressee party may notify
to the other in writing or to their respective solicitors or agents
duly authorized and shall in the case of a notice or request sent
by facsimile be deemed to have been served on the day of the
transmission of such notice or communication provided such day is a
business day and if it is not, such notice or communication shall
be deemed to be served on the next succeeding business day and
conformation of transmission is received or registered and a
confirmation of the facsimile is sent by prepaid registered post.
Any notice or communication sent by telex, telegram or prepaid
registered post shall be deemed to have been given at the time when
it ought in the ordinary course of transmission or post to have
been received.
18. SUCCESSORS, ETC BOUND
This Agreement shall be binding upon the respective heirs, personal
representatives, successors-in-title and permitted assigns of the
parties hereto.
19. GOVERNING LAW
The validity, interpretation and performance of this Agreement shall
be interpreted in accordance with the laws of Malaysia.
20. MASTER ASSET PURCHASE AGREEMENT
This Agreement is entered into to fulfill the terms of the Asset
Purchase Agreement between National Semiconductor Corporation and
Fairchild Semiconductor Corporation dated the same date hereof (the
"Master Asset Purchase Agreement"). If there shall be any
inconsistency between the provisions of this Agreement and the
Master Asset Purchase Agreement, the provisions of the Master Asset
Purchase Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto set their hands hereunder.
The Vendor
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
Signed by )
for and on behalf of )
in the presence of )
<PAGE>
DATED THIS 11TH DAY OF MARCH, 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD
(the "Purchaser")
-------------------------------------------
SALE AND PURCHASE AGREEMENT
-------------------------------------------
<PAGE>
CONTENTS
NO DESCRIPTION PAGE
- -- ----------- ----
1. AGREEMENT FOR SALE.......................................2
2. AGREEMENT UNCONDITIONAL..................................2
3. PAYMENT OF TOTAL PURCHASE................................2
4. CLOSING DATE.............................................2
5. THE PURCHASER'S SOLICITORW OBLIGATION IN RESPECT
OF THE RETENTION SUM.....................................3
6. RETENTION SUM............................................3
7. COMPLIANCE WITH THE REAL PROPERTY GAIN TAX ACT 1976......4
8. EXECUTION OF TRANSFER....................................4
9. TENANCY..................................................4
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS...............4
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR.....5
12. INDEMNITY................................................6
13. ACQUISITION..............................................6
14. CAVEAT...................................................6
15. TIME.....................................................6
16. COSTS....................................................7
17. NOTICE...................................................7
18. SUCCESSORS, ETC. BOUND...................................7
19. GOVERNING LAW............................................7
20. MASTER ASSET PURCHASE AGREEMENT..........................7
EXECUTION 8
<PAGE>
THIS AGREEMENT is made this day of MARCH 11, 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial Zone,
11900 Bayan Lepas, Penang, Malaysia (the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD a private limited company
incorporated in Malaysia and having its registered office at No. 16-2B,
Second Floor, Jalan 1/76D, Desa Pandan, 55100 Kuala Lumpur (the "Purchaser")
of the other part.
WHEREAS:-
(A) The Vendor is the registered proprietor of all that piece of land held
under H.S.(D) 44 PT 169, Mukim 12 Dacrah Barat Daya, Penang, measuring
approximately an area of 5 acres (hereinafter referred to as the "Said
Property").
(B) The document of title to the Said Property is endorsed with express
conditions and/or restrictions-in-interest.
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase
the Said Property subject to the conditions of title express or implied
affecting the same but otherwise free from all encumbrances and with
vacant possession at the total purchase price of Ringgit Twenty Two
Million Two Hundred Thousand (RM22,200,000) (hereinafter referred to as
the "Total Purchase Price") subject to the terms and conditions
hereinafter appearing.
NOW IT IS HEREBY AGREED as follows:
1. AGREEMENT FOR SALE
Subject to the provisions of this Agreement, the vendor shall sell and the
Purchaser shall purchase the Said Property subject to the conditions of
title express or implied affecting the same but otherwise free from all
encumbrances and with vacant possession at the Total Purchase Price and
upon the terms and subject to the conditions herein contained.
2. AGREEMENT UNCONDITIONAL
This Agreement shall be unconditional.
3. PAYMENT OF TOTAL PURCHASE PRICE
3.1 The Total Purchase Price shall be paid by the Purchaser to the Vendor on
11 March 1997 (the "Closing Date").
<PAGE>
3.2 All moneys paid to the Vendor pursuant to this Agreement are paid on the
conditions that they shall become repayable to the Purchaser if the
Transfer (as hereinafter defined) cannot be registered for any reason
whatsoever not due to the Purchaser's default.
In such event, the Vendor hereby agrees to refund all the said moneys upon
the expiry of seven (7) days from the date of receipt by the Vendor of
a notice from the Purchaser requesting for such refund, failing which
the Vendor shall in addition pay to the Purchaser interest thereon at
the rate of often per centum (10%) per annum, calculated from the day
next after the expiry of the said seven (7) days to the date of receipt by
the Purchaser of such payment based on a three hundred and sixty-five
(365) day year on the actual number of days elapsed, such interest to be
payable together with the said moneys.
4. CLOSING DATE
4.1 Upon payment by the Purchaser of the Total Purchase Price on or before the
expiry of the Closing Date, the vendor shall deliver or cause to be
delivered to the Purchaser's Solicitors:
(a) the valid and registrable memorandum of transfer of the Said Property
from the Vendor in favour of the Purchaser (hereinafter referred to as the
"Transfer");
(b) all other relevant documents including the issue document of title to
the Said Property to effect the registration of the Purchaser as the
proprietor of the Said Property; and
(c) the latest receipts for payments of all quit rent and assessment payable in
respect of the Said Property.
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RETENTION SUM
Shearn Delamore, of 6 Floor Wisma Penang Garden, No. 42 Jalan Sultan Ahmad
Shah 10050, Penang (the "Purchaser's Solicitors:) shall be paid by the
Vendor on the Closing Date, such sum (hereinafter referred to as the
"Retention Sum") as shall be required to be retained by the Purchaser
pursuant to the provisions of the Real Property Gains Tax Act 1976 or
any amendment, re-enactment or re-certification thereof (hereinafter
referred to as the "Act").
6. RETENTION SUM
6.1 The Retention Sum shall be deposited by the Purchaser's Solicitors with a
bank or other financial institution (hereinafter referred to as the
"Bank") and placed on fixed deposit in the name of the Purchaser's
Solicitors for periods of one (1) month each. The Purchaser's Solicitors
shall, and the parties hereto hereby authorize them to do so, pay to
the Director-General of the Inland Revenue Board, Malaysia, out of the
retention Sum and all interest earned thereon such sum as may be demanded
by requisition as defined in the act served on the Purchaser or the
Vendor pursuant to the Act unless Purchaser's Solicitors shall have
received a notice of clearance from the Director-General to the
effect that no real property gains tax is payable or that the said tax as
assessed by the Director-General has been paid, as the case may be, in
which event the Retention Sum shall be released forthwith to the vendor
by the Purchaser's Solicitors together with all interest earned thereon
upon receipt of such notice of clearance from the director-general.
PROVIDED FURTHER that if the sale and purchase hereunder of the Said
Property shall be rescinded in accordance with the provisions of this
Agreement, the Purchaser's Solicitors shall
<PAGE>
unless the Purchaser otherwise direct immediately cause the Retention Sum
together with the interest earned thereon to be withdrawn from fixed
deposit and upon withdrawal immediately pay the same (after deduction
or any penalty levied by the Bank for early withdrawal) to the Purchaser.
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976
7.1 Each party hereto hereby covenants and undertakes with the other party
hereto:-
a) to duly submit such notifications and execute and do all documents
acts and things on each of their part to be executed and done under
the Act, and
(b) to indemnify and save harmless the other party hereto against all
liabilities penalties actions proceedings demands and costs resulting
from their respective default if any in complying with the Act.
7.2. Without prejudice to the generality of the foregoing, the Vendor
hereby undertakes that it will bear and pay all taxes if any
chargeable under the Act on the disposal of the said Property (if
any) and keep the Purchaser, their successors-in-title, assigns and
persons deriving title thereunder indemnified in respect thereof.
8. EXECUTION OF TRANSFER
The parties hereto shall simultaneously with the execution of this
Agreement, execute the Transfer and deliver the same to the Purchaser's
Solicitors to present the same to the collector of Stamp Duly for
adjudication as to the stamp duly chargeable thereon.
9. VACANT POSSESSION
Vacant possession of the Said Property shall be delivered by the Vendor to
the Purchaser upon receipt of the Total Purchase Price by the Purchaser's
Solicitors in accordance with Clause 3 hereof.
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS
All quit rent and assessment charges payable in respect of the Said
Property shall be apportioned as at the date of delivery of vacant
possession of the Said Property and any sums due by virtue of such
apportionment shall be paid or allowed as the case may be on the date of
apportionment. PROVIDED ALWAYS that the Vendor shall indemnify the
Purchaser, their successors-in-title, assigns and persons deriving title
thereunder in respect of all penalties fines and damages which may arise
as a result of any late payments or defaults in payments by the Vendor
in respect of such quit rent and assessment charges if such are incurred
prior to the date of apportionment.
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR
11.1 As at the date hereof, the Vendor hereby covenants, undertakes,
warrants and represents to and with the Purchaser that:
(a) the Vendor has the power and authority to enter into this Agreement
and to do all acts and things on its part to be done and performed
pursuant hereto;
<PAGE>
(b) the Said Properly is free from all encumbrances and to the best of
this knowledge and belief no impediment exists which would impede,
prevent, affect or obstruct the registration of the Transfer of
the Said Property from the Vendor to the Purchaser;
(c) there are no rates, charges, taxes or other outgoings which are
in arrears and outstanding in respect of the Said Property;
(d) all express and implied conditions of title to the Said Property
have been complied with;
(e) there are no subsisting sale and purchase agreements in respect of
the Said Property or any part thereof between the Vendor and any
third party or parties;
(f) there are no other party or parties with any valid or legal claim
interest or benefit in the Said Property or any part thereof.
(g) the Vendor shall not hereafter save with the consent of the Purchaser
mortgage, charge, transfer, sell, convey or otherwise deal with the
Said Property so as to encumber, encroach upon or divest the
Purchaser of its rights, title and interest to the Said Property.
11.2. The Vendor further covenants, warrants and undertakes to and with the
Purchaser that all warranties and undertakings on his part herein
contained will be fulfilled down to and will be true and correct
at completion in all respects as if they had been entered into
afresh at completion.
11.3 Notwithstanding the completion of the sale and purchase hereunder,
all covenants warranties, undertakings and obligations given hereunder
or undertaken herein shall continue hereafter to subsist for so
long as may be necessary to give effect to each and every one of them
in accordance with the terms hereof.
12. INDEMNITY
The Vendor shall indemnify the Purchaser, its successors-in-title and
assigns against all losses, claims, damages and costs suffered or otherwise
incurred by Purchaser arising out of or resulting from any
misrepresentation or breach of warranty or covenant of the Vendor as herein
set out and against all liability in respect of any taxes fees or charges
payable in respect of the Said Property prior to the date of delivery of
vacant possession of the Said Property referred to in Clause 9 hereof
under any Act of Parliament or any instrument rule or order made under any
Act of Parliament or any regulation bye-law or instrument of any local
authority or of any statutory or other appropriate body.
13. ACQUISITION
13.1 The Vendor hereby warrants and undertakes to the Purchase that as at
the date of execution of this Agreement there has not been any
acquisition of the Said Property or any part thereof and that the
same is not subject to any acquisition or intended acquisition by any
government statutory urban or municipal authority and that no
advertisement in the Government Gazette of such intention has been
published pursuant to the Land Acquisition Act 1960 or any amendment
re-enactment or re-certification hereof.
<PAGE>
14. CAVEAT
The Purchaser shall be entitled at any time after the execution of this
Agreement at its own cost and expense to lodge with the appropriate
authorities a private caveat against any dealing with the Said Property
until the registration of the Transfer in favor of the Purchaser. PROVIDED
THAT in the event this Agreement is terminated pursuant to the provisions
hereof, the Purchaser shall at its own cost and expense withdraw the
aforesaid private caveat PROVIDED FURTHER THAT for the purpose of
effecting the registration of the Transfer the Purchaser shall at its
own cost and expense withdraw the aforesaid private caveat.
15. TIME
Time is of the essence of this Agreement.
16. COSTS
Each party shall bear its own solicitor's costs in respect of the sale and
purchase hereunder. The parties shall bear in equal proportion, the
expenses of all stamp and registration fees together with such other
disbursements of and incidental to the registration of the Transfer of
the Said Property.
17. NOTICE
Any notice or request with reference to this Agreement shall be in writing
and shall be deemed to have been sufficiently served or given for all
purposes herein on the respective parties hereto if left by hand or sent
by facsimile, telex, telegram or prepaid registered post to the party to
whom it is addressed at the address above stated or to such address as the
addressee party may notify to the other in writing or to their
respective solicitors or agents duly authorized and shall in the case of
a notice or request sent by facsimile be deemed to have been served on
the day of the transmission of such notice or communication shall be deemed
to be served on the next succeeding business day and confirmation of
transmission is received or registered and a confirmation of the facsimile
is sent by prepaid registered post. Any notice or communication sent
by telex, telegram or prepaid registered post shall be deemed to have been
given at the time when it ought in the ordinary course of transmission or
post to have been received.
18. SUCCESSORS, ETC BOUND
This Agreement shall be binding upon the respective heirs, personal
representatives, successors-in-title and permitted assigns of the parties
hereto.
19. GOVERNING LAW
The validity, interpretation and performance of this Agreement shall be
interpreted in accordance with the laws of Malaysia.
20. MASTER ASSET PURCHASE AGREEMENT
This Agreement is entered into to fulfill the terms of the Asset purchase
Agreement between National Semiconductor Corporation and Fairchild
Semiconductor corporation dated the same date hereof (the "Master Asset
Purchase Agreement"). If there shall be any inconsistency between the
provisions of this Agreement and the Master Asset Purchase Agreement, the
provisions of the Master Asset Purchase Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto set their hands hereunder:
The Vendor
- ----------
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
- -------------
Signed by )
for and on behalf of )
in the presence of )
<PAGE>
DATED THIS 11th DAY OF MARCH 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD
(the "Purchaser")
--------------------------------------
SALE AND PURCHASE AGREEMENT
--------------------------------------
<PAGE>
TABLE OF CONTENTS
1. AGREEMENT FOR SALE.......................................................38
2. AGREEMENT UNCONDITIONAL..................................................38
3. PAYMENT OF TOTAL PURCHASE PRICE..........................................38
4. CLOSING DATE.............................................................39
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RETENTION SUM....39
6. RETENTION SUM............................................................39
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX 1976.........................40
8. EXECUTION OF TRANSFER....................................................40
9. VACANT POSSESSION........................................................40
10. APPOINTMENT OF QUIT RENT AND ASSESSMENTS.................................41
11. COVENANTS WARRANTIES AND UNDERTAKING OF THE VENDOR.......................41
12. INDEMNIFY................................................................42
13. ACQUISITION..............................................................42
14. CAVEAT...................................................................42
15. TIME.....................................................................42
16. COSTS....................................................................43
17. NOTICE...................................................................43
18. SUCCESSOR ETC BOUND......................................................43
19. GOVERNING LAW............................................................43
20. MASTER ASSET PURCHASE AGREEMENT..........................................43
<PAGE>
THIS AGREEMENT is made this day of March 11, 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial Zone,
11900 Bayan Lepas, Penang, Malaysia (the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD a private limited company
incorporated in Malaysia and having its registered office at No. 16-2B, Second
Floor, Jalan 1/76D, Desa Pandan, 55100 Kuala Lumpur (the "Purchaser") of the
other part.
WHEREAS-
(A) The Vendor is the registered proprietor of all that piece of land held
under H.S.(D) 19 No. PT PDBP. 609/411/72, Mukim 12 Daerah Barat Daya,
Penang, measuring approximately an area of 1.14 acres (hereinafter
referred to as the "Said Property").
(B) The document of title to the Said Property is endorsed with express
conditions and/or restrictions-in-interest.
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Said Property subject to the conditions of title express or implied
affecting the same but otherwise free from all encumbrances and with
vacant possession at the total purchase price of Ringgit Three Million
Five Hundred and Fifty Thousand only (RM3.550,000) (hereinafter referred
to as the "Total Purchase Price") subject to the terms and conditions
hereinafter appearing.
NOW IT IS HEREBY AGREED as follows-
I. AGREEMENT FOR SALE
------------------
Subject to the provisions of this Agreement, the Vendor shall sell and
the Purchaser shall purchase the Said Property subject to the
conditions of title express or implied affecting the same but otherwise
free from all encumbrances and with vacant possession at the Total
Purchase Price and upon the terms and subject to the conditions herein
contained.
II. AGREEMENT UNCONDITIONAL
-----------------------
This Agreement shall be unconditional.
III. PAYMENT OF TOTAL PURCHASE PRICE
-------------------------------
<PAGE>
A. The Total Purchase Price shall be paid by the Purchaser to the
Vendor on 11 March 1997 (the "Closing Date").
B. All moneys paid to the Vendor pursuant to this Agreement are paid on
the condition that they shall become repayable to the Purchaser if
the Transfer (as hereinafter defined) cannot be registered for any
reason whatsoever not due to the Purchaser' s default.
In such event, the Vendor hereby agrees to refund all the said
moneys upon the expiry of seven (7) days from the date of receipt by
the Vendor of a notice from the Purchaser requesting for such
refund, failing which the Vendor shall in addition pay to the
Purchaser interest thereon at the rate often per centum (10%) per
annum, calculated from the day next after the expiry of the said
seven (7) days to the date of receipt by the Purchaser of such
payment based on a three hundred and sixty-five (365) day year on
the actual number of days elapsed, such interest to be payable
together with the said moneys.
IV. CLOSING DATE
------------
A. Upon payment by the Purchaser of the Total Purchase Price on or
before the expiry of the Closing Date, the Vendor shall deliver or
cause to be delivered to the Purchaser's Solicitors:-
1. the valid and registrable memorandum of transfer of the Said
Property from the Vendor in favour of the Purchaser
(hereinafter referred to as the "Transfer");
2. all other relevant documents including the issue document of
title to the Said Property to effect the registration of the
Purchaser as the proprietor of the Said Property; and
3. the latest receipts for payments of all quit rent and
assessment payable in respect of the Said Property.
V. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE
-------------------------------------------------------
RETENTION SUM
-------------
Shearn Delarmore, of 6 Floor Wisma, Penang Garden, No. 42 Jalan Sultan
Ahmad Shah 10050, Penang (the "Purchaser's Solicitors") shall be paid by
the Vendor on the Closing Date, such sum (hereinafter referred to as the
"Retention Sum") as shall be required to be retained by the Purchaser
pursuant to the provisions of the Real Property Gains Tax Act 1976 or any
amendment, re-enactment or re-certification thereof (hereinafter referred
to as the "Act").
VI. RETENTION SUM
-------------
<PAGE>
A. The Retention Sum shall be deposited by the Purchaser' s Solicitors
with a bank or other financial institution (hereinafter referred to
as the "Bank") and placed on fixed deposit in the name of the
Purchaser's Solicitors for periods of one (1) month each. The
Purchaser's Solicitors shall, and the parties hereto hereby
authorize them to do so, pay to the Director-General of the Inland
Revenue Board, Malaysia, out of the Retention Sum and all interest
earned thereon such sum as may be demanded by requisition as defined
in the Act served on the Purchaser or the Vendor pursuant to the Act
unless the Purchaser's Solicitors shall have received a notice of
clearance from the Director-General to the effect that no real
property gains tax is payable or that the said tax as assessed by
the Director-General has been paid, as the case may be, in which
event the Retention Sum shall be released forthwith to the Vendor by
the Purchaser's Solicitors together with all interest earned thereon
upon receipt of such notice of clearance from the Director General.
PROVIDED FURTHER that if the sale and purchase hereunder of the Said
Property shall be rescinded in accordance with the provisions of
this Agreement, the Purchaser's Solicitors shall unless the
Purchaser otherwise direct immediately cause the Retention Sum
together with all interest earned thereon to be withdrawn from
fixed deposit and upon withdrawal immediately pay the same (after
deduction or any penalty levied by the Bank for early withdrawal) to
the Purchaser.
VII. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX 1976
------------------------------------------------
A. Each party hereto hereby covenants and undertakes with the other
party hereto:
1. to duly submit such notifications and execute and do all
documents acts and things on each of their part to be executed
and done under the Act; and
2. to indemnify and save harmless the other party hereto against
all liabilities, penalties, actions, proceedings, demands and
costs resulting from their respective default if any in
complying with the Act.
B. Without prejudice to the generality of the foregoing, the Vendor
hereby undertakes that it will bear and pay all taxes if any
chargeable under the Act on the disposal of the Said Property (if
any) and keep the Purchaser, their successors-in-title, assigns and
persons deriving title thereunder indemnified in respect thereof.
VIII. EXECUTION OF TRANSFER
---------------------
The parties hereto shall simultaneously with the execution of this
Agreement, execute the Transfer and deliver the same to the Purchaser's
Solicitors to present the same to the Collector of Stamp Duty for
adjudication as to the stamp duty chargeable thereon.
IX. VACANT POSSESSION
-----------------
<PAGE>
Vacant possession of the Said Property shall be delivered by the Vendor
to the Purchaser upon receipt of the Total Purchase Price by the
Purchaser's Solicitors in accordance with Clause 3 hereof.
X. APPOINTMENT OF QUIT RENT AND ASSESSMENTS
----------------------------------------
All quit rent and assessment charges payable in respect of the Said
Property shall be apportioned as at the date of delivery of vacant
possession of the Said Properly and any sums due by virtue of such
apportionment shall be paid or allowed as the case may be on the date of
apportionment. PROVIDED ALWAYS that the Vendor shall indemnify the
Purchaser, their successors-in-title, assigns and persons deriving title
thereunder in respect of all penalties fines and damages which may arise
as a result of any late payments or defaults in payment by the Vendor in
respect of such quit rent and assessment charges if such are incurred
prior to the date of apportionment.
XI. COVENANTS WARRANTIES AND UNDERTAKING OF THE VENDOR
--------------------------------------------------
A. As at the date hereof, the Vendor hereby covenants, undertakes,
warrants and represents to and with the Purchaser that:-
1. the Vendor has the power and authority to enter into this
Agreement and to do all acts and things on its part to be done
and performed pursuant hereto;
2. the Said Properly is free from all encumbrances and to the best
of this knowledge and belief no impediment exists which would
impede, prevent, affect or obstruct the registration of the
Transfer of the Said Property from the Vendor to the Purchaser,
3. there are no rates, charges, taxes or other outgoings which are
in arrears and outstanding in respect of the Said Property;
4. all express and implied conditions of title to the Said
Property have been complied with;
5. there are no subsisting sale and purchase agreements in respect
of the Said Property or any part thereof between the Vendor and
any third party or parties;
6. there are no other party or parties with any valid or legal
claim interest or benefit in the Said Property or any part
thereof
7. the Vendor shall not hereafter save with the consent of the
Purchaser mortgage, charge, transfer, sell, convey or otherwise
deal with the Said
<PAGE>
Property so as to encumber, encroach upon or divest the
Purchaser of its rights, title and interest to the Said
Property.
B. The Vendor further covenants, warrants and undertakes to and with
the Purchaser that warranties and undertakings on his part herein
contained will be fulfilled down to and will be true and correct at
completion in all respects as if they had been entered into afresh
at competition.
C. Notwithstanding the completion of the sale and purchase hereunder,
all covenants, warranties, undertakings and obligations given
hereunder or undertaken herein shall continue hereafter to subsist
for so long as may be necessary to give effect to each and every one
of them in accordance with the terms hereof.
XII. INDEMNIFY
---------
The Vendor shall indemnify the Purchaser. its successors-in-title and
assigns against all losses, claims, damages and costs suffered or
otherwise incurred by the Purchaser arising out of or resulting from any
misrepresentation or breach of warranty or covenant of the Vendor as
herein set out and against all liability in respect of any taxes fees or
charges payable in respect of the Said Property prior to the date of
delivery of vacant possession of the Said Property referred to in
Clause 9 hereof under any Act of Parliament or any instrument rule or
order made under any Act of Parliament or any regulation bye-law or
instrument of any local authority or of any statutory or other
appropriate body.
XIII. ACQUISITION
-----------
A. The Vendor hereby warrants and undertakes to the Purchase that as at
the date of execution of this Agreement there has not been any
acquisition of the Said Property or any pan thereof and that the
same is not subject to any acquisition or intended acquisition by
any governmental, statutory, urban, or municipal authority and
that no advertisement in the Government Gazette of such intention
has been published pursuant to the Land Acquisition Act 1960 or any
amendment re-enactment or re-certification hereof.
XIV. CAVEAT
------
The Purchaser shall be entitled at any time after the execution of this
Agreement at its own cost and expense to lodge with the appropriate
authorities a private caveat against any dealing with the Said Property
until the registration of the Transfer in favour of the Purchaser.
PROVIDED THAT in the event this Agreement is terminated pursuant to the
provisions hereof the Purchaser shall at its own cost and expense
withdraw the aforesaid private caveat PROVIDED FURTHER THAT for the
purpose of effecting the registration of the Transfer the Purchaser shall
at its own cost and expense withdraw the aforesaid private caveat.
XV. TIME
----
<PAGE>
Time is of the essence of this Agreement.
XVI. COSTS
-----
Each party shall bear its own solicitor's costs in respect of the sale
and purchase hereunder. The parties shall bear in equal proportion, the
expenses of all stamp and registration fees together with such other
disbursements of and incidental to the registration of the Transfer of
the Said Property.
XVII. NOTICE
------
Any notice or request with reference to this Agreement shall be in
writing and shall be deemed to have been sufficiently served or given for
all purposes herein on the respective parties hereto if left by hand or
sent by facsimile, telex, telegram or prepaid registered post to the
party to whom it is addressed at the address above stated or to such
address as the addressee party may notify to the other in writing or to
their respective solicitors or agents duly authorized and shall in the
case of a notice or request sent by facsimile be deemed to have been
served on the day of the transmission of such notice or communication
provided such day is a business day and if it is not, such notice or
communication shall be deemed to be served on the next succeeding
business day and confirmation of transmission is received or registered
and a confirmation of the facsimile is sent by prepaid registered post.
Any notice or communication sent by telex, telegram or prepaid registered
post shall be deemed to have been given at the nine when it ought in the
ordinary course of transmission or post to have been received.
XVIII.SUCCESSOR ETC BOUND
-------------------
This Agreement shall be binding upon the respective heirs, personal
representatives, successors-in-title and permitted assigns of the parties
hereto.
XIX. GOVERNING LAW
-------------
The validity, interpretation and performance of this Agreement shall be
interpreted in accordance with the laws of Malaysia,
XX. MASTER ASSET PURCHASE AGREEMENT
-------------------------------
This Agreement is entered into to fulfill the terms of the Asset Purchase
Agreement between National Semiconductor Corporation and Fairchild
Semiconductor Corporation dated the same date hereof (the "Master Asset
Purchase Agreement"). If there shall be any inconsistency between the
provisions of this Agreement and the Master Asset Purchase Agreement, the
provisions of the Master Asset Purchase Agreement shall prevail.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands hereunder.
The Vendor
- ----------
<PAGE>
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
- -------------
Signed by )
for and on behalf of )
in the presence of )
<PAGE>
DATED THIS 11th DAY OF MARCH 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD
(the "Purchaser")
---------------------------------
SALE AND PURCHASE AGREEMENT
---------------------------------
<PAGE>
CONTENTS
NO. DESCRIPTION PAGE
- --- ----------- ----
1. AGREEMENT FOR SALE................................................... 2
2. AGREEMENT UNCONDITIONAL.............................................. 2
3. PAYMENT 0F TOTAL PURCHASE PRICE...................................... 2
4. CLOSING DATE......................................................... 2
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RETENTION
SUM................................................................ 3
6. RETENTION SUM........................................................ 3
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976................. 4
8. EXECUTION OF TRANSFER................................................ 4
9. TENANCY.............................................................. 4
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS........................... 4
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR................. 4
12. INDEMNITY............................................................ 5
13. ACQUISITION.......................................................... 6
14. CAVEAT............................................................... 6
15. TIME................................................................. 6
<PAGE>
16. COSTS................................................................ 6
17. NOTICE............................................................... 6
18. SUCCESSORS, ETC. BOUND............................................... 7
19. GOVERNING LAW........................................................ 7
20. MASTER ASSET PURCHASE AGREEMENT...................................... 7
EXECUTION............................................................ 8
i
<PAGE>
THIS AGREEMENT is made this day of March 11, 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial Zone.,
11900 Bayan Lepas, Penang, Malaysia (the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN, BHD a private limited company
incorporated in Malaysia and having its registered office at No. 16-2B, Second
Floor, Jalan 1/76D, Desa Pandan, 55100 Kuala Lumpur (the " Purchaser`) of the
other part.
WHEREAS:-
(A) The Vendor is the registered proprietor of all that piece of land held
under H.S.(D) 3400.M4k12 PT 215, Mukim 12 Daerah Barat Daya, Penang,
measuring approximately an area of 5.16864 acres (hereinafter referred to
as the "Said Property").
(B) The document of title to the Said Property is endorsed with express
conditions and/or restrictions-in-interest.
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase
the Said Property subject to the conditions of title express or implied
affecting the same but otherwise free from all encumbrances and with an
existing tenancy on one storey of a two storey building situated on the
Said Property with Dynacraft Industries Sdn Bhd pursuant to a tenancy
agreement dated 20 January 1996 (the "Tenancy") at the total purchase
price of price of Ringgit Thirty Three Million Five Hundred Thousand only
(R.M33,500,000) (hereinafter referred to as the "Total Purchase Price")
subject to the terms and conditions hereinafter appearing.
<PAGE>
NOW IT TS HEREBY AGREED as follows:
XXI. AGREEMENT FOR SALE
Subject to the provisions of this Agreement, the Vendor shall
sell and the Purchaser shall purchase the Said Property subject
to the conditions of title express or implied affecting the
same but otherwise free from all encumbrances and with vacant
possession at the Total Purchase Price and upon the terms and
subject to the conditions herein contained.
XXII. AGREEMENT UNCONDITIONAL
This Agreement shall be unconditional.
XXIII. PAYMENT 0F TOTAL PURCHASE PRICE
A. The Total Purchase Price shall be paid by the Purchaser to
the Vendor on 11 March 1997 (the "Closing Date").
B. All moneys paid to the Vendor pursuant to this Agreement
are paid on the condition that they shall become repayable
to the Purchaser if the Transfer (as hereinafter defined)
cannot be registered for any reason whatsoever not due to
the Purchaser' s default. In such event, the Vendor hereby
agrees to refund all the said moneys upon the expiry of
seven (7) days from the date of receipt by the Vendor of a
notice from the Purchaser requesting for such refund,
failing which the Vendor shall in addition pay to the
Purchaser interest thereon at the rate often per centum
(10%) per annum, calculated from the day next after the
expiry of the said seven (7) days to the date of receipt
by the Purchaser of such payment based on a three hundred
and sixty-five (365) day year on the actual number of days
elapsed, such interest to be payable together with the
said moneys.
XXIV. CLOSING DATE
A. Upon payment by the Purchaser of the Total Purchase Price
on or before the expiry of the Closing Date, the Vendor
shall deliver or cause to be delivered to the Purchaser's
Solicitors:-
1. the valid and registrable memorandum of transfer of
the Said Property from the Vendor in favour of the
Purchaser (hereinafter referred to as the "Transfer");
2. all other relevant documents including the issue
document of title to the Said Property to effect the
registration of the Purchaser as the proprietor of
the Said Property, and
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<PAGE>
3. the latest receipts for payments of all quit rent and
assessment payable in respect of the Said Property.
XXV. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE
RETENTION SUM
Shearn Delamore, of 6 Floor Wisma Penang Garden, No. 42 Jalan
Sultan Ahmad Shah 10050, Penang (the "Purchaser's Solicitors")
shall be paid by the Vendor on the Closing Date, such sum
(hereinafter referred to as the "Retention Sum") as shall be
required to be retained by the Purchaser pursuant to the
provisions of the Real Property Gains Tax Act 1976 or any
amendment. re-enactment or re-certification thereof
(hereinafter referred to as the "Act").
XXVI. RETENTION SUM
The Retention Sum shall be deposited by the Purchaser' s
Solicitors with a bank or other financial institution
(hereinafter referred to as the "Bank") and placed on fixed
deposit in the name of the Purchaser's Solicitors for periods
of one (1) month each. The Purchaser's Solicitors shall, and
the parties hereto hereby authorize them to do so, pay to the
Director-General of the Inland Revenue Board, Malaysia, out of
the Retention Sum and all interest earned thereon such sum as
may be demanded by requisition as defined in the Act served on
the Purchaser or the Vendor pursuant to the Act unless the
Purchaser's Solicitors shall have received a notice of
clearance from the Director-General to the effect that no real
property gains tax is payable or that the said tax as assessed
by the Director-General has been paid, as the case may be, in
which event the Retention Sum shall be released forthwith to
the Vendor by the Purchaser's Solicitors together with all
interest earned thereon upon receipt of such notice of
clearance from the Director General. PROVIDED FURTHER that if
the sale and purchase hereunder of the Said Property shall be
rescinded in accordance with the provisions of this Agreement,
the Purchaser's Solicitors shall unless the Purchaser otherwise
direct immediately cause the Retention Sum together with all
interest earned thereon to be withdrawn from fixed deposit and
upon withdrawal immediately pay the same (after deduction or
any penalty levied by the Bank for early withdrawal) to the
Purchaser.
3
<PAGE>
XXVII. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976
A. Each party hereto hereby covenants and undertakes with the
other party hereto:-
1. to duly submit such notifications and execute and do
all documents acts and things on each of their part
to be executed and done under the Act, and
2. to indemnify and save harmless the other party hereto
against all liabilities penalties actions proceedings
demands and costs resulting from their respective
default if any in complying with the Act.
B. Without prejudice to the generality of the foregoing, the
Vendor hereby undertakes that it will bear and pay all
taxes if any chargeable under the Act on the disposal of
the Said Property (if any) and keep the Purchaser, their
successors-in-title, assigns and persons deriving title
thereunder indemnified in respect thereof
XXVIII. EXECUTION OF TRANSFER
The parties hereto shall simultaneously with the execution of
this Agreement, execute the Transfer and deliver the same to
the Purchaser's Solicitors to present the same to the Collector
of Stamp Duty for adjudication as to the stamp duty chargeable
thereon.
XXIX. TENANCY
The Said Property shall be sold subject to the Tenancy.
XXX. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS
All quit rent and assessment charges payable in respect of the
Said Property shall be apportioned as at the Closing Date, as
the case may be, and any sum due by virtue of such
apportionment shall be paid or allowed as the case may be on
the date of apportionment. PROVIDED ALWAYS that the Vendor
shall indemnify the Purchaser, their successors-in-title,
assigns and persons deriving title thereunder in respect of all
penalties fines and damages which may arise as a result of any
late payments or defaults in payment by the Vendor in respect
of such quit rent and assessment charges if such are incurred
prior to the date of apportionment.
XXXI. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR
A. Subject to Clause 9, as at the date hereof, the Vendor
hereby covenants, undertakes, warrants and represents to
and with the Purchaser that:-
4
<PAGE>
1. the Vendor has the power and authority to enter into
this Agreement and to do all acts and things on its
part to be done and performed pursuant hereto.
2. the Said Property is free from all encumbrances and
to the best of this knowledge and belief no
impediment exists which would impede, prevent, affect
or obstruct the registration of the Transfer of the
Said Property from the Vendor to the Purchaser,
3. there are no rates, charges., taxes or other
outgoings which are in arrears and outstanding in
respect of the Said Property,
4. all express and implied conditions of title to the
Said Property have been complied with,
5. there are no subsisting sale and purchase agreements
in respect of the Said Property or any part thereof
between the Vendor and any third party or parties',
6. the Vendor shall not hereafter save with the consent
of the Purchaser mortgage, charge, transfer, sell,
convey or otherwise deal with the Said Property so as
to encumber, encroach upon or divest the Purchaser of
its rights, title and interest to the Said Property.
B. The Vendor further covenants, warrants and undertakes to
and with the Purchaser that all warranties and
undertakings on his part herein contained will be
fulfilled down to and will be true and correct at
completion in all respects as if they had been entered
into afresh at completion.
C. Notwithstanding the completion of the sale and purchase
hereunder, all covenants, warranties, undertakings and
obligations given hereunder or undertaken herein shall
continue hereafter to subsist for so long as may be
necessary to give effect to each and every one of them in
accordance with the terms hereof
XXXII. INDEMNITY
The Vendor shall indemnify the Purchaser, its
successors-in-title and assigns against all losses, claims,
damages and costs suffered or otherwise incurred by the
Purchaser arising out of or resulting from any
misrepresentation or breach of warranty or covenant of the
Vendor as herein set out and against all liability in respect
of any taxes fees or charges payable in respect of the Said
Property prior to the Closing Date under any Act of Parliament
or any instrument rule or order made under any Act of
Parliament or any regulation by-law or instrument of any local
authority or of any statutory or other appropriate body.
5
<PAGE>
XXXIII. ACQUISITION
The Vendor hereby warrants and undertakes to the Purchase that
as at the date of execution of this Agreement there has not
been any acquisition of the Said Property or any part thereof
and that the same is not subject to any acquisition or intended
acquisition by any governmental statutory urban or municipal
authority and that no advertisement in the Government Gazette
of such intention has been published pursuant to the Land
Acquisition Act 1960 or any amendment re-enactment or
re-certification hereof
XXXIV. CAVEAT
The Purchaser shall be entitled at any time after the execution
of this Agreement at its own cost and expense to lodge with the
appropriate authorities a private caveat against any dealing
with the Said Property unto the registration of the Transfer in
favour of the Purchaser. PROVIDED THAT in the event this
Agreement is terminated pursuant to the provisions hereof, the
Purchaser shall at its own cost and expense withdraw the
aforesaid private caveat PROVIDED FURTHER THAT for the purpose
of effecting the registration of the Transfer the Purchaser
shall at its own cost and expense withdraw the aforesaid
private caveat.
XXXV. TIME
Time is of the essence of this Agreement.
XXXVI. COSTS
Each party shall bear its own solicitor's costs in respect of
the sale and purchase hereunder. The parties shall bear in
equal proportion, the expenses of all stamp and registration
fees together with such other disbursements of and incidental
to the registration of the Transfer of the Said Property.
XXXVII. NOTICE
Any notice or request with reference to this Agreement shall be
in writing and shall be deemed to have been sufficiently served
or given for all purposes herein on the respective parties
hereto if left by hand or sent by facsimile, telex, telegram or
prepaid registered post to the party to whom it is addressed at
the address above stated or to such address as the addressee
party may notify to the other in writing or to their respective
solicitors or agents duly authorized and shall in the case of a
notice or request sent by facsimile be deemed to have been
served on the day of the transmission of such notice or
communication provided such day is a business day and if it is
not, such notice or communication shall be deemed to be served
on the next succeeding business day and
6
<PAGE>
confirmation or transmission is received or registered and a
confirmation of the facsimile is sent by prepaid registered
post. Any notice or communication sent by telex, telegram or
prepaid registered post shall be deemed to have been given at
the time when it ought in the ordinary course of transmission
or post to have been received.
XXXVIII. SUCCESSORS, ETC. BOUND
This Agreement shall be binding upon the respective heirs,
personal representatives, successors-in-title and permitted
assigns of the parties hereto.
XXXIX. GOVERNING LAW
The validity, interpretation and performance of this Agreement
shall be interpreted in accordance with the laws of Malaysia.
XL. MASTER ASSET PURCHASE AGREEMENT
This Agreement is entered into to fulfill the terms of the
Asset Purchase Agreement between National Semiconductor
Corporation and Fairchild Semiconductor Corporation dated the
same date hereof (the "Master Asset Purchase Agreement"). If
there shall be any inconsistency between the provisions of this
Agreement and the Master Asset Purchase Agreement, the
provisions of the Master Asset Purchase Agreement shall prevail.
7
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto set their hands
hereunder.
The Vendor
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
Signed by )
for and on behalf of )
in the presence of )
8
<PAGE>
DATED THIS 11th DAY OF MARCH 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD
(the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD
(the "Purchaser")
---------------------------------
SALE AND PURCHASE AGREEMENT
---------------------------------
<PAGE>
CONTENTS
NO DESCRIPTION Page
- -- ----------- ----
1. AGREEMENT FOR SALE................................................ 1
2. AGREEMENT UNCONDITIONAL........................................... 1
3. PAYMENT OF TOTAL PURCHASE PRICE................................... 2
4. CLOSING DATE...................................................... 2
5. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE RETENTION
SUM............................................................... 2
6. RETENTION SUM..................................................... 2
7. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976.............. 3
8. EXECUTION OF TRANSFER............................................. 3
9. VACANT POSSESSION................................................. 3
10. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS........................ 3
11. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR.............. 4
12. INDEMNITY......................................................... 4
13. AMMUM............................................................. 5
14. CAVEAT............................................................ 5
15. TIME.............................................................. 5
16. COSTS............................................................. 5
17. NOTICE............................................................ 5
18. SUCCESSORS, ETC. BOUND............................................ 6
i
<PAGE>
19. GOVERNING LAW..................................................... 6
20. MASTER ASSET PURCHASE AGREEMENT................................... 6
EXECUTION......................................................... 7
ii
<PAGE>
THIS AGREEMENT is made this day of March 11, 1997
BETWEEN
NATIONAL SEMICONDUCTOR SDN BHD a private limited company incorporated in
Malaysia having its registered address at Bayan Lepas Free Industrial Zone,
11900 Bayan Lepas, Penang, Malaysia (the "Vendor")
AND
FAIRCHILD SEMICONDUCTOR (MALAYSIA) SDN BHD a private limited company
incorporated in Malaysia and having its registered office at No 16-2B, Second
Floor, Jalan 1/76D, Desa Pandan, 55100 Kuala Lumpur (the "Purchaser") of the
other part.
WHEREAS:-
(A) The Vendor is the registered proprietor of all that piece of
land held under H.S.(D) 44 PT 169, Mukim 12 Dacrah Barat Daya,
Penang, measuring approximately an area of 5 acres (hereinafter
referred to as the "Said Property").
(B) The document of title to the Said Property is endorsed with
express conditions and/or restrictions-in-interest.
(C) The Vendor has agreed to sell and the Purchaser has agreed to
purchase the Said Property subject to the conditions of title
express or implied affecting the same but otherwise free from
all encumbrances and with vacant possession at the total
purchase price of Ringgit Twenty Two Million Two Hundred
Thousand (RM22,200,000) (hereinafter referred to as the "Total
Purchase Price") subject to the terms and conditions
hereinafter appearing.
NOW IT IS HEREBY AGREED as follows:
XLI. AGREEMENT FOR SALE
Subject to the provisions of this Agreement, the Vendor shall
sell and the Purchaser shall purchase the Said Property subject
to the conditions of title express or implied affecting the
same but other-wise free from all encumbrances and with vacant
possession at the Total Purchase Price and upon the terms and
subject to the conditions herein contained.
XLII. AGREEMENT UNCONDITIONAL
This Agreement shall be unconditional.
<PAGE>
XLIII. PAYMENT OF TOTAL PURCHASE PRICE
A. The Total Purchase Price shall be paid by the Purchaser to
the Vendor on 11 March 1997 (the "Closing Date").
B. All moneys paid to the Vendor pursuant to this Agreement
are paid on the condition that they shall become repayable
to the Purchaser if the Transfer (as hereinafter defined)
cannot be registered for any reason whatsoever not due to
the Purchaser' s default.
In such event, the Vendor hereby agrees to refund all the said
moneys upon the expiry of seven (7) days from the date of
receipt by the Vendor of a notice from the Purchaser requesting
for such refund, failing which the Vendor shall in addition pay
to the Purchaser interest thereon at the rate often per centum
(10%) per annum, calculated from the day next after the expiry
of the said seven (7) days to the date of receipt by the
Purchaser of such payment based on a three hundred and
sixty-five (365) day year on the actual number of days elapsed,
such interest to be payable together with the said moneys.
XLIV. CLOSING DATE
A. Upon payment by the Purchaser of the Total Purchase Price
on or before the expiry of the Closing Date, the Vendor
shall deliver or cause to be delivered to the Purchaser's
Solicitors:-
1. the valid and registrable memorandum of transfer of
the Said Property from the Vendor in favour of the
Purchaser (hereinafter referred to as the "Transfer");
2. all other relevant documents including the issue
document of title to the Said Property to effect the
registration of the Purchaser as the proprietor of
the Said Property; and
3. the latest receipts for payments of all quit rent and
assessment payable in respect of the Said Property.
XLV. THE PURCHASER'S SOLICITORS OBLIGATION IN RESPECT OF THE
RETENTION SUM
Sheam Delamore, of 6 Floor Wisma Penang Garden, No.42 Jalan
Sultan Ahmad Shah 10050, Penang (the "Purchaser's Solicitors")
shall be paid by the Vendor on the Closing Date, such sum
(hereinafter referred to as the "Retention Sum") as shall be
required to be retained by the Purchaser pursuant to the
provisions of the Real Property Gains Tax Act 1976 or any
amendment, re-enactment or re-certification thereof
(hereinafter referred to as the "Act").
XLVI. RETENTION SUM
A. The Retention Sum shall be deposited by the Purchaser's
Solicitors with a bank or other financial institution
(hereinafter referred to as the "Bank") and placed on
fixed deposit in the name of the Purchaser's Solicitors
for periods of one (1) month each. The Purchaser's
Solicitors shall, and the parties hereto hereby authorize
2
<PAGE>
them to do so, pay to the Director-General of the Inland
Revenue Board, Malaysia, out of the Retention Sum and all
interest earned thereon such sum as may be demanded by
requisition as defined in the Act served on the Purchaser
or the Vendor pursuant to the Act unless the Purchaser's
Solicitors shall have received a notice of clearance from
the Director-General to the effect that no real property
gains tax is payable or that the said tax as assessed by
the Director-General has been paid, as the case may be, in
which event the Retention Sum shall be released forthwith
to the Vendor by the Purchaser's Solicitors together with
all interest earned thereon upon receipt of such notice of
clearance from the Director General, PROVIDED FURTHER that
if the sale and purchase hereunder of the Said Property
shall be rescinded in accordance with the provisions of
this Agreement, the Purchaser's Solicitors shall unless
the Purchaser otherwise direct immediately cause the
Retention Sum together with all interest earned thereon to
be withdrawn from fixed deposit and upon withdrawal
immediately pay the same (after deduction or any penalty
levied by the Bank for early withdrawal) to the Purchaser.
XLVII. COMPLIANCE WITH THE REAL PROPERTY GAINS TAX ACT 1976
A. Each party hereto hereby covenants and undertakes with the
other party hereto:-
1. to duly submit such notifications and execute and do
all documents acts and things on each of their part
to be executed and done under the Act; and
2. to indemnify and save harmless the other party hereto
against all liabilities penalties actions proceedings
demands and costs resulting from their respective
default if any in complying with the Act.
B. Without prejudice to the generality of the foregoing, the
Vendor hereby undertakes that it will bear and pay all
taxes if any chargeable under the Act on the disposal of
the Said Property (if any) and keep the Purchaser, their
successors-in-title, assigns and persons deriving title
thereunder indemnified in respect thereof.
XLVIII. EXECUTION OF TRANSFER
The parties hereto shall simultaneously with the execution of
this Agreement, execute the Transfer and deliver the same to
the Purchasers Solicitors to present the same to the Collector
of Stamp Duty for adjudication as to the stamp duty chargeable
thereon.
XLIX. VACANT POSSESSION
Vacant possession of the Said Property shall be delivered by
the Vendor to the Purchaser upon receipt of the Total Purchase
Price by the Purchaser's Solicitors in accordance with Clause 3
hereof.
L. APPORTIONMENT OF QUIT RENT AND ASSESSMENTS
All quit rent and assessment charges payable in respect of the
Said Property shall be apportioned as at the date of delivery
of vacant possession of the Said Property and any sums due by
virtue of such apportionment shall be paid or allowed as the
case may be on the date of apportionment. PROVIDED ALWAYS that
the Vendor shall indemnify the
3
<PAGE>
Purchaser, their successors-in-title, assigns and persons
deriving title thereunder in respect of all penalties fines and
damages which may arise as a result of any late payments or
defaults in payment by the Vendor in respect of such quit rent
and assessment charges if such are incurred prior to the date
of apportionment.
LI. COVENANTS, WARRANTIES AND UNDERTAKINGS OF THE VENDOR
A. As at the date hereof, the Vendor hereby covenants,
undertakes, ,warrants and represents to and with the
Purchaser that:-
1. the Vendor the power and authority to enter into this
Agreement and to do all acts and things on its part
to be done and performed pursuant hereto;
2. the Said Properly is free from all encumbrances and
to the best of this knowledge and belief no
impediment exists which would impede, prevent, affect
or obstruct the registration of the Transfer of the
Said Properly from the Vendor to the Purchaser;
3. there are no rates, charges, taxes or other outgoings
which are in arrears and outstanding in respect of
the Said Property;
4. all express and implied conditions of title to the
Said Property have been complied with,
5. there are no subsisting sale and purchase agreements
in respect of the Said Property or any part thereof
between the Vendor and any third party or parties';
6. there are no other party or parties with any valid or
legal claim interest or benefit in the Said Property
or any part thereof,
7. the Vendor shall not hereafter save with the consent
of the Purchaser mortgage, charge, transfer, sell,
convey or otherwise deal with the Said Property so as
to encumber, encroach upon or divest the Purchaser of
its rights, title and interest to the Said Property.
B. The Vendor further covenants, warrants and undertakes to
and with the Purchaser that all warranties and
undertakings on his part herein contained will be
fulfilled down to and will be true and correct at
completion in all respects as if they had been entered
into afresh at completion.
C. Notwithstanding the completion of the sale and purchase
hereunder, all covenants, warranties, undertakings and
obligations given hereunder or undertaken herein shall
continue hereafter to subsist for so long as may be
necessary to give effect to each and every one of them in
accordance with the terms hereof.
LII. INDEMNITY
The Vendor shall indemnify the Purchaser, its
successors-in-title and assigns against all losses, claims,
damages and costs suffered or otherwise incurred by the
Purchaser arising out of or resulting from any
misrepresentation or breach of warranty or covenant of the
Vendor as herein set out and against all liability in respect
of any taxes fees or charges payable in respect of the Said
Property prior to the date of delivery of vacant Possession of
the Said Property referred to in Clause 9 hereof under any Act
of Parliament or any
4
<PAGE>
instrument rule or order made under any Act of Parliament or any
regulation bye-law of instrument of any local authority or of
any statutory or other appropriate body.
LIII. AMMUM
A. The Vendor hereby warrants and undertakes to the Purchase
that as at the date of execution of this Agreement there
has not been any acquisition of the Said Property or any
par, thereof and that the same is not subject to any
acquisition or intended acquisition by any governmental
statutory urban or municipal authority and that no
advertisement in the Government Gazette of such intention
has been published pursuant to the Land Acquisition Act
1960 or by any amendment re-enactment or re-certification
hereof.
LIV. CAVEAT
The Purchaser shall be entitled at any time after the execution
of this Agreement at its own cost and expense to lodge with the
appropriate authorities a private caveat against any dealing
with the Said Property until the registration of the Transfer
in favour of the Purchaser, PROVIDED THAT in the event this
Agreement is terminated pursuant to the provisions hereof, the
Purchaser shall at its own cost and expense withdraw the
aforesaid private caveat PROVIDED THAT for the purpose of
effecting the registration of the Transfer the Purchaser shall
at its own cost and expense withdraw the aforesaid private
caveat.
LV. TIME
Time is of the essence of this Agreement,
LVI. COSTS
Each party shall bear its own solicitor's costs in respect of
the sale and purchase hereunder. The parties shall bear in
equal proportion, the expenses of all stamp and registration
fees together with such other disbursements of and incidental
to the registration of the Transfer of the Said Property.
LVII. NOTICE
Any notice or request with reference to this Agreement shall be
in writing and shall be deemed to have been sufficiently served
or given for all purposes herein on the respective parties
hereto if left by hand or sent by facsimile, telex, telegram or
prepaid registered post to the party to whom it is addressed at
the address above stated or to such address as the addressee
party may notify to the other in writing or to their respective
solicitors or agents duly authorized and shall in the case of a
notice or request sent by facsimile be deemed to have been
served on the day of the transmission of such notice or
communication provided such day is a business day and if it is
not, such notice or communication shall be deemed to be served
on the next succeeding business day and confirmation of
transmission is
5
<PAGE>
received or registered and a confirmation of the facsimile is
sent by prepaid registered post. Any notice or communication
sent by telex, telegram or prepaid registered post shall be
deemed to have been given at the time when it ought in the
ordinary course of transmission or post to have been received.
LVIII. SUCCESSORS, ETC. BOUND
This Agreement shall be binding upon the respective heirs,
personal representatives, successors-in-title and permitted
assigns of the parties hereto.
LIX. GOVERNING LAW
The validity, interpretation and performance of this Agreement
shall be interpreted in accordance with the laws of Malaysia.
LX. MASTER ASSET PURCHASE AGREEMENT
This Agreement is entered into to fulfill the terms of the
Asset Purchase Agreement between National Semiconductor
Corporation and Fairchild Semiconductor Corporation dated the
same date hereof (the "Master Asset Purchase Agreement"). If
there shall be any inconsistency between the provisions of this
Agreement and the Master Asset Purchase Agreement, the
provisions of the Master Asset Purchase Agreement shall prevail.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands
hereunder,
The Vendor
Signed by )
for and on behalf of )
in the presence of )
The Purchaser
Signed by )
for and on behalf of )
in the presence of )
6
<PAGE>
Exhibit 10.16
LEASE AGREEMENT
KNOW ALL MEN BY THESE PRESENT:
This Contract of Lease made and entered into in the City of
Manila on this 10th day of October, 1979, by and between:
Export Processing Zone Authority, a government
corporation created and operating under Pres. Decree
No. 66 with office address at 4th Floor, Legaspi Towers
300, Vito Cruz, Pasay, Metro-Manila, represented herein
by its Acting Chairman, MR. TEODORO Q. PENA, who has
been duly authorized, hereinafter referred to as
"LESSOR".
- and -
Fairchild Semiconductor (Hong Kong) Limited, a
foreign corporation duly authorized to do business in
the Philippines, with office address at 135 Hoi Bun
Road, Kwun Tong, Kowloon, Hong-kong, represented herein
by its Philippines Branch General manger and
Comptroller, MR. Y. I. LEE and MR. ARNOLD P. AGAYANI,
respectively, who have been duly authorized,
hereinafter referred to as "LESSEE".
WHEREAS, a portion of the public land located in Mactan
Island, Province of Cebu, Philippines, designated as Mactan
Export Processing Zone, has been proclaimed an export processing
zone and the ownership, management and operation thereof is
vested in LESSOR pursuant to executive Proclamation No. 1811
issued by the President of the Philippines on January 15, 1979;
-1-
<PAGE>
WHEREAS, LESSEE has applied with LESSOR as a zone registered
enterprise under Pres. Decree No. 66, as amended, and desires to
lease a portion of said zone for its proposed electronics
manufacturing plant (hereinafter called "the plant");
WHEREAS, in the exercise of its powers duties under Pres.
Decree No. 66, LESSOR has approved LESSEE's application as a zone
registered enterprise and the lease of said land to LESSEE.
It is therefor agreed:
1. Lease of Land. LESSOR hereby leases to LESSEE, and
LESSEE hereby accepts in lease from LESSOR that parcel of land in
Mactan Export Processing Zone with an area of two (2) hectares,
more or less, and more particularly bounded and described in the
attached survey plan marked as Annex "A" (hereinafter called "the
leased premises") and made a integral part hereof. During any
renewal term the "leased premises" shall include all buildings
and improvements on the land.
In the event test borings and site survey prove the site
unsuitable in the opinion of LESSEE, the parties shall negotiate
to agree upon an alternative location within the Mactan Export
Processing Zone and should the parties fail to agree within two
(2) months from the date notice is given by LESSEE to LESSOR of
its determination that the original site is not suitable, then
LESSEE (shall have the right to terminate this lease with
immediate effect.
2. Ownership of Leased Premises. LESSOR represents it is
the owner of the leased premises and the same is free from any
occupants, liens or encumbrances. LESSOR further represents it
has the right to make this lease and covenants it will executed
and deliver to
-2-
<PAGE>
LESSEE such documents as may be necessary or
proper to effect the registration of this lease by LESSEE in the
event a certificate of title is issued for the leased premises or
such registration is allowed under existing laws, and procure any
necessary assurances of title that may be reasonably required for
the protection of LESSEE. All expenses for the registration of
the lease shall be for the account of LESSEE.
3. Term. This contract shall take effect on the date of
execution by both parties but the lease term shall be for a
period of twenty-five (25) years commencing on January 1, 1980
(also called the commencement date of the lease") unless sooner
terminated as hereinafter provided. LESSEE shall have the option
to renew this lease for another period of twenty-five (25) years
under the same terms and conditions as herein provided, except
the annual rental which shall be as hereinafter provided. Such
option shall be exercised by LESSEE giving LESSOR written notice
of LESSEE's intention to renew not later than two (2) years
prior to the expiration of the original term.
4. Rental. Starting on January 1, 1980, LESSEE shall pay
semi-annually in advance to LESSOR ass rental for the leased
premises, without any deduction, set-off, prior notice or demand,
the monthly sums for the five-year periods herein provided, in
accordance with the following schedule:
<TABLE>
<CAPTION>
Rental Per Square
Meter Per Month
Five-Year Period (Pesos)
- ---------------------------------------------------------------
<S> <C>
Original term:
(a) During the period of construction of
the plan but in no case to exceed
January 1, 1980 No Rent
(b) January 1, 1980 to December 31, 1984 1.00
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(c) January 1, 1985 to December 31, 1989 1.25
(d) January 1, 1990 to December 31, 1994 1.5625
(e) January 1, 1995 to December 31, 1999 1.9531
(f) January 1, 2000 to December 31, 2004 2.4413
</TABLE>
The rentals shall be paid in the office of LESSOR in
Manila without necessity of demand.
Renewal term - January 1, 2005 - Subject to
negotiation as to rental rates but not to exceed
P4.20 per square meter per month. Rental during
the entire term, including any renewals, shall
be computed strictly on land measurement (without
reference to buildings or improvements).
5. Construction of plant. LESSEE shall within a
reasonable period after the execution of this Agreement construct
or cause to be constructed on the leased premises the plant as
shown in the preliminary plans hereto attached as Annex "B", in
accordance with Lessor's guidelines and in compliance with all
applicable laws, ordinances and , regulations, all
at LESSEE's cost and expense. From the date of execution of this
Agreement and during the course of such construction, LESSEE, its
employees, agents, invitees, architects, contractors and their
laborers, may enter at all times the leased premises for the
purpose of making such examinations, tests, checks, test borings,
excavations, take or remove soil, water, and kindred materials
found or contained in the leased premises, install water and
telephone lines, drainage and sewage systems, and all other
services necessary or convenient therefor. Such rights of access
herein granted shall, however, be exercised in such manner as not
to destroy, stop, diminish or impair the water pipelines,
installations and other facilities located in the adjoining
properties of LESSORS not covered by this lease.
-4-
<PAGE>
6. Enjoyment and use of leased premises.
(a) LESSEE shall have at all times during the lease
term peaceful and quiet enjoyment of the leased premises.
(b) LESSEE shall use and occupy the leased premises
exclusively for the business to be carried on by it as a
registered zone enterprise and any other awful purposes connected
with said business.
(c) LESSEE shall comply with all laws and regulations
of the national, provincial and municipal authorities applicable
to the business to be conducted in the leased premises. LESSEE,
at its sole expense, shall obtain all licenses or permits which
may be required for the conduct of its business, or for the
construction of buildings and other improvements, installations
of machinery and equipment, and the making of repairs,
alterations, improvements, or additions thereto, and LESSOR, when
necessary, will assist LESSEE in applying for and securing all
such permits or licenses.
(d) Subject to LESSOR's prior approval which shall not
be unreasonably withheld, LESSEE may place and maintain in and
about the leased premises and in or to the inside and outside
walls and windows of the buildings in its plant, such fencing and
neat and appropriate signs advertising its business as it shall
desire.
(e) LESSEE shall not use or permit the use of the
leased premises, or any part thereof, for any purpose prohibited
by law.
(f) LESSEE shall make every reasonable effort to
beautify the leased premises.
-5-
<PAGE>
(g) LESSEE shall provide for the safe disposal of all
injurious waste produced in the leased premises.
7. Buildings and Improvements. LESSEE may erect such
buildings and installations and make such improvements on the
leased premises, undertake repairs and additions thereto, and
install machinery and equipment, of every description and
character, as it shall see fit for the purpose of carrying on its
business. All buildings, installations and improvements, repairs
and additions, thereto, machinery and equipment, erected or
installed by LESSEE, even though attached to the leased premises
in a fixed or permanent manner, shall during the original lease
term remain the property of LESSEE and be considered as personal
property for all purposes, and LESSEE may remove, sell, or in any
manner dispose of them at anytime during the original lease term:
In the case of a sale as stated in the previous
paragraph; LESSEE shall first offer the buildings and permanent
improvements to LESSOR. The terms on which LESSEE shall make
such offer to LESSOR shall be the same as those on which it
intends to sell to a third party. In the event such option (the
"right of first refusal") is not accepted by LESSOR within ninety
(90) days from receipt of notice thereof from LESSEE, LESSEE
shall be free to sell to third parties without further
restrictions except that the contract price in the subsequent
offer shall not be more favorable to third parties than that
presented to LESSOR. In the event LESSEE shall fail to
consummate the sale to a third party within one (1) year from
LESSOR's decision not to exercise its right of first refusal,
then LESSEE cannot present such offer to third parties without
again re-offering the same to LESSOR. In case such sale is
consummated with third parties, such sale shall be subject to the
terms and conditions provided in this Lease Contract and to
LESSOR's
-6-
<PAGE>
current rental and policies and relevant laws, decrees,
rules and regulations. In the case of the voluntary sale by
LESSEE of the buildings during original lease term, LESSOR shall
be entitled to one twenty-fifth (1/25) part of such sale proceeds
for every year from the date this lease was in effect to the date
of the sale.
LESSEE shall not, in removing such buildings,
installations and improvements, repairs and additions thereto,
and machinery and equipment, cause substantial damage or injury
to the leased premises. No injury shall be considered
substantial if it is promptly corrected by restoration to the
condition prior to such installation (except for whatever was
authorized to be removed) if so required by LESSOR. Provided,
however, that in case LESSEE shall voluntarily terminate its
operations and vacate the leased premises at anytime after the
expiration of the twenty-five year lease term, all buildings and
permanent improvements remaining on the leased premises at that
time shall become the property of LESSOR. However, all
machinery, equipment and facility improvements, such as wall
partitions, of every description and character, installed on the
leased premises, and all movable and other property not attached
to the leased premises in a fixed or permanent manner remaining
on the leased premises at the time, shall continue to be the
property of LESSEE and may be removed by LESSEE within a
reasonable time after the termination of this lease or the
renewal thereof, or the assignment or subletting to a third
party.
In the event LESSEE wishes to dispose of its interests
in the property by assignment or sublease, LESSOR shall not
unreasonably withhold consent provided that the proposed assignee
or sublessee is qualified by LESSOR to operate in the Mactan
Export Processing Zone and further provided that any assignment
or sublease shall be limited to the original twenty-five
(25)-year term and shall not include the right of renewal.
-7-
<PAGE>
8. Utilities. LESSOR agrees to provide and bring to the
boundary of the leased premises accessible to LESSEE water,
electricity, power, telephone, sewerage and other utilities to
the leased premises. Roads and utility services shall be
provided by LESSOR as set forth on Annex C. LESSEE agrees to pay
all the water, fuel, gas; oil, heat, electricity, power,
materials and services which may be furnished by LESSOR and other
persons to LESSEE in or about the leased premises during the term
of this lease.
9. Taxes. LESSEE shall pay all taxes, fees and
assessments due, if any, on the leased premises. LESSEE shall
also pay all taxes, fees and assessments due on the buildings,
installations, improvements, machinery and equipment erected or
installed, as well as on the business or activities carried on or
conducted by it on the leased premises. LESSEE shall have the
right to contest the validity or amount in whole or in part of
any tax, fee or assessment asserted against it by any authority
which it deems to have been improperly levied or assessed.
10. Sale of Leased Premises. Should LESSOR desire to sell
the land during the original term of this Agreement, or the land
and/or buildings during the renewal thereof, LESSOR shall first
give written notice of such intention to LESSEE, (and providing,
as to the land, that LESSEE is then allowed by the Constitution
and laws of the Philippines to acquire land) LESSEE shall have
the first option to purchase the leased premises at the same
price offered or to be offered to third persons. If LESSEE
chooses not to purchase and LESSOR sells to a third party, LESSOR
agrees that it will require such third party to acknowledge and
respect the terms of this lease and any sale of land and/or
buildings shall be subject to this lease.
11. Default: Termination. This lease is made upon express
condition and LESSEE agrees that should LESSEE fail to pay the
rental herein stipulated, or any part thereof, or any
-8-
<PAGE>
other sum required of LESSEE to be paid to LESSOR at the time or
in the manner herein provided; or if default should be made in
any of the other covenants or conditions on LESSEE's part herein
and no corrective or remedial measures satisfactory to LESSOR
are instituted within thirty (30) days from receipt of written
notice by LESSOR or LESSOR's agent to LESSEE of such default,
such default, breach or act shall give LESSOR the right to
terminate this lease.
Should (i) LESSEE be prevented by the Government
authorities from successfully and profitably carrying on its
business on the leased premises, (ii) LESSOR breach the terms and
conditions of this Agreement, or (iii) any of the benefits and
incentives granted to LESSEE by Pres. Decree No. 66, as amended,
or any of the rights, guarantees, commitments, or assurances
given by the government authorities be withdrawn, suspended,
reduced or restricted; then the LESSEE may, at its option,
terminate this lease, or any renewal thereof, and neither party
shall have any claim against the other by reason of such
termination except that rentals paid by LESSEE for the unexpired
portion of the lease shall be refunded by LESSOR and the
provisions of Par. 7 hereof shall apply.
12. Insurance and Indemnity.
(a) LESSEE shall keep, save and hold LESSOR harmless
from all liabilities, penalties, losses, damages, costs,
expenses, causes of action, and/or judgment arising out or by
reason of any injury or liability caused by any person or
persons, from any cause or causes whatsoever, while in, upon or
in any way connected with the leased premises during the term of
this lease. For this purpose, LESSEE shall take out at its own
expense and keep in force during the term of this lease public
liability insurance with an insurance company acceptable to
LESSOR in an amount not less than One Million United States
Dollars (US$1,000,000) combined single
-9-
<PAGE>
limit of liability for bodily injury and property damage arising
out of the use of or resulting from any accident occurring in or
about the leased premises, and LESSOR shall be named as an
additional insured thereon.
(b) LESSEE shall, at its expense, take out and keep in
force during the term of this agreement a policy or policies of
fire insurance covering the buildings and improvements to be
erected on the leased premises against fire and extended coverage
perils in the amount of the replacement cost of subject property;
provided, however, that any such policy may contain deductibles
in such amounts as may be consistent with LESSEE's corporate
insurance programs. Such policy or policies shall name LESSEE as
insured thereon and LESSOR shall be provided with a loss payable
endorsement which shall provide for adjustment of loss as the
respective interests of LESSOR and LESSEE may appear at the time
of any such loss; provided, however, that the parties hereto
specifically understand and agree that LESSEE, as named insured
and to the extent provided in any such policy, may in its sole
discretion first apply any such insurance proceeds in the event
of loss to the reconstruction or repair of subject property.
(c) LESSEE shall provide LESSOR with certificates of
such insurance policies as provided hereinabove as soon as
practicable following the execution of this Agreement.
13. Waiver. The receipt by LESSOR of any rent payment with
or without knowledge of the breach of any covenant hereof, shall
not be deemed a waiver of any such breach, and no waiver of any
sum or right due hereunder shall be valid unless made in writing
and signed by the party waiving said sum or right. No delay or
omission in the exercise of any right or remedy accruing ...to
any party hereto upon any breach of obligation -provided in this
Lease Contract
-10-
<PAGE>
entered into by the LESSEE and LESSOR shall impair such right
or remedy or be construed as a waiver of any such breach
thereafter occurring.
14. Notices. All notices under this Agreement shall be sent
by registered mail to the parties at their addresses set forth
above, or at such addresses as the parties may advise each other
in writing.
15. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and cannot be changed in any
manner except in writing subscribed by the parties through their
duly authorized officers.
16. Benefit. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have signed these presents
in the City of Manila, Philippines, this
-11-
<PAGE>
Annex "C"
A B
10,000 Sq. Ft. 100,000 Sq. Ft.
POWER 60 KW
At 480 volts primary 75 KVA 1200 KVA
220/120 secondary 60
cycle
WATER and SEWERAGE 7200 gal. per day 2000 people-50,000
gal. per day
4000 people-96,000
gal. per day
Includes all needs
Flow rates-75-100
gal. per min.
(on 24 hour basis)
TELEPHONE 5 Lines 10 Lines
TELEX One Line One Line
-12-
<PAGE>
_____ day of _________, 1979.
EXPORT PROCESSING ZONE FAIRCHILD SEMICONDUCTOR
AUTHORITY (HONG KONG) LIMITED
(AUTHORITY) (REGISTRANT)
By:
TEODORO Q. PENA Y.I. LEE ARNOLD P. AGBAYANI
Acting Chairman Philippine Branch Philippine Branch
General Manager Comptroller
SIGNED IN THE PRESENCE OF
_______________________________ _____________________________
A C K N O W L E D G M E N T
Republic of the Philippines )
City of Manila ) s.s.
BEFORE ME, in the City of Manila, Philippines, this 10th day of Oct. ,
1979 personally appeared:
NAME RESIDENCE TAX CERTIFICATES
TEODORO Q. PENA AB -0202668
Acting chairman Issued -Las Pinas
EXPORT PROCESSING ZONE March 12,1979
AUTHORITY
Y. I. LEE, Philippine Branch R260166
Manager, FAIRCHILD, SEMI- Issued-Korea (South)
CONDUCTOR (HONGKONG) LIMITED MARCH 31,1978
ARNOLD P. AAGBAYANI OH-10447
Philippine. Branch Comptroller Issued- Chicago
FAIRCHILD SEMI-CONDUCTOR May 29, 1979
(HONK KONG) Limited
-13-
<PAGE>
All known to me and to me , known to be the same persons who executed the
foregoing instrument and acknowledged before me that the same is their free
and voluntary act and deed as well as that of the entities represented.
Said instrument refers to a LEASE AGREEMENT consisting of twelve (12)
pages, including this page of acknowledgment, signed by the parties and their
witnesses on each and every page thereof and sealed with my notarial seal.
VICTORIA CARINA VIQUERUBIN
NOTARY PUBLIC
UNTIL DECEMBER 31, 1979
Doc. No. 174
Page No 26 PRT No. 26078
Book No III
Series of 1979 Issued at MANILA
ON JAN. 5, 1979
-14-
<PAGE>
SUPPLEMENTAL AGREEMENT
KNOW ALL BY THESE PRESENTS:
This Agreement, made and entered into by and between:
EXPORT PROCESSING ZONE AUTHORITY, a government corporation created and
operating under Presidential Decree No. 66, as amended, with office
address at 4th floor, Legaspi Towers 300, Roxas Boulevard, Metro-Manila,
represented herein by its Administrator, Mr. GERARDO S. ESPINA, who has
been duly authorized hereinafter referred to as the "AUTHORITY
-AND-
FAIRCHILD SEMICONDUCTOR (Hong Kong) Limited, a foreign corporation duly
organized and authorized to do business in the Philippines with office
address at LSS Holbun Road, Kwun Tong, Kowloon , Hong Kong, represented
herein by its Philippine Branch General Manager and Comptroller, Messrs.
Y.I. Lee and Arnold P. Aghayani, respectively, who have been duly
authorized, hereinafter referred to as the "REGISTRANT".
W I T N E S S E T H That:
WHEREAS, on October 10, 1979, the Authority and Registrant executed a
Lease Agreement hereinafter referred to as "Original Contract", which
contract was acknowledged before Atty. Victoria Cavina V. Quarabin a notary
public for and in the City of Manila and appearing in her notarial register
on Doc. No. 174 Page No. 30. Book No. III, Series of 1979.
WHEREAS, the Original provided for the Lease of a particular portion of
Mactan Export Processing Zone containing an area of two (2) hectares, more or
less:
WHEREAS. under Resolution No. 82-014 dated March 20, 1932, of the EPZA
Board of Commissioners, an additional area of One Hundred (100) square meters
of land was allocated in favor of the Registrant for the construction of its
mechanized garbage disposal system;
-15-
<PAGE>
NOW, THEREFORE, in view of the foregoing promises, and for and in
consideration of the actual covenants and undertakings hereinafter provided,
the parties hereto have agreed as follows
1. That paragraph 1 of Section 1 the Original Contract is hereby
amended, to read as follows:
Section 1 (par. 1). Lease of Land - Lessor hereby leases to
Lessor and Lessee hereby accepts in lease from Lessor that parcel of
land in Hactn Export Processing Zone with an area of two (2) hectares
(2), more or less , and more particularly bounded and described in the
attached survey plan marked as Annex "A" (hereinafter called "the
leased premises") and made an integral part hereof and an additional
area of ONE HUNDRED (100) sq a of land adjacent to said leased
premises to be utilized for its mechanized garbage disposal system.
During any removal term, the "leased premises" shall include all
buildings and improvements on the land.
2. It is understood that the rentals rate which shall govern the lease
of the additional area shall be the rate prevailing at the time of
the execution of this Agreement.
3. Nothing herein contained shall be construed as modifying or (2)
spending any of the terms and conditions of the Original Contract,
except as herein expressly provided.
IN WITNESS WHEREOF, the parties hereto have signed these presents this 10th
day of May , 1982 at ____________ Manila, Philippines.
EXPORT PROCESSING ZONE FAIRCHILD SEMICONDUCTOR LIMITED
AUTHORITY (REGISTRANT)
(AUTHORITY)
By: By:
GERARDO B. ESPINA Y. I LEE
Administrator
-16-
<PAGE>
SIGNED IN THE PRESENCE OF
1. A.L. PADILLA 2. R.B. BALAJADIA
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES )
CITY OF MANILA ) S.S.
BEFORE ME, in the City of Manila, Philippines, this ____ day of May ,
1982, personally appeared:
NAME RESIDENCE TAX CERTIFICATES
GERARDO S. ESPINA A/B
Administrator
Y.I. LEE A/B - 1032679-A, dtd. 1-29-82
-17-
<PAGE>
N A M E RESIDENCE TAX CERTIFICATES
ARNOLD P. AGBAYNI A/B
both known to me and to me known to be the same persons who executed the
forgoing instrument and acknowledged before me that the same is their free
and voluntary act and deed as well as that of the entities represented.
Said instrument refers to a SUPPLEMENTAL AGREEMENT consisting of four (4)
pages, including this page of acknowledgment, signed by the parties and their
witnesses on each and every page thereof and sealed with my notarial seal.
NOTARY PUBLIC
ATTY. LEVY B. FERNANDO
NOTARY PUBLIC
UNTIL DEC. 31.1982
Doc. No.192
page no 40
Book No. I
Series of 1982
-18-
<PAGE>
SECOND SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENT
This AGREEMENT, made and entered into by and between the -
EXPORT PROCESSING ZONE AUTHORITY, a government
corporation created and operating under Presidential Decree
No. 66, as amended, with office address as 4th Floor,
Legaspi Towers 300, Roxas Blvd., Metro-Manila, represented
herein by its Administrator, Mr. GERARDO S. ESPINA, who has
been duly authorized, hereinafter referred to as the
"AUTHORITY".
- and -
FAIRCHILD SEMICONDUCTOR (HONGKONG) Limited, a foreign
corporation duly organized and authorized to do business in
the Philippines with office address at Mactan Export
Processing Zone, Lapu-Lapu City, represented herein by its
General Manager, Mr. KENT A. GOHEEN, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT".
W I T N E S S E T H:
WHEREAS, on October 10, 1979, the AUTHORITY, and the REGISTRANT executed
a Lease Agreement hereinafter referred to as "original Contract:, which
contract was acknowledged before Atty. Victoria Cavina V. Querubin, a Notary
Public for and in the City of Manila and appearing in her notarial register
as Doc. No. 174; Page No. 36; Book No. III, Series of 1979:
WHEREAS, the Original Contract provided for the lease of a particular
portion of Mactan Export Processing Zone containing an area of two (2)
hectares more or less:
WHEREAS, under Resolution No. 82-044 dated March 20, 1982, of the EPZA
Board of Commissioners, an additional area of One Hundred (100) Square Meters
of land was allocated in favor of the REGISTRANT for the construction of its
mechanized garbage disposal system;
WHEREAS, on August 4, 1983, the REGISTRANT has requested to lease another
additional area of TWO HUNDRED THIRTY (230) Sq. M. for its Incinerator Plant;
WHEREAS, under Resolution No. 83-112 dated September 6, 1983, the EPZA
Board of Commissioners has approved said request;
-19-
<PAGE>
NOW, THEREFORE, in view of the foregoing premises and for and in
consideration of the mutual covenants and undertakings hereinafter provided,
the parties hereto have agreed as follows:
1. That paragraph 1 of Section 1 of the Original Contract is hereby
further amended to read as follows:
"Section 1 (Para1). Lease of Land. Lessor hereby leases to Lessee and
Lessee hereby accepts in lease from Lessor that parcel of land in Mactan
Export Processing Zone with an area of two (2) hectares more or less, and
more particularly bounded and described in the attached survey plan
marked as Annex "A" (hereinafter called the "leased premises"), and made
an integral part hereof and an additional area of One Hundred (100)
Square Meters of land adjacent to said leased garbage disposal system and
another additional area of TWO HUNDRED THIRTY (230) Sq. M. of land to be
utilized for its incinerator plant. During any renewal term, the "leased
premises" shall include all buildings and improvements on the land".
2. It is understood that the rental rate which shall govern the lease
of the additional area shall be the rate prevailing at the time of the
execution of this Agreement.
3. Nothing herein contained shall be construed as modifying or amending
any of the terms and conditions of the Original Contract, except as herein
expressly provided.
4. This Second Supplemental Agreement shall form part of the Original
Contract.
IN WITNESS WHEREOF, the parties hereto have signed these presents this
12th day of December, 1983, in the City of Manila, Philippines.
EXPORT PROCESSING ZONE FAIRCHILD SEMICONDUCTOR
AUTHORITY (HONKKONG)
(AUTHORITY) (REGISTRANT)
By By:
ORIGINAL SIGNED
GERARDO S. ESPINA KENT A. GOHEEN
Administrator General Manager
SIGNED IN THE PRESENCE OF :
1. ROGELIO B. BALAJADIA 2. ARTHUR L. PADILLA
A C K N O W L E D G M E N T
-20-
<PAGE>
REPUBLIC OF THE PHILIPPINES )
CITY OF MANILA ) S. S.
BEFORE ME, in the City of Manila, this 12th day of December, 1983,
personally appeared the following:
NAME RESIDENCE TAX CERTIFICATE
GERARDO S. ESPINA A/B 9874552
Administrator April 8, 1983
Manila
KENT A. GOHEEN A/B 1203912
January 18, 1983
Lapulapu City
both known to me and to me known to be the same persons who executed the
foregoing instrument and acknowledged before me that the same is free and
voluntary act and deed as well as that of the entities they represent.
Said instrument refers to a SECOND SUPPLEMENTAL AGREEMENT consisting of four
(4) pages, including this page of acknowledgment signed by the parties and
their witnesses on each and every page thereof and sealed with my notarial
seal.
ROMEO V. PEREZ
NOTARY PUBLIC
UNTIL DEC. 31. 1984
PTR-J90254-MLA-1-3 83
TAN-P6260-D0447-A7
Doc. No. 361
Page No. 39
Book No. XXIV
Series of 1983 ...
-21-
<PAGE>
THIRD SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, made and entered into by and between -
EXPORT PROCESSING ZONE Authority a government
corporation created and operating under Presidential Decree
No. 66, as amended, with office address at the 4th Floor,
Legaspi Towers 300, Roxas Boulevard, Metro Manila,
represented herein by its Administrator Mr. RENATO L.
CAYETANO, who has been duly authorized, hereinafter referred
to as the "AUTHORITY".
- and -
FAIRCHILD SEMICONDUCTOR (HONKKONG) LIMITED, a foreign
corporation duly registered and authorized to do business in
the Philippines with office address at Mactan EXPORT
Processing Zone, Lapulapu City, represented herein by its
General Manager, MR. KINT A. GOHEEN, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT"
W I T N E S S E T H That:
WHEREAS, on October 10, 1979, the AUTHORITY and the REGISTRANT executed a
Lease Agreement hereinafter referred to as "Original Contract" which contract
was acknowledged before Atty. Victoria Cavina V. Querbin, a Notary Public for
and in the City of Manila and appearing in her Notarial Register as Doc. No.
174, Page No. 36; Book No. III; and Series of 1979;
WHEREAS, the Original Contract provided for the lease of a particular
portion of Mactan Export Processing Zone containing an area of two (2)
hectares, more of less;
WHEREAS, under Resolution No. 82-044 dated March 20,1982, of the EPZA
Board of Commissioners. an additional area of One Hundred (100 sq. ms.)
square meters of land was allocated in favor of the REGISTRANT for the
construction of its mechanized garbage disposal system.
WHEREAS, on August 4, 1983, the REGISTRANT again Requested an additional
area of TWO HUNDRED (200 sq. Ms.) SQUARE METERS of land for their incinerator
plant of the disposal of their chemical wastes which request was farvorably
recommended by the Zone Manager, MEPZ, to the Administrator and subsequently
approved by the latter on August 10, 1983:
-22-
<PAGE>
WHEREAS, under Resolution No. 83-141 dated December 6, 1983, of the EPZA
Board of Commissioners, another additional area of ONE HUNDRED FIFTY (150 Sq.
Ms.) SQUARE METERS of land was allocated in favor of the REGISTRANT to be
used in the expansion of its Nitrogen Gas Tank Area subject to the payment of
rentals in accordance with the schedule of rates fixed under Resolution No.
82-042 dated March 8,1982.
NOW, THEREFORE, in view of the foregoing premises, and for and in
consideration of the mutual covenants and undertakings hereinafter provided,
the parties hereto have agreed as follows:
1. That paragraph 1 of Section 1 of the Original Contract is hereby
further amended to read as follows:
"Section I (Par. 1). Lease of Land -
LESSOR hereby leases to LESSEE and LESSEE hereby
accepts in lease from LESSOR that parcel of land in
Mactan Export Processing Zone with an area of two (2)
hectares, more or less, and more particularly bounded
and described in the attached Survey Plan marked as
Annex "A". (hereinafter called "The Leased Premises")
and made an integral part hereof and an additional
areas of :
(a) One Hundred (100 Sq. Ms.) Square Meters to be
utilized for its mechanized garbage disposal system;
(b) Two Hundred (200 Sq. Ms.) Square Meters for its
incinerator plant; and
(c) One Hundred Fifty (150 Sq. Ms.) Square Meters to be
used in the expansion of its Nitrogen Gas Tank Area. During
any 4enewal term, the "leased premises" shall include all
buildings and improvements on the land."
2. Nothing herein contained shall be construed as
modifying or amending any of the terms and conditions of the
Original Contract and the First and Second Supplemental
Agreement, except as herein expressly provided.
IN WITNESS WHEREOF, the parties hereto have signed these presents,
this _____ day of __________________, 1984 at _________________ Philippines.
EXPORT PROCESSING ZONE FAIRCHILD SEMICONDUCTOR
AUTHORITY (HONKKONG) LIMITED
-23-
<PAGE>
By: By:
RENATO CAYETANO KENT A. GOHEEN
Administrator General Manager
SIGNED IN THE PRESENCE OF
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES )S.S.
CITY OF CEBU )
BEFORE ME, in the City of Cebu, Philippines, this 17th day of August,
1984, personally appeared:
NAM E RESIDENCE TAX CERTIFICATE
KENT A. GOHEEN A/B-13939661-Lapu-lapu City
General Manager February 21,1984
known to be the same person who executed this contract and acknowledged
before me that the same is his free act and deed.
Said instrument refers to THIRD SUPPLEMENTAL AGREEMENT, consisting of
four (4) pages, including this page of acknowledgment signed by the parties
and their witnesses on each and every page thereof and sealed with my
notarial seal.
MANUEL P. LEGASPI
NOTARY PUBLIC
UNTIL 1985
PTR. No. 5235457
JAN. 25,1984 PLACER SURIGAO NORTE
Doc. No. 187
page No. 39
Book No. XIV
Series of 1984
-24-
<PAGE>
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES )
CITY OF MANILA ) S.S
BEFORE ME, in the City of Manila, Philippines, this ____day of September,
1984, personal appeared:
NAME RESIDENCE TAX CERTIFICATE
RENATO L. CAYETANO LB-172950-Patros M.M.
Administrator Jan. 23, 1984
known to be the same person who executed this contract and acknowledge before
me that the same is his free act and deed.
Said instrument refers to THIRD SUPPLEMENTAL AGREEMENT, consisting of
four (4) pages, including this page of acknowledgment signed by the parties
and their witnesses on each and every page thereof and sealed with my
notarial seal.
Doc. No. 438
Page No. 89
Book No. II
Series of 1984
-25-
<PAGE>
FOURTH SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT made and entered into by and between:
EXPORT PROCESSING ZONE AUTHORITY, a government
corporation created and operating under Presidential Decree
No 66, as amended, with office address at the 4th floor,
Legaspi Towers 300, Roxas Blvd., Metro Manila, represented
herein by its Chairman-Administrator, MR. JAIME L. GUERRERO,
who has been duly authorized, hereinafter referred to as the
"AUTHORITY."
- and -
FAIRCHILD SEMICONDUCTOR (HONKKONG) LIMITED, a foreign
corporation duly registered and authorized to do business in
the Philippines with office address as Mactan, Export
Processing Zone, Lapu-Lapu City, represented herein by its
General Manager, MR. JAMES D. STILSON, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT".
W I T N E S S E T H That:
WHEREAS, on October 10, 1979, the AUTHORITY and the REGISTRANT executed a
Registration Agreement hereinafter referred to as the "Original Contract,"
which contract was acknowledged before Atty. Victoria Casina V. Querubin, a
Notary Public for and in the City of Manila and appearing in her Notarial
Register as Doc. No. 174; Page No. 36; Book No. III; and Series of 1979;
WHEREAS, the Original Contract provided for the lease by the REGISTRANT
of a particular portion of Mactan Export Processing Zone containing an area
of two (2) hectares, more or less;
WHEREAS, the REGISTRANT requested to lease several additional areas -
100, 200, and 150 square meters, which were the subject of the First, Second
and Third Supplemental Agreements, respectively;
WHEREAS, on November 7, 1986, the REGISTRANT requested again to lease
additional land area of TWO THOUSAND SEVEN HUNDRED FORTY THREE (2,743 Sq.
Ms.) SQUARE METERS which the Chairman-Administrator approved upon the
recommendation of the AUTHORITY's Project Evaluation and Review Department.
-26-
<PAGE>
NOW, THEREFORE, in view of the foregoing premises, and for and in
consideration of the mutual covenants and undertakings hereinafter provided,
the parties hereto have agreed as follows:
1. That paragraph 1 of Section 1 of the Original Contract is hereby
further amended to read as follows:
Section 1. (Para. 1). Lease of Land -
"LESSOR hereby leases to LESSEE, LESSEE hereby accepts
in lease from LESSOR that parcel of land in Mactan
Export Processing Zone with an area of two (2)
hectares, more or less, and more particularly bounded
and described in the attached Survey Plan marked as
Annex "A" (hereinafter called "The Leased Premises")
and made an integral part herof and additional areas
of:
a) One Hundred (100 sq.m.) Square Meters to be utilized
for its mechanized garbage disposal system (Plan
attached and marked as Annex "B");
b) Two Hundred (200 sq.m.) Square Meters for its
incinerator plans (Plan attached and marked as Annex
"C:);
c) One Hundred Fifty (150 sq.m.) Square Meters to be used
in the expansion of its Nitrogen Gas Tank Area (Plan
attached an marked as Annex "D"); and
d) Two Thousand Seven Hundred Forty Three (2,743 sq.m.)
Square Meters(Plan attached and marked as (Annex "E").
During any renewal term, the "leased premises" shall
include all buildings and improvements on the land.
2. The schedule of rental rates to be applied on the 2,743 sq.m. space
shall be the rates provided under Board Resolution No. 85-033 dated March 18,
1985, as follows:
Jan. 1, 1985 to Dec. 31, 1989.................... 4.20/sq.m./mo.
Jan. 1, 1990 to Dec. 31, 1994.................... 6.09/sq.m./mo.
Jan. 1, 1995 to Dec. 31, 1999.................... 8.83/sq.m./mo.
Jan. 1, 2000 to Dec. 31, 2004.................... 12.80/sq.m./mo.
3. The REGISTRANT shall deposit with the AUTHORITY an amount equivalent
to two (2) months rental in the amount of Twenty Three Thousand Forty-One and
20/100 (p23,041.20) Pesos, which deposit shall be forfeited in favor of the
AUTHORITY in case
-27-
<PAGE>
implementation of the project is not effected within ninety (90) days from
date of signing of this Fourth Supplemental Agreement;
4. The REGISTRANT shall start payment of regular rentals thereon on
the 90th day from date of the signing of this Fourth Supplemental Agreement
or on the 90th day from date of actual occupancy of the lot as certified by
the MEPZ Zone Manager, whichever date comes earlier;
5. The expansion to be authorized herein shall be on that area
indicated by red color marks on the location map attached hereto as Annex
"E," specifically described as 21 meters away from the existing perimeter
fence on the North west elevation and 15 meters on the southeast elevation;
6. Nothing herein contained shall be construed as amending or modifying
any of the terms and conditions of the Original Contract, "First, "Second"
and "Third Supplemental Agreements," except as herein expressly provided.
7. This Fourth Supplemental agreement shall form part of the "Original
Contract," "First." "Second" "Third Supplemental Agreements."
IN WITNESS WHEREOF, the parties hereto have signed those presents this
10th day of March, 1987 in the City of Manila, Philippines.
EXPORT PROCESSING ZONE FAIRCHILD SEMICONDUCTOR
AUTHORITY (HONKKONG) LIMITED
(AUTHORITY) (REGISTRANT)
By: By:
JAIME L. GUERRERO JAMES D. STILSON
Chairman-Administrator General Manager
SIGNED IN THE PRESENCE OF:
_______________________________ _____________________________
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES )S.S.
CITY OF CEB )
BEFORE ME in the City of Cebu, Philippines, this ____ day of ____, 1987,
personally appeared:
NAME RESIDENCE TAX CERTIFICATE
-28-
<PAGE>
JAMES D, STILSON Passport no. 0510-13285
General Manager issued on: Feb. 24, 1986
known to be the same person who executed this contract and acknowledged
before me that the same is his free act and deed.
Said instrument refers to FOURTH SUPPLEMENTAL AGREEMENT, consisting of
four (40) pages, including this page of acknowledgment signed by the parties
and their witnesses on each and every page thereof and sealed with my
notarial seal.
MANUEL A ESPINA
NOTARY PUBLIC
UNTIL DECEMBER 31,1988
PTR _______--
Doc. No. ______
Page No. _______
Book No. ______
Series of 1987
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES ) S.S.
CITY OF MANILA )
BEFORE ME, in the City of Manila, Philippines, this ____day of _____,
1987, personally appeared:
NAME RESIDENCE TAX CERTIFICATE
JAIME L. GUERRERO A/B 6764959, Feb. 3,1987
Chairman-Administrator Manila
known to be the same person who executed this contract and acknowledged
before me that the same is his free act and deed.
Said instrument refers to FOURTH SUPPLEMENTAL AGREEMENT, consisting of
four (4) pages, including this page of acknowledgment signed by the parties
and their witnesses on each and every page thereof and sealed with my
notarial seal.
NOTARY OF PUBLIC
Doc. No___;
Page No. ___;
-29-
<PAGE>
Book No.___;
Series of 1987.
/iea
-30-
<PAGE>
SIXTH SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS;
This Agreement made and entered into by and between -
EXPORT PROCESSING ZONE AUTHORITY, a government
corporation created and operating under Presidential Decree
No. 66, as amended, with office address at the 4th Floor,
Legaspi Towers 300, Roxas Blvd., Metro Manila, represented
herein by its Administrator, MR. RAMON J. FAROLAN, who is
duly authorized, hereinafter referred to as the "AUTHORITY",
- and -
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a
foreign corporation duly registered and authorized to do
business in the Philippines with office address at the
Mactan Export Processing Zone, Lapulapu City, represented
herein by its Managing Director, MR. ROBERT M. GAGNE, who is
likewise duly authorized, hereinafter referred to as the
"REGISTRANT".
W I T N E S S E T H, That:
WHEREAS, on October 10, 1979, the AUTHORITY and the REGISTRANT executed a
Registration Agreement, hereinafter referred to as the "Original Contract",
which Agreement was acknowledged before Atty. Victoria Quirubin, a Notary
Public for and in the City of Manila and appearing in her Notarial Register
as Doc. No, 124; Page No. 36; Book No. III , Series of 1979;
WHEREAS, the REGISTRANT requested for an additional area at the Mactan
Export Processing Zone to be utilized as a disposal area for its solid wastes
resulting from its operations and as an expansion area;
WHEREAS, the AUTHORITY's Board of Commissioners under its Resolution No.
87-088 has approved the request of the REGISTRANT;
NOW, THEREFORE , in view of the foregoing premises and the mutual
covenants and undertakings hereinafter provided, the parties hereto have
agreed as follows:
1. The AUTHORITY hereby leases unto the registrant the following
parcels of land at the Mactan Export Processing Zone, which areas are clearly
indicated by bold red marks in the plan attached hereto as Annex "A" an make
and integral part hereof, to wit:
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<PAGE>
a. A particular portion of the Zone containing an area of about ONE
THOUSAND THREE HUNDRED TWENTY (1,320) SQUARE METERS as garbage
disposal area; and
b. A particular portion of the Zone containing an area of ONE
THOUSAND EIGHT HUNDRED NINETY (1,890) SQUARE METERS as an expansion
area.
2. The following schedule of rentals shall be applied on the above
mentioned leased premises:
Jan. 1, 1985 to Dec. 31, 1989.................... P4.20/sq.m./mo
Jan. 1, 1990 to Dec. 31, 1994.................... 6.09/sq.m./mo.
Jan. 1, 1995 to Dec. 31, 1999.................... 8.38/sq.m./mo.
Jan. 1, 2000 to Dec. 31, 2004.................... 12.00/sq.m./mo.
Thereafter, by appropriate Board Resolution
3. Payment of rentals for the garbage disposal area shall commence on
the 91st day from April 28, 1987 date when the MEPZ Zone Manager approved the
REGISTRANT's request to start site grading and construction, while on the
expansion area, payment of rental, shall commence on the 91st day from the
date of actual occupancy as certified by the MEPZ Zone Manager, thereafter,
monthly rentals shall be payable to the AUTHORITY in advance on or before the
5th day of every month without necessity of demand. In case of delinquency
in the payment of the rentals, as herein specified, such delinquent payment
shall bear interest at the rate of two (2%) per cent a month computed from
the date of delinquency.
4. The term of the lease of the above mentioned areas shall be
coterminous with the term of the Original Contract.
5. The REGISTRANT shall deposit with the AUTHORITY an amount equivalent
to two (2) months rentals on the above - mentioned leased premises upon the
signing of this Agreement.
6. Nothing herein contained shall be construed as amending or modifying
any of the terms and conditions of the Original Contract, First, Second,
Third, and Fourth Supplemental Agreement except as herein expressly provided.
7. This Sixth Supplemental Agreement shall form integral part of the
Original Contract.
IN WITNESS WHEREOF, the parties hereto have signed these presents this
16th day of February 1990 at the City of Manila and Lapulapu, Philippines.
EXPORT PROCESSING ZONE NATIONAL SEMICONDUCTOR
AUTHORITY (HK) DISTRIBUTION LTD.
(Authority) (Registrant)
-32-
<PAGE>
By: By:
RAMON J. FAROLAN ROBERT M. GAGNE
Administrator Managing Director
SIGNED IN THE PRESENCE OF:
__________________________________ ________________________
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
CITY OF LAPULAPU ) S.S.
BEFORE ME in Lapulapu City, Philippines, this 16th day of February 1990,
personally appeared ROBERT M. GAGNE, Managing Director of the NATIONAL
SEMICONDUCTOR DISTRIBUTION (HONGKONG) LIMITED with ________ No. 051349266
issued on Oct. 6, 1986 at _____ CA USA who is known to me and to me known to
be the same person who executed the foregoing instrument and acknowledged
before me that the same is his free and voluntary act and deed.
Said instrument refers to FIFTH SUPPLEMENTAL AGREEMENT, consisting of three
(3) pages, including this page of acknowledgment signed by the parties and
their witnesses on each and every page thereof and sealed with notarial seal.
JOSEPH SONG TANCO
NOTARY PUBLIC
Until December 31, 1991
P.T.R. No. 5220585
Cebu City, January 5, 1990
Doc. No. 458;
Page No. 93;:
Book No. II;
Series of 1990.
-33-
<PAGE>
SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplemental Agreement made and entered into in the City of Manila
and LAPU LAPU by and between -
EXPORT PROCESSING ZONE AUTHORITY, a government
corporation created and operating under Presidential Decree
No.66, as amended revising Republic Act 5490, with office
address at the 4th floor Legaspi Tower 300, Roxas Blvd.,
Metro Manila, represented herein by its Administrator MR.
---TAGUMPAY R. JARDINIANO, who is duly authorized,
hereinafter referred to as the "AUTHORITY",
- and -
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a
corporation July organized and existing under the laws of
the Philippines, with office address at Mactan Export
Processing Zone , represented herein by its Finance
Controller, MS. MERLYNDE PESIRLA, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT".
W I T N E S S E T H that;
WHEREAS, on October 10. 1979, the AUTHORITY and the REGISTRANT executed a
Registration Agreement, which contract was acknowledged before Atty. Victoria
Querubin, a Notary Public for and in the City of Manila and appearing in her
notarial register as Doc. No. 173, Page No. 36; Book No. III and Series of
1979;
WHEREAS, under the Original Contract, the scope of the REGISTRANT's
registered activity was limited to the manufacture of electronic products at
the Mactan Export Processing Zone.
WHEREAS, the REGISTRANT applied for the registration of its expansion
project involving the acquisition and installation of additional machinery
and equipment for the production of SOT-23 transistors, a semi-conductor
device used as an electronic component In the assembly of electrical and
electronic machineries at the MEPZ;
WHEREAS, under Board Resolution No. 93-120 dated August 16, 1993 of its
Board of Commissioners, the AUTHORITY approved the said application:
WHEREAS, the REGISTRANT is presently occupying a total leased area of
30,159,32 sq. m. under the Original Contract, which area is now fully
utilized by it;
-34-
<PAGE>
WHEREAS, the REGISTRANT requested to lease an additional area of 8,642
sq. m. for the expansion of its manufacturing capability effective November
1, 1993;
WHEREAS, the AUTHORITY has approved the said request;
NOW, THEREFORE, in view of the foregoing premises and the mutual
covenants and undertakings hereinafter provided, the parties hereto have
agreed as follows:
1. In addition to the Manufacture of electronic products at the MEPZ,
the production of SOT-23 transistors, a semi-conductor device used as an
electronic component in the assembly of electrical and electronic machineries
is hereby included in the REGISTRANT'S registered activity as an expansion
project in accordance with its representations, commitments and proposal set
forth in its application and for ___ an integral part hereof
2. Within ninety (90) days from date of registration, the REGISTRANT
shall submit to the AUTHORITY (PERD) an Environmental Clearance Certificate
issued by the Environmental Management Bureau;
3. The registered capacity for the subject expansion project shall be
685 million pieces of SOT-23 per year;
4. The REGISTRANT shall strictly adhere to the following timetable;
Installation of Machinery
and Equipment August, 1993
Start of Commercial Operation September, 1993
5. REGISTRANT shall present proof of increase in capitalization by US
$2.0 M within one (1) year from the start of commercial operation of the
expansion project;
6. The REGISTRANT shall establish a separate book of account for the
project and shall set up an accounting system consistent with Item R No. 3 of
its application with EPZA compatible with EPZA reporting requirements under
General Circular No. 84-001:
7. That REGISTRANT shall furnish the AUTHORITY with copies of reports
which by law or regulation it is required to submit to the National Census
and Statistics Office, Central Bank, Department of Labor and Employment,
Bureau of Internal Revenue, Social Security System and Securities Exchange
Commission covering operations capital investments and other matter in its
operations in accordance with and within the person(s) fixed under Section
13, Rule __ of the Amended EPZA Rules and Regulations Implementing PD 66. as
further amended by the Omnibus Investments Code of 1987.
-35-
<PAGE>
8. That REGISTRANT shall formally notify the MEPZ Zone Manager of the
date it is to start commercial production of its product and shall submit a
sworn certificate of the start of its commercial operation within thirty (30)
days from such date to the AUTHORITY (PERD);
9. In addition to the lot area of 30,159.32 sq. ms. allocated to the
REGISTRANT under the Original Contract, the AUTHORITY hereby leases to the
REGISTRANT an additional area of EIGHT THOUSAND SIX HUNDRED FORTY TWO
(8,642,00 sq. ms.) at the Mactan Export Processing Zone for its exclusive use
and, which area is clearly indicated by bold red marks in the plan attached
hereto as Annex "A" and made and integral part hereof Said area is
hereinafter refereed to as the "Leased Premises".
10. The REGISTRANT shall commence to pay rentals based on the rates
stated in par. 3.1 of Article III of the Original Contract on the additional
8,642 sq. m. effective November 1, 1983 thereafter, the regular rentals on
the Leased Premises shall be payable to the AUTHORITY in advance on of before
the 5th day or every month without necessity of demand.
In case of delinquency in the payment of rentals, such delinquent payment
shall bear interest at the rate of two (2%) percent a month computed from the
date of delinquency.
11. That on or upon signing of this Agreement, the REGISTRANT shall
deposit with the AUTHORITY an amount equivalent to two month rental on the
Leased premises, which deposit shall be forfeited in favor of the AUTHORITY
in the event that project Implementation is not started ninety (90) days from
date of registration. If the project is started within the said period, the
deposit shall be held in trust by the AUTHORITY and shall be credited as
payment of land rentals or other obligations that may be due to the AUTHORITY
only upon the termination of the lease period unless the same is renewed
and/or unless the REGISTRANT has violated the terms and conditions of this
Agreement, the Amended EPZA Rules and Regulations and the applicable EPZA
circulary or memoranda. In the latter case, the deposit shall continue to be
held in trust by the AUTHORITY or be considered as liquidated damages by way
of penalty.
12. The REGISTRANT recognizes the right of the AUTHORITY to conduct an
inventory of REGISTRANT's machineriess, equipments stocks of finished or
semifinished products, work in process, raw materials, supplies and other
assets, at any hour of the day or night upon a 24-hour notice given by the
AUTHORITY.
The REGISTRANT shall not prevent, obstruct impede or otherwise frustrate
the exercise of this prerogative by the AUTHORITY.
It is understood that in the exercise of this power to conduct an
inventory, the AUTHORITY acting thru its duly authorized representatives, may
break open any door, window, wall floor or ceiling of any enclosure where
such equipments stocks or machineries are kept without being liable for
prosecution or damages therefor when itis determined that the items/goods to
be inventoried are intentionally placed in the enclosure to prevent their
examination, or when despite the notice as required, the enclosures were
locked, sealed or otherwise closed in any manner to prevent entry therein by
the AUTHORITY's representative/s.
-36-
<PAGE>
The AUTHORITY may only (2) employ such force and cause such damage as may
be necessary to cause entry into the premises.
13. Nothing herein contained shall be construed as amending or modifying
any of the terms and conditions of the Original Contract except as herein
expressly provided.
14. This Supplemental Agreement shall form integrap part of the Original
Contract.
IN WITNESS WHEREOF, the parties hereunto have signed these presentation on
____ day of AUG 25 1994
EXPORT PROCESSING ZONE NATIONAL SEMICONDUCTOR (HK)
AUTHORITY DISTRIBUTION LTD.
(Authority ) (Registrant)
By: By:
TAGUMPAY R. JARDINIANO MERLYNDE PESIRLA
Administrator Finance Controller
SIGNED IN THE PRESENCE OF;
_____________________________ ________________________
ACKNOWLEDGMENT
Republic of the Philippines )
Lapulapu City )s.s.
BEFORE ME, this __day of Aug 25. 1994, 1994 personally appeared MERLYNDE
PESIRLA, Finance Controller, National Semiconductor (HK) Distribution, Ltd.,
both known to me and to me known to be the same person who executed the
foregoing instrument and acknowledged to me that the same is her free and
voluntary act and deed as well as that of the entity represented with Residence
Cert. #20324487, issued March 23, 1994, Mandaue City.
Said instrument refers to a Supplemental Agreement consisting of six (6)
pages including this page of acknowledgment signed by the parties and their
witnesses on each and every page thereof and sealed with my notarial seal.
ENRIQUE M.O. DIOLA, JR.
NOTARY OF PUBLIC
Until December 31, 1995
Privilege Tax Receipt No. 0486073
Cebu City. 1-28-94
-37-
<PAGE>
Doc. no. 23;
Page No. 6;
Book No. VI;
Series of 1994
Before me personally appeared Tagumpay R. Jordiniano R. C. #23647723,
January 7, 1994, Muntinlupa, Rizal, known to me to be the same person who
executed the foregoing document consisting of 6 pages including this
acknowledgment signed according to law and he acknowledged before me that the
same is his free act and deed.
Makati, Metro Manila , August 12,1994.
Doc. No. 64; Page 143
-38-
<PAGE>
(MAP)
-39-
<PAGE>
SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplemental Agreement made and entered by and between -
EXPORT PROCESSING ZONE AUTHORITY, a government corporation, created
and operating under Presidential Decree No. 66, as amended, Revising
Republic Act 5490. with office address at the 4th floor. Legaspi
Towers 300. Roxas Boulevard, Metro-Manila. represented herein by its
Administrator. MR. TAGUMPAY R. FARDINIANO. who is duly authorized.
hereinafter referred to as the "AUTHORITY"
- and -
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a corporation duly
organized and existing under the laws of the Philippines with office
address at Mactan Export Processing Zone, Mactan, Lapu-Lapu City,
represented herein by its Finance Comptroller. MS. MERLYNDE PESIRLA.
who is likewise duly authorized. hereinafter referred to as the
"REGISTRANT"
W I T N E S S E T H:
WHEREAS on October 10, 1979, the AUTHORITY and the REGISTRANT executed a
Registration Agreement, which Querbin, a Notary Public for and in the City of
Manila and which contract was acknowledged before Atty. Victoria appearing in
her notarial Register as Doc. No. 173, Page No. 36, Book No. III and series of
1979;
WHEREAS, on several occasions, the REGISTRANT requested to lease additional
land areas inside the Mactan Export Processing Zone (MEPZ) which requests were
approved and were the subject of the several Supplemental Agreements.
WHEREAS, the REGISTRANT requested a new to lease additional 1,249.85 sq.m.
of lot inside the MEPZ for the installation of additional cooling tower of its
air conditioning system, which request was approved by the AUTHORITY subject to
the standard lease terms and conditions.
NOW, THEREFORE, in view of the foregoing premises and the mutual covenants
and undertakings hereinafter provided, the parties hereto have agreed as
follows:
1. The AUTHORITY hereby leasee unto the the REGISTRANT an additional ONE
THOUSAND TWO HUNDRED FORTY NINE AND 85/100 (1.259.85 sq.m.) SQUARE METERS of
land at the MEPZ for its exclusive use and purposes subject to the following
schedule of rental rates:
-40-
<PAGE>
Up to Dec. 31, 1994 - P6.09 sq.m./mo.
01 Jan. 1995 - 31 Dec. 1999 - 8.38/ sq.m/mo.
01 Jan. 2000- 31 Dec. 2004 - 12.80/ sq.m./mo.
Thereafter. by appropriate Board Resolution.
2. The REGISTRANT shall commence to pay rentals on the said additional
1,249.85 sq.m. of leased area on the date when the REGISTRANT started fencing
the subject area as certified by the MEPZ Zone Manager, thereafter, the regular
rentals on the leased premises shall be payable to the AUTHORITY in advance on
or before the 5th day of every month without the necessity of demand
3. That on or upon the signing of this Agreement, the REGISTRANT shall
deposit with the AUTHORITY an amount equivalent to two (2) months rentals on the
leased premise, which deposit shall be forfeited in favor of the AUTHORITY in
the event that the implementation of the project is not started ninety (90) days
from the date of registration. If the project is started within the said period,
the deposit shall be held in trust by the AUTHORITY and shall be credited as
payment of land rentals or other obligations that may be due to the AUTHORITY
only upon the termination of the lease period unless the same is renewed and/or
unless the REGISTRANT has violated the terms and conditions of this Agreement,
the Amended EPZA Rules and Regulations, and the applicable EPZA circulars or
memoranda. In the latter case, the deposit shall continue to be held in trust
by the AUTHORITY or be considered as liquidated damages by way of penalty.
In case of delinquency in the payment of rentals, such delinquent payment
shall bear interest at the rate of two (2%) percent a month computed from the
date of delinquency.
4. Nothing herein contained shall be construed as amending or modifying
any of the terms and conditions of the Original Contract except as herein
expressly provided.
5. This Supplemental Agreement shall form integral part of the Original
Contract.
IN WITNESS WHEREOF the parties hereto have signed this present this 29th
day of May 1995 at the City of Manila, Philippines.
EXPORT PROCESSING ZONE NATIONAL SEMICONDUCTOR
AUTHORITY (HK) DISTRIBUTION. LTD.
(Authority) (Registrant)
BY: BY:
TAGUMPAY R. JARDINIANO MERIYNDE PESIRLA
Administrator Finance Comptroller
W I T N E S S E S
- - - - - - - - -
-41-
<PAGE>
A C K N O W L E D G M E N T
- - - - - - - - - - - - - -
Republic of the Philippines )
City of Makili )s.s.
BEFORE ME, this 29th day of May, 1995 personally appeared the following:
NAME CTC/PASSPORT NO.
TAGUMPAY R. JARDINIANO No. 3480315 1-23/95
Muntinlupa
MERLYNDE PESIRLA Res. Cert. No. 1786976
Mandaue, Cebu 1/04/1995
both known to me and to me known to be the same persons who executed the
foregoing instrument and acknowledged to me that the same is their free and
voluntary act and deed as well as that of the entities represented.
Said instrument refers to a Supplemental Agreement consisting of three (3)
pages including this page signed by the parties and their witnesses on each and
every page thereof and sealed with my notarial seal.
NOTARY PUBLIC
DOC. NO. 202
BOOK NO. 42
PAGE NO. I
SERIES OF 1995
-42-
<PAGE>
SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplemental Agreement, made and entered into in the Cities of Manila
and Lapu-Lapu by and between ---
EXPORT PROCESSING ZONE AUTHORITY, a government corporation
created and operating under Presidential Decree No. 66, as amended
revising Republic Act 5490, with office address at the 4th Floor,
Leraspi Towers 300, Roxas Blvd., Metro Manila, represented herein by
its Administrator. MR. TAGUMPAY R. JARDINIANO, who is duly authorized
hereinafter referred to as the "AUTHORITY"
-and-
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a corporation duly
organized and existing under the laws of the Philippines, with office
address at Mactan Export Processing Zone represented herein by its
Finance Controller, MS. MERLYNDE PESIRLA, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT."
WITNESSETH That:
WHEREAS, on October 10, 1979 the AUTHORITY and the REGISTRANT executed
a Registration Agreement, which contract was acknowledged before Atty.
Victoria Querubin, a Notary Public for and in the City of Manila and
appearing in her Notarial Register as Doc. No. 173: Page No. 36: Book No.
III and Series of 1979;
WHEREAS, the Original Contract was amended by a Supplemental Agreement
dated August 25, 1994 authorizing the inclusion in the scope of the
REGISTRANT's registration activity of an expansion project consisting in
the production of SOT - 23 transistors and the lease of an area of 8,642
sq. m. in MEPZ in addition to the lot of 30,159.32 sq.m. allocated to the
REGISTRANT under the Original Contract:
WHEREAS, in a Memorandum dated March 24, 1995, the AUTHORITY informed
the REGISTRANT that the leased premises under the said Supplemental
Agreement was an integral part of the Original Contract and therefore
ownership of all structures and improvements thereon, including a new
additional building which is scheduled to be completed by July, 1995, shall
revert to the AUTHORITY after December 31, 2004, the expiration of the
Original Contract;
WHEREAS, the REGISTRANT in a letter dated May 22, 1995, requested for
a reconsideration of the AUTHORITY's foregoing position on the following
grounds:
-43-
<PAGE>
1. That the subject leased premises does not form part of the original
parcel of land covered by the Original Contract which was executed in 1979;
2. That the subject leased premises was made available to the REGISTRANT
in 1993 and the corresponding Supplemental Agreement was approved in 1994:
3. That the lease of the above mentioned leased premises should be
subject to a longer term of 25 years renewable for another 25 years as provided
under R.A. 7652;
4. That the term and condition of the Original Contract will reduce the
life of the said building by less than 10 years, thus preventing the Registrant
from making a reasonable recovery of its additional capital investment:
WHEREAS, the AUTHORITY has approved the REGISTRANT's request;
NOW, THEREFORE, in view of the foregoing premises and the mutual covenants
and undertakings hereinafter provided, the parties hereto have agreed as
follows:
1. The term of the lease of the additional 8,642 sq.m. of land in MEPZ
under the subject Supplemental Agreement shall be for a period of twenty-five
(25) years commencing from November 1, 1993, unless sooner terminated as
hereinafter provided. The lease of the leased premises shall be renewable at
the option of the REGISTRANT for a period of twenty-five (25) pursuant to the
provisions hereinafter set forth. The option to renew the lease shall be
exercised in writing by the REGISTRANT, not later than sixty (60) days prior to
the expiration of the Original term. The execution of the renewal Contract
shall be made prior to the termination of the first twenty-year period. Upon
the expiration of the first twenty-five year term of the lease, the REGISTRANT's
factory building(s) and improvements shall automatically belong to the AUTHORITY
without cost and without the need of judicial demand. Thereafter, subject to
such terms and conditions as may be mutually agreed upon by the parties, a new
lease agreement may be entered into on the said factory building and in the zone
area occupied by it.
2. It is understood, however, that in all cases, the period of the lease
shall be co-terminous with the registration of the REGISTRANT with the
AUTHORITY. In the event the REGISTRANT's registration is canceled or revoked
prior to the expiration of the lease period, the lease over the leased premises
as provided, herein, shall be deemed automatically terminated without the need
of judicial or extrajudicial demand/action: Provided, further, that the lease
on the leased premises shall thereafter be treated or month-to-month basis
effective from the payment of rentals by REGISTRANT in accordance with the
rental rates fixed in par.10 of the subject Supplemental Agreement or with the
prevailing rental rates in MEPZ, whichever is applicable. Provided, further,
That within two (2) months from the date of the said cancellation or revocation,
unless this period is extended upon written request and upon written approval of
the AUTHORITY based on meritorious grounds, the REGISTRANT shall have the option
to:
(a) sell its building(s) and permanent improvements to another
zone export enterprise after giving a one-month notice to the
AUTHORITY; or
-44-
<PAGE>
(b) remove the said building(s) and permanent improvements at
its own expense after giving a one-month notice to the AUTHORITY.
However, both options shall be subject to the pre-emptive right of the
AUTHORITY to acquire the said building(s) and permanent improvements upon
payment of compensation therefor, in an amount equivalent to the book value
thereof less depreciation cost at the rate of five (5%) percent per annum. In
the event the AUTHORITY decides not to exercise its pre-emptive right to acquire
the said building(s) and permanent improvements, it shall communicate the same
to the zone export enterprise within two (2) months from receipt of the latter's
notice to sell or to remove the same.
If the REGISTRANT cannot sell its factory building to another
zone-registered enterprise or to an entity qualified to become a zone-registered
enterprise within the said two-month option period to sell or to remove/demolish
its factory building or within the extension period that may have been granted
and the AUTHORITY did not exercise its pre-emptive right to acquire the same,
REGISTRANT shall remove or demolish the factory building at its own expense,
failing which the AUTHORITY shall remove or demolish the same without the need
of a judicial order or demand and the cost thereof shall be chargeable to the
REGISTRANT.
3. The REGISTRANT shall pay all real property taxes, fees and charges
under the provisions of the real property tax code and other laws in respect to
the provisions leased by it.
4. Nothing herein contained shall construed as amending or modifying any
of the terms and conditions of the Original Contract except as herein expressly
provided.
5. This Supplemental Agreement shall form an integral part of the
Original Contract.
IN WITNESS WHEREOF, the parties hereto have signed these presents on this
______ day of May, 1995.
EXPORT PROCESSING ZONE NATIONAL SEMICONDUCTOR (HK)
AUTHORITY DISTRIBUTION LTD.
(Authority) (Registrant)
By: By:
TAGUMPAY R. JARDINIANO MERLYNDE PESIRLA
Administrator Finance Controller
SIGNED IN THE PRESENCE OF :
_______________________ ______________________
-45-
<PAGE>
A C K N O W L E D G M E N T
Republic of the Philippines )
City of Manila )
BEFORE ME, this __________ day of __________________, 1995 personally
appeared the following:
NAME RESIDENCE TAX CERTIFICATE
MERLYNDE PESIRLA NO. 1786976 Jan. 1, 1995
both known to me and to me know to be the same persons who executed the
foregoing instrument and acknowledged to me that the same is their free and
voluntary act and deed as well as that of the entities represented.
Said instrument refers to a Supplemental Agreement consisting of five (5)
pages including this page of acknowledgment signed by the parties and their
witnesses on each and every page thereof and sealed with my notarial seal.
Doc. No. 84;
Page No. 18;
Book No. VII;
Series of 1995.
-46-
<PAGE>
ACKNOWLEDGMENT
--------------
Republic of the Philippines )
City of Manila )
BEFORE ME, this _____ day of _______, 1995 personally appeared the
following:
NAME RESIDENCE TAX CERTIFICATE
TAGUMPAY R. JARDINIANO No. 3480135, Jan. 23, 1995
both known to me and to me known to be same persons who executed the foregoing
instrument and acknowledged to me that the same is their free and voluntary act
and deed as well that of the entities represented.
Doc. No. 212:
Page No. 44:
Book No. I:
Series of 1995
-47-
<PAGE>
SEVENTH SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplemental Agreement, made and entered into in the City of Manila,
by and between -
PHILIPPINE ECONOMIC ZONE AUTHORITY, a government corporation created and
operating under Republic Act 7916 otherwise known as Special Economic Zone
Act of 1995, with office address at the 4th Floor Legaspi Towers 300, Roxas
Blvd., Metro Manila, represented herein by its Director General, MS. LILIA
B. DE LIMA, who is duly authorized, hereinafter referred to as the "PEZA".
- and -
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a corporation duly organized
and existing under the laws of the Philippines with office address at
Mactan Export Processing Zone, Mactan, Lapu-Lapu City, represented herein
by its Finance Comptroller, MS. MERLYNDE PESIRLA, who is likewise duly
authorized, hereinafter referred to as the "REGISTRANT"
W I T N E S S E T H That:
WHEREAS, on October 10, 1979, the Export Processing Zone Authority
(EPZA) and the REGISTRANT executed a Registration Agreement, which contract
was acknowledged before Atty. Victoria Querubin, a Notarial Public for and
in the City of Manila and appearing in her Notarial Register as Doc. No.
173, Page No. 36, Book No. III and series of 1979;
WHEREAS, with the effectivity of R.A. 7916 (the Special Economic Zone
Act of 1995) and its implementing Rules and Regulations, all the rights,
obligations and interests of EPZA under the Original Contract have been
transferred to and assumed by the Philippine Economic Zone Authority (PEZA);
WHEREAS, on several occasions, the REGISTRANT requested to lease
additional land areas inside the Mactan Export Processing Zone (MEPZ) which
requests were approved and were the subject of the several Supplemental
Agreements;
WHEREAS, the REGISTRANT requested anew to lease additional 1,845.60
sq. ms. of land located between Registrant's factory building and CLIGCO
inside Mactan ECOZONE which request was approved by the PEZA subject to the
standard lease terms and conditions.
NOW, THEREFORE, in view of the foregoing premises and the mutual
covenants and undertakings hereinafter provided, the parties hereto have
agreed as follows:
-48-
<PAGE>
1. The PEZA hereby leases unto the REGISTRANT an additional ONE
THOUSAND EIGHT HUNDRED AND FORTY-FIVE AND 60/100 (1,845.60 sq. ms.) SQUARE
METERS of land at the MEPZ for its exclusive use and purposes subject to the
following schedule of rental rates:
01 Jan. 1995 - 31 Dec. 1999 - P 8.83/sq.m./mo.
01 Jan. 2000 - 31 Dec. 2004 - 12.80/sq.m./mo.
Thereafter, by appropriate Board Resolution.
2. The REGISTRANT shall commence to pay rentals on the said
additional 1,845.60 sq. ms. of leased area on the date when the REGISTRANT
started fencing or occupying the subject area as certified by the Mactan ECOZONE
Administrator thereafter, the regular rentals on the leased premises shall be
payable to the PEZA in advance on or before the 5th day of every month without
the necessity of demand.
3. That on or upon the signing of this Agreement, the REGISTRANT
shall deposit with the PEZA an amount equivalent to two (2) months rentals on
the leased premises, which deposit shall be forfeited in favor of the PEZA in
the event that the implementation of the project is not started ninety (90) days
from the date of registration. If the project is started within the said
period, the deposit shall be held in trust by the PEZA and shall be credited as
payment of land rentals or other obligations that may be due to the PEZA only
upon the termination of the lease period unless the same is renewed and/or
unless the REGISTRANT has violated the terms and conditions of this Agreement,
the Amended EPZA Rules and Regulations, and the applicable EPZA circulars or
memoranda. In the latter case, the deposit shall continue to be held in trust
by the PEZA or be considered as liquidated damages by way of penalty.
4. The term of the lease of the additional 1,845.60 sq.ms. of land
in Mactan ECOZONE Administrator under the subject Supplemental Agreement shall
be for a period of fifty (50) years commencing from March 24, 1995, unless
sooner terminated as hereinafter provided. The lease of the Leased premises
shall be renewable at the option of the REGISTRANT for a period of twenty-five
(25) pursuant to the provisions of Republic Act No. 7652 (Investor's Lease Act),
Section 30 of Republic Act No. 7916 and Rule V of the latter's implementing
Rules and Regulations. The option to renew the lease shall be exercised in
writing by the REGISTRANT, not later than sixty (60) days prior to the
expiration of the Original Term. The execution of the renewal Contract shall be
made prior to the termination of the first twenty-year period.
5. It is understood, however, that in all cases the period of the
lease shall be co-terminous with the registration of the REGISTRANT with the
PEZA. In the event the REGISTRANT'S registration is canceled or revoked prior
to the expiration of the lease period, the lease over the leased premises as
provided, herein, shall be deemed automatically terminated without the need of
judicial or extrajudicial demand/action. Provided, further, that the lease on
the leased premises shall thereafter be treated or month-to-month basis
effective from the payment of rentals by REGISTRANT in accordance with the
rental rates fixed in par. 10 of the subject Supplemental Agreement or with the
prevailing rental rates in MEPZ, whichever is applicable. Provided, further,
That within two (2) months from the date of said cancellation or revocation,
-49-
<PAGE>
unless this period is extended upon written approval of the PEZA based on
meritorious grounds, the REGISTRANT shall have the option to:
(a) sell its building(s) and permanent improvements to another zone
export enterprise after giving one-month notice to the PEZA; or
(b) remove the said building(s) and permanent improvements at its own
expense after giving a one-month notice to the PEZA.
However, both options shall be subject to the pre-emptive right of the PEZA
to acquire the said building(s) and permanent improvements upon payment of
compensation therefore, in an amount equivalent to the book value thereof less
depreciation cost at the rate of five (5%) percent per annum. In the event the
PEZA decides not to exercise its pre-emptive improvements, it shall communicate
the same to the zone export enterprise within two (2) months from receipt of the
latter's notice to sell or to remove the same.
If the REGISTRANT cannot sell its factory building to another
zone-registered enterprise or to an entity qualified to become a zone-registered
enterprise within the said two-month option period to sell or to remove/demolish
its factory building or within the extension period that may have been granted
and the PEZA did not exercise its pre-emptive right to acquire the same,
REGISTRANT shall remove or demolish the factory building at its own expense,
failing which the PEZA shall remove or demolish the same without the need of a
judicial order or demand and the cost thereof shall be chargeable to the
REGISTRANT.
6. The REGISTRANT shall pay all real property taxes, fees and charges
under the provisions of the real property tax code and other laws in respect to
the provisions leased by it.
7. Nothing herein contained shall be construed as amending or modifying
any of the terms and conditions of the Original Contract except as herein
expressly provided.
8. This Supplemental Agreement shall form an integral part of the
Original Contract.
IN WITNESS WHEREOF, the parties hereto have signed this _____ day of
_________, 1995 at the City of Manila, Philippines.
PHILIPPINE ECONOMIC ZONE NATIONAL SEMICONDUCTOR
AUTHORITY (HK) DISTRIBUTION, LTD.
(PEZA) (Registrant)
BY: BY:
LILIA B. DE LIMA MERLINDE PESIRLA
Director General Finance Controller
-50-
<PAGE>
WITNESSES
_______________________ ______________________
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
CITY OF MANILA ) S.S.
BEFORE ME, this _______day of ____________, 1995 personally appeared the
following:
NAME RESIDENCE CERTIFICATE NO.
LILIA B. DE LIMA
MERLYNDE PESIRLA
both known to me and to me known to be the same persons who executed the
foregoing instrument and acknowledged to me that the same is their free and
voluntary act and deed as well as that of the entities represented.
Said instrument refers to a Supplemental Agreement consisting of five (5)
pages including this page of acknowledgment signed by the parties and their
witnesses on each and every page thereof and sealed with my notarial seal.
Doc. No. 147
Page No 30
Book No._____
Series of 1995.
-51-
<PAGE>
SUPPLEMENTAL AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplemental Agreement made and entered into by and between-
PHILIPPINE ECONOMIC ZONE AUTHORITY, a government corporation created and
operating under Republic Act No. 7916, with office address at Almeda
Building, Roxas Blvd., cor. San Luis St., Pasay City, represented herein by
its Director General, MS. LILIA B. DE LIMA, who is duly authorized,
hereinafter referred to as the "PEZA",
-- and -
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION LTD., a corporation duly organized
and existing under Philippine laws, with office address at the Mactan
Ecozone, Lapu-Lapu City, represented herein by its Managing Director, MR.
K. H. KHOR, who is likewise duly authorized, hereinafter referred to as the
"REGISTRANT".
WITNESSETH That:
WHEREAS, on October 10, 1979, the then Export Processing Zone
Authority (EPZA) and the REGISTRANT executed a Registration Agreement,
hereinafter referred to as the "Original Contract", which contract was
acknowledged before Atty. Victoria Querubin, a Notary Public for and in the
City of Manila and appearing in her Notarial Register as Doc. No. 173, Page No.
36, Book No. III, Series of 1979;
WHEREAS, upon the effectivity of R.A. 7916 creating the Philippine
Economic Zone Authority (PEZA) and E.O. No. 282 governing the evolution of
EPZA into PEZA, all rights and obligations of EPZA under the Original
Contract were transferred to and assumed by the PEZA;
WHEREAS, on several occasions, the REGISTRANT requested to lease
additional land areas inside the Mactan Ecozone, which requests were
approved by the PEZA and were subject of a number of supplemental
agreements;
WHEREAS, as per information of the MEZ Administrator pursuant to a
previous survey, the total area leased by the REGISTRANT is 40,647 sq. ms.
and not 36,324 sq.ms. as indicated in the Original LeaseAgreement and
subsequent supplemental agreements;
WHEREAS, in response to the request for clarification by the Legal
Services Department (PEZA) at the instance of the REGISTRANT, the MEZ
officials concerned conducted a geodetic survey of the area occupied by the
former and found that the said area consists of 40,216 sq.ms. only;
-52-
<PAGE>
WHEREAS, pursuant to a summary of areas leased by the REGISTRANT that
was prepared and submitted by MEZ, out of the said total area of 40,216
sq.ms., a portion consisting of 2,046 sq.ms. is not covered by supplemental
agreement;
WHEREAS, the REGISTRANT requested for the correction of PEZA's
official records to reflect the actual area leased by it;
WHEREAS, the REGISTRANT likewise requested to amend the term of the
Original Lease Agreement and subsequent supplemental agreements to fifty (50)
years pursuant to the pertinent provision of the PEZA Law;
WHEREAS, the PEZA approved the said requests;
NOW, THEREFORE, in view of the foregoing premises and the mutual
covenants and undertakings hereinafter provided, the parties hereto have agreed
as follows:
1. In addition to the 38,170.45 sq.ms. of land leased by it under
the Original Lease Agreement and subsequent supplemental agreements, the PEZA
hereby leases to the REGISTRANT and the latter hereby accepts in lease that
parcel of land at the Mactan Ecozone consisting of 2,046 sq.ms., more or less,
now used and occupied by it but without a lease contract.
2. The rental rates to be applied to the said additional area shall
be as follows:
Jan. 1, 1996 - Dec. 31, 1999 - 8.83/sq.m./mo.
Jan. 1, 2000 - Dec. 31, 2004 - 12.80/sq.m./mo.
Thereafter, by appropriate PEZA Board Resolution.
Monthly rentals shall be payable to the PEZA in advance on or before
the 5th day of every month without necessity of demand. In case of delinquency
in the payment of the rentals, as herein specified, such delinquent payment
shall bear interest at the rate of two (2%) percent a month computed from the
date of delinquency.
The term of the lease of the entire leased premises consisting of
40,216 sq.ms. shall be for a period of FIFTY (50) years commencing as follows:
(a) For the following lots covered by the Original Lease Agreement and
subsequent supplemental agreements consisting of a total area of 38,170.45
square meters - from the date of execution thereof, to wit:
Date of Execution of Original
Supplemental Lease Agreement Lot Area (Sq. Ms.)
October 10, 1979 (Original) 20,000
-53-
<PAGE>
May 24, 1982 100
December 12, 1983 230
August 17, 1984 150
March 10, 1987 2,743
February 16, 1990 1,320
February 16, 1990 1,890
August 25, 1994 8,642
May 27, 1995 1,249.85
November 9, 1995 1,845.60
(b) For the additional area of 2,046 square meters - from January 1,
1996 as per the attached certification of the MEZ Administrator dated September
18, 1996.
The lease of the leased premises shall be renewable once at the option
of the REGISTRANT for a period of not more than TWENTY-FIVE (25) years pursuant
to the provisions of R.A. No. 7952 (Investor's Lease Act), Section 30 of R.A.
No. 7916 and Rule V of the latter's implementing Rules and Regulations. The
REGISTRANT must, however, present proof that it has made social and economic
contributions to the country; otherwise, the application for renewal/extension
shall be disapproved. The option to renew the lease shall be exercised in
writing by the REGISTRANT not later than sixty (60) days prior to the expiration
of the original term.
3. It is understood, however, that in all cases the period of the
lease shall be coterminous with the registration of the REGISTRANT with PEZA.
In the event the REGISTRANT's registration is canceled or revoked for whatever
valid reasons, as well as cessation from operation by the REGISTRANT for a
continuous period of two (2) months unless this period is extended by PEZA on
meritorious grounds upon written request of the REGISTRANT, prior to the
expiration of the lease period, the lease over the leased premises as provided
herein shall be deemed automatically terminated without the need of judicial or
extrajudicial demand/action. Provided, that the lease on the leased premises
shall thereafter be treated on a month-to-month basis effective from the date of
said cancellation or revocation subject to the payment of rentals by the
REGISTRANT to PEZA in accordance with the rental rates in the Mactan Ecozone,
whichever is applicable. Provided, further, that within two (2) months from the
date of said cancellation or revocation, unless this period is extended upon
written request and written approval of the PEZA based on meritorious grounds,
the REGISTRANT shall have the option to:
-54-
<PAGE>
a. sell its building(s) and permanent improvements to another
ecozone export enterprise after giving a one month notice to
PEZA; or
b. remove the said building(s) and permanent improvements at its own
expense after giving a one-month notice to PEZA.
4. The REGISTRANT shall see to it that its operation during the
course of manufacture or production will not endanger public safety or public
health nor violate the anti-pollution requirements of the government and shall
comply with the medical, dental, occupational health and safety laws,
regulations and standards of the Labor Code of the Philippines, as amended as
well as other provisions therein and rules and regulations promulgated
thereunder and other labor laws and regulations governing labor relations,
fixing of minimum wage, terms and conditions of employment, etc. For this
purpose, the REGISTRANT shall comply with the Master Employment Contract that
shall be prescribed by PEZA in coordination with the Department of Labor and
Employment and the policies and declarations promulgated for the preservation of
industrial peace within the Mactan Ecozone pursuant to Sections 39 and 38,
respectively of R.A. 7916 and Rule XXIII of its implementing Rules and
Regulations.
5. The REGISTRANT may assign, transfer, convey, sell, mortgage or
otherwise encumber its building(s)/structure(s), its machinery and equipment or
this Registration Agreement or leasehold rights arising therefrom, provided a
written consent of PEZA is obtained by the REGISTRANT fifteen (15) days prior to
such assignment, transfer, conveyance, sale, mortgage or encumbrance and subject
to such conditions and restrictions as may be imposed by PEZA. Any and all
rights and interests accruing to third parties in violation of this provision
shall not be binding against the PEZA.
6. The REGISTRANT shall keep, save and hold the PEZA free and
harmless from all liabilities, penalties, losses, damages, costs, expenses,
causes, claims and/or judgments arising out of or by reason of any injury or
liability caused by any person or persons from any cause or causes whatsoever
during the term of this Agreement by obtaining appropriate insurance with an
insurance company as would amply protect both parties herein against any
liability arising from its registered operations, including insurance against
losses from fire and fortuitous events.
7. The REGISTRANT recognizes the right of the PEZA to conduct an
inventory of REGISTRANT's machineries, equipment, stocks of finished or
semi-finished products, work-in-process, raw materials, supplies and other
assets, at any hour of the day or night, upon a 24-hour notice given by the
PEZA. The REGISTRANT shall not prevent, obstruct, impede or otherwise frustrate
the exercise of this prerogative by the PEZA.
8. The REGISTRANT agrees that the PEZA may disapprove or withhold
any application for permit to import, to export, to farm-out or to sell locally
or to avail of any incentive being administered by the PEZA as the case may be,
if REGISTRANT is delinquent in payment of rentals and other fees and charges due
or has violated any provision of the Original Contract or this Agreement, R.A.
7916 and its implementing Rules and Regulations and relevant PEZA memoranda and
circulars. Damages that may result due to the said disapproval or
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withholding shall be solely borne by the REGISTRANT and the PEZA shall be
wholly free from liability for whatever damages that may result therefrom.
9. For all actions brought by either of the parties hereto against
the other, the party prevailing in said action shall be entitled to recover
costs of suits and reasonable attorney's fees which shall in no case be less
than TEN THOUSAND and ( 10,000) PESOS.
10. The parties hereto agree that any court action arising out of
this Agreement shall be filed in the proper court in the City of Lapu-Lapu.
11. The REGISTRANT shall present proof that it has settled all its
accounts with PEZA pertaining to its lease of the leased premises prior to the
execution of this supplemental agreement.
12. Nothing herein contained shall be construed as amending or
modifying any of the terms and conditions of the Original Contract except as
herein expressly provided.
13. This Supplemental Agreement shall form an integral part of the
Original Contract.
IN WITNESS WHEREOF, the parties hereto have signed those presents this
___ day of ________________, 1996 in the City of Pasay, Philippines.
PHILIPPINE ECONOMIC ZONE NATIONAL SEMICONDUCTOR
AUTHORITY (HK) DISTRIBUTOR LTD.
(PEZA) (REGISTRANT)
By: By:
LILIA B. DE LIMA K. H. KHOR
Director General Managing Director
SIGNED IN THE PRESENCE OF:
___________________________ __________________________
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES )
Metro Manila ) S.S.
BEFORE ME, a Notary Public for and in Metro Manila, on this ____ day
of ______________, 1996 personally appeared:
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NAME CTC/PASSPORT NO.
LILIA B. DE LIMA
K. H. KHOR
both known to me and to me known to be the same persons who executed the
foregoing instrument and acknowledged to me that the same is their free and
voluntary act and deed as well as that of the entities represented.
Said instrument refers to a Supplemental Agreement consisting of seven
(7) pages, including this page of acknowledgment signed by the parties on each
and every page thereof and sealed with my notarial seal.
NOTARY PUBLIC
Doc. No. 585
Page No. 118
Book No. II
Series of 1996.
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Exhibit 10.17
LEASE
(Santa Clara)
THIS LEASE (the "Lease") is made and entered into as of the 11th day of
March, 1997, by and between NATIONAL Semiconductor Corporation, a Delaware
corporation ("Landlord"), and FAIRCHILD Semiconductor Corporation, a Delaware
corporation ("Tenant").
WITNESETH:
WHEREAS, Landlord is the owner of two buildings known as Building 4 and
Building 9 (the "Buildings") located on a property having the address described
in Exhibit A (the "Property"); and
WHEREAS, Landlord desires to lease that portion of the Buildings described
on Exhibit A (hereinafter, the "Premises").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, Landlord
and Tenant hereby stipulate and agree as follows:
1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises on the terms and conditions set forth in this Lease.
2. TERM. The term of this Lease shall commence on the date hereof and
shall terminate on May 31, 1998 (the "Expiration Date"), unless sooner
terminated pursuant to the terms hereof, by which date Tenant agrees to vacate
the Premises. The term of this Lease may be extended by the mutual agreement of
the parties. Without limiting Landlord's right to refuse to enter into such a
mutual agreement, Landlord may require an increase in rental as a condition to
any such extension. Tenant may, without penalty, terminate this Lease prior to
the Expiration Date, at any time, by written notice to Landlord specifying the
date for the termination of the Lease and delivered to Landlord at least thirty
(30) days prior to such date (the earlier of the Expiration Date and the date so
specified is hereinafter referred to as the "Termination Date").
3. USE. Tenant shall use the Premises in a manner consistent with its
historical use.
<PAGE>
4. RENT. Tenant shall pay to Landlord base rent as adjusted pursuant to
Section 5 below (the "Base Rent") in accordance with the terms of the Base Rent
Schedule attached hereto and made a part hereof as Exhibit B. The monthly Base
Rent shall be paid no later than the fifth day of each month for space provided
in that month. If the term of this Lease begins or ends on any day other than
the first day of a calendar month, then the rental payments for such periods
shall be prorated on a per diem basis.
5. INCLUDED SERVICES. Payment of Base Rent shall entitle Tenant, without
payment of additional charge, to use and receive, to the extent available at the
Property, such services as are both (i) normally provided for and included in
the per Accounting Period occupancy charge allocated to all other occupants of
the Property who are engaged in similar activities at the Property as the uses
thereof permitted Tenant hereby, and (ii) currently provided to the Tenant's
operations, (collectively, "Included Services"). Included Services shall
include, but are not limited to: electricity, natural gas, water, sewer, and
garbage collection, heat, air conditioning, routine maintenance (e.g. cleaning
services), normal repair to maintain facilities in good condition, janitorial
services, security and badging services, parking in all parking areas and
garages, and cafeteria services. Tenant's right to use and receive any Included
Services without charge shall be limited in volume and level to that which is
reasonable and which is consistent with Tenant's historical use. Landlord shall
not be responsible for any decrease or interruption in the availability of any
Included Service caused by third parties or circumstances beyond Landlord's
control. Should any such decrease occur, Landlord shall allocate the available
supply of such Included Service on an equitable basis. In addition to the
Included Services, payment of Base Rent shall cover all state and local real
property taxes and assessments levied against the Property, but Tenant shall be
responsible for the payment of any taxes levied upon its personalty located at
the Property.
6. ADDITIONAL SERVICES. Additional services as are both (i) normally
provided at a variable monthly allocated charge for all other occupants of the
Property who are engaged in similar activities at the Property as the uses
thereof permitted Tenant hereby, and (ii) currently provided to the Tenant's
operations, (collectively, "Additional Services"), shall be provided to Tenant
at the same rates as are charged to Landlord's departments and working groups
occupying the Property. Additional Services include, but are not limited to:
computer and network services, desktop computer maintenance and repair services,
voice and data communication services, shipping and receiving services
including, without limitation, mail delivery and package distribution, requested
maintenance and janitorial services beyond the scope included within Included
Services, and maintenance, janitorial and repair services necessitated by the
negligence of Tenant or its agents, employees or invitees. Additional Services
shall be available to Tenant at a level and subject to terms and limitations
consistent with the availability of such services to the other occupants of the
Property.
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7. EXPANSION OR DECREASE OF LEASED SPACE.
(a) Tenant may decrease the amount of space it occupies in the
Premises upon thirty (30) days prior written notice to Landlord; however, such
space may not be increased without the consent of Landlord, which consent shall
not be unreasonably withheld.
(b) For any month in which the square footage of space used by Tenant
increases or decreases from the amount set forth on Exhibit B, the amount paid
with respect to the Premises shall be equitably apportioned to reflect Tenant's
actual utilization.
(c) If Tenant requires additional space due to an increase in the
number of Tenant's workforce at the Premises, then, at Tenant's request made on
or before May 1, 1997, Landlord will provide up to twenty-seven (27) additional
offices by relocating the Mask Technology group from Building 4 and renovating
the area at Landlord's expense. Landlord shall have no obligation hereunder to
comply with any such request made after May 1, 1997. Tenant shall reimburse
Landlord for the unamortized portion of any such expense to the extent that,
following such renovations, Tenant terminates this Lease or decreases the space
of the Premises prior to the Expiration Date. Expansion efforts will commence
when Tenant establishes ten (10) open personnel requisitions for additional
employees and will be scheduled for completion on an all commercially reasonable
efforts basis within twelve (12) to sixteen (16) weeks.
(d) Upon substantial completion of such renovations (including the
issuance of any certificate of occupancy or temporary certificate of occupancy
required as a condition to Tenant's occupancy), such additional space shall be
added to the Premises and additional Base Rent of $2.65 per square foot per four
(4) week period shall be payable with respect to such additional space. In such
event, the Landlord and Tenant shall execute an amendment to this Lease to
reflect the additional Premises and the additional Base Rent, but this Lease
shall remain unmodified in all other respects.
8. RIGHT TO RELOCATE.
(a) Landlord reserves the right to reasonably relocate Tenant
employees as deemed necessary to provide proper segregation from Landlord
operations. Such relocation shall be made only with the consent of Tenant,
which consent shall not be unreasonably withheld.
(b) All relocation requested by Landlord shall be accomplished at
Landlord's sole expense and shall be performed in a manner that minimizes the
impact to Tenant's ongoing operations.
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(c) Upon any such relocation, Landlord and Tenant shall execute an
amendment to this Lease to reflect such change, but this Lease shall remain
unmodified in all other respects, including the Base Rent payable hereunder.
9. AS-IS CONDITION. Subject to the provisions of Section 7 of this
Lease, Tenant accepts the Premises and any and all fixtures and improvements
therein in their "as is" "where is" condition and acknowledges that (i) no
representation with respect to the condition of the Premises or any such
fixtures and improvements has been made to Tenant by or on behalf of Landlord,
and (ii) Landlord has no responsibility for improving the space for Tenant.
10. PERSONAL PROPERTY AND CONDITION AT TERMINATION. The conference room
furniture, partitions and modular furniture in the Premises, including Building
4 and Building 9, shall be considered the sole property of Landlord and shall
not be removed by Tenant. Chairs, detached file cabinets and all office
equipment shall be considered the personal property of Tenant. On or before the
Termination Date, Tenant shall remove all of its personal property, including,
without limitation, its trade fixtures, from the Premises at its sole cost and
expense and shall leave the Premises broom clean and otherwise in the same
condition as it was on the date hereof, normal wear and tear and loss by
casualty or condemnation excepted.
11. DEFAULT BY TENANT. Landlord shall notify Tenant of any default by
Tenant of Tenant's obligations under this Lease. Tenant shall have ten (10)
days from its receipt of such notice to cure any monetary default and thirty
(30) days after receipt of such notice to cure any other default; provided that
with respect to non-monetary defaults which do not materially impair the value
of the Premises, Tenant may have such additional time to effect such cure as is
reasonably required as long as Tenant is diligently pursuing such cure. Upon
the termination of the applicable grace period, Landlord may terminate this
Lease and exercise any and all other remedies available to it at law or in
equity with respect to this Lease.
12. INSURANCE.
(a) At all times during the Term of this Lease, Tenant shall maintain
(i) commercial general liability insurance (including, without limitation,
premises, independent contractors, contractual liability, and a broad form of
comprehensive general liability endorsement) with limits of not less than Three
Million Dollars ($3,000,000) combined for bodily injury, death and property
damage; (such amount of insurance to be increased from time to time as is
customary for insurance of such type to reasonably reflect inflation and other
matters); and (ii) casualty insurance on its personal property and equipment
which insurance may have deductible amounts which are consistent with Landlord's
historical deductible amounts with respect to such coverage on its personal
property and on the Buildings and the Premises.
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(b) At all times during the Term of this Lease, Landlord shall
maintain (i) commercial general liability insurance (including, without
limitation, premises, independent contractors, contractual liability, and a
broad form of comprehensive general liability endorsement) with limits of not
less than Three Million Dollars ($3,000,000) combined for bodily injury, death
and property damage (such amount of insurance to be increased from time to time
as is customary for insurance of such type to reasonably reflect inflation and
other matters); (ii) all risk extended fire and casualty insurance, written at
replacement cost value with replacement cost endorsements, insuring the
Buildings and Premises, exclusive of Tenant's personal property ("Landlord's
Casualty Policy"); and (iii) casualty insurance on its personal property and
equipment which insurance may have deductible amounts which are consistent with
Landlord's historical deductible amounts with respect to such coverage on its
personal property and on the Buildings and the Premises.
(c) All public liability insurance required by this Lease to be
maintained by Landlord or Tenant shall name the other party as an additional
insured. Each party shall provide to the other current certificates of such
insurance as it is required to maintain. Such certificates shall provide that
any change restricting or reducing any such coverage or the cancellation of any
policy under which any such certificate is issued shall not be valid except upon
twenty (20) days notice in writing to Landlord and Tenant of such change or
cancellation. All such policies shall be obtained from responsible insurance
companies qualified to do business in the State of California and in good
standing therein. Insofar as and to the extent that the following provisions
may be effective without invalidating or making it impossible to secure
insurance coverage obtainable from responsible insurance companies doing
business in the State of California (even though extra premium may result
therefrom), Landlord and Tenant mutually agree, and their insurance policies
shall provide, that with respect to any loss which is covered by insurance then
being carried by them, respectively, or which would be covered by insurance
policies required by this Lease if such policies had no deductible amount, the
one carrying or required to carry such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss; and
they further mutually agree that their respective insurance companies shall have
no right of subrogation against the other on account thereof, nor shall the
party suffering the loss have any claim against the other party with respect to
any such loss not covered by its insurance that would have been covered had
insurance policies maintained by the injured party had no deductible amount.
This provision is intended to restrict each party (as permitted by law) to
recovery against insurance carriers to the extent of such coverage, and waive
fully, and for the benefit of each, any rights and/or claims which might give
rise to a right of subrogation in any insurance carrier.
(d) In the event that at any time during the Term of this Lease the
Premises or other portions of the improvements within which the Premises are
located shall be damaged or destroyed to any material degree in whole or in part
by fire or other cause, either Landlord or Tenant may elect to terminate this
Lease, but if neither party so elects, Landlord shall be required to repair and
restore the Premises and the improvements in which the Premises are located
within a reasonable time period. During such time as the Premises,
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as a result of such damage or destruction, cannot be occupied by Tenant, there
shall be an equitable reduction in the payment of Base Rent. In any case where
a party has the right to elect to terminate this Lease in accordance with this
Section such party shall make such election by notice to the other party given
not later than sixty (60) days after the occurrence of the damage or destruction
giving rise to such election. If either party elects to terminate as
hereinabove provided, then this Lease and the term thereof shall cease and come
to an end, and any unearned Base Rent or other charges paid in advance shall be
refunded to Tenant.
13. ENVIRONMENTAL.
(a) Landlord and Tenant acknowledge that there are environmental
conditions at, near or affecting the Property for which Landlord or one of its
affiliates is currently performing investigation, remediation or other response
actions (collectively, "Remediation"). Landlord covenants and agrees that
Remediation is being and will continue to be performed pursuant to and in
compliance with applicable federal, state, county and municipal laws, rules,
regulations, orders, permits and directives relating to human health or the
environment ("Environmental Laws"), and the performance of Remediation does not
and will not have an adverse effect on the Premises or unreasonably interfere
with the Tenant's use and/or operation thereat. Landlord will retain full
responsibility for any violations of Environmental Laws and Remediation required
now or in the future relating to environmental conditions (including, but not
limited to responsibility for any fines and penalties) unless environmental
conditions or violations or Remediation results from Tenant's activities.
(b) In addition to indemnifications in Section 14 of this Lease and
in the Asset Purchase Agreement between Fairchild Semiconductor Corporation, as
Buyer, and National Semiconductor Corporation, as Seller, dated as of the date
hereof ("Purchase Agreement"), Landlord agrees to indemnify, defend and hold
Tenant harmless from and against any and all actions, demands, claims, losses,
damages, costs and liabilities and expenses (including, without limitation,
reasonable attorney's fees) (collectively, "Claims") asserted against, imposed
upon or incurred by Tenant which arise out of, result from or in any way relate
to (i) any environmental conditions existing at, on, under, about or migrating
to or from the Premises as of the commencement of this Lease, (ii) Landlord's
performance of Remediation (whether performed or required to be performed before
or after the commencement of the Lease), (iii) any violation of Environmental
Law prior to the date of this Lease, (including, without limitation, any
violation relating to the Remediation, the Premises or the Landlord's activities
thereat), and (iv) environmental conditions or violations of Environmental Laws
not caused by Tenant's activities, regardless of when such violations occur or
conditions arise. Landlord agrees to respond on Tenant's behalf to such Claims
or, at Tenant's election, to pay the costs of Tenant's response. In the event
that Landlord fails to comply with the obligations of this Section, Tenant, at
its sole discretion and notwithstanding anything to the contrary, shall have the
option to terminate this Lease.
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(c) Landlord hereby waives and releases Tenant from any and all
claims, known and unknown, foreseen or unforeseen, which exist or may arise
under common or statutory environmental law, including the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA") or
any other statutes now or hereafter in effect, except for those matters for
which Tenant is obligated to indemnify Landlord under this Lease.
(d) Tenant covenants and agrees to defend, indemnify and hold
Landlord harmless from and against any and all Claims that are asserted against
or incurred by Landlord or the Premises to the extent such Claims relate to or
arise out of any environmental condition caused by Tenant's activities at the
Premises, or Tenant's violation of any Environmental Law, (which violation was
not in existence prior to the date hereof), provided, however, that Tenant shall
not be obligated to indemnify Landlord for any Claim for which Landlord is
required to indemnify Tenant under this Lease.
(e) Tenant shall not use, store or bring upon the Premises any
chemicals or toxic or hazardous materials or substances of an type, without the
prior written consent of Landlord, which may be granted or denied in its sole
and absolute discretion. Notwithstanding the foregoing, Tenant may, without
obtaining such consent, use, store and bring upon the Premises incidental
amounts of (i) those chemicals that, as of the date hereof, Tenant was using or
storing at the Premises in connection with the uses of the Premises permitted by
this Lease, and (ii) any other chemicals as become necessary or desirable for
Tenant to continue to use the Premises as permitted herein in the ordinary
course of its business.
14. INDEMNIFICATION.
(a) Tenant covenants and agrees, as its sole cost and expense and in
addition to any other right or remedy of Landlord hereunder, to indemnify and
save harmless Landlord from and against all loss, cost, expense, liability and
claims (but excluding any liability arising out of the negligence or willful
misconduct of Landlord or its agents, employees or contractors), including,
without limitation, reasonable attorneys' fees and court costs, arising from or
in connection with (i) Tenant's use, occupancy, operation and control of the
Premises, (ii) the conduct or management of any work, or any act or omission
done in or on the Premises by or under the direction or at the request of
Tenant, (iii) any breach or default on the part of Tenant in the payment of any
rent or performance of any covenant or agreement on the part of Tenant to be
performed pursuant to the terms of this Lease, or (iv) any act or negligence of
Tenant or any of its agents, contractors, servants, employees, licensees or
invitees. The provisions of this Section shall survive the termination or
expiration of this Lease.
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(b) In the event that any action or proceeding is brought against
Landlord by reason of any claims covered by the foregoing indemnity, Tenant
will, upon notice from Landlord, resist or defend such action or proceeding by
counsel reasonably satisfactory to Landlord. Landlord will not defend such
action or proceeding by counsel so long as Tenant is diligently doing so on
Landlord's behalf. Landlord will give prompt notice to Tenant of any action or
proceeding brought against Landlord by reason of any claims covered by the
foregoing indemnity, together with copies of any documents served in connection
therewith, and Landlord will not settle any such claim without Tenant's written
consent.
(c) Landlord covenants and agrees, at its sole cost and expense and
in addition to any other right or remedy of Tenant hereunder, to indemnify and
save harmless Tenant from and against any and all loss, costs, expense,
liability and claims (but excluding any liability arising out of the negligence
or willful misconduct of Tenant or its agents, employees or contractors or the
failure by Tenant to comply with any provision of this Lease), including without
limitation, reasonable attorneys' fees and court costs, arising from and in
connection with (i) Landlord's use, ownership or control of the Buildings, (ii)
the conduct or management of any work, or any act or omission done in or on the
Buildings by or under the direction or at the request of Landlord, (iii) any
breach or default on the part of Landlord in the performance of any obligation
or covenant to be performed pursuant to the terms of this Lease, (iv) any act or
negligence of Landlord or any of its agents, contractors, servants, employees,
licensees or invitees, or (v) any failure of the Buildings to be or remain in
compliance with all laws, ordinances, orders and regulations affecting the
Buildings and the cleanliness, safety, accessibility, occupation and use of the
same, including without limitation, any Environmental Laws (other than
non-compliance resulting from acts or omissions of Tenant). The provisions of
this Section shall survive the termination or expiration of this Lease.
(d) In the event that any action or proceeding is brought against
Tenant by reason of any claims covered by the foregoing indemnity, Landlord
will, upon notice from Tenant, resist or defend such action or proceeding by
counsel reasonably satisfactory to Tenant. Tenant will not defend such action
or proceeding so long as Landlord is diligently doing so on Tenant's behalf.
Tenant will give prompt notice to Landlord of any action or proceeding brought
against Tenant by reason of any claims covered by the foregoing indemnity,
together with copies of any documents served on Tenant in connection therewith,
and Tenant will not settle any such claim without Landlord's written consent.
15. ACCESS. Tenant hereby covenants and agrees that it will not and will
take all necessary steps to prevent its employees, agents and invitees from
entering into or upon any portion of the Facility restricted by Landlord (any
such portion is hereinafter referred to as a "Restricted Access Area").
Following the execution of this Lease, Landlord shall provide Tenant with a Site
Plan of the Facility indicating all of the Restricted Access Areas. Tenant
acknowledges that it is the intent of the parties that Tenant shall only have
access to those parts of the Facility as are reasonably necessary or desirable
for its use and enjoyment
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of the Premises and of the services available to it hereunder or under any other
agreement between Landlord and Tenant and dated of even date herewith.
16. ASSIGNMENT AND SUBLETTING.
(a) Subject to the provisions of Section 16(c) below. Tenant may not
assign this Lease or sublet the Premises or any part thereof without obtaining
the consent of Landlord therefor, which consent shall not be unreasonably
withheld, and without first offering to Landlord the right to accept an
assignment or sublease of the Premises on the same terms that Tenant proposed to
assign or sublease to a third party. If Landlord fails to accept or reject
Tenant's offer of assignment or sublease of the Premises within fifteen (15)
days of receipt of the making of such offer, then Landlord shall be deemed to
have rejected such offer. If Landlord fails to accept or reject Tenant's
request for consent to the assignment or sublease of the Demised Premised by a
third party within thirty (30) days of receipt of such request for consent, the
Landlord shall be deemed to have consented to the proposed assignment or
sublease to such third party. Any attempted assignment or sublease in violation
of this Section shall be void and shall confer no rights on the purported
assignee. The consent by Landlord to an assignment or subletting shall not
relieve Tenant from primary liability hereunder or from the obligation to obtain
the express consent in writing of Landlord to any future assignment or
subletting.
(b) Notwithstanding the foregoing, Tenant shall have the right to
assign this Lease or to grant a leasehold mortgage on Tenant's leasehold
interest under this Lease as security to any lender making a loan to Tenant for
Tenant's business. After receiving written notice from any person, firm, or
other entity, stating that it holds a mortgage or security interest on Tenant's
leasehold interest under this Lease, Landlord shall, so long as such mortgage is
outstanding, be required to give to such holder the same notices as are required
to be given to Tenant under the terms of this Lease, but such notices may be
given by Landlord to Tenant and such holder concurrently. It is further agreed
that such holder shall have the same opportunity to cure any default, and the
same time within which to effect such curing, as is available to Tenant; and if
necessary to cure such a default, such holder shall have access to the Premises
and the Buildings. Landlord further agrees to recognize such holder, its
successors or assigns, as successor Tenant under this Lease in the event of the
foreclosure, or transfer in lieu of foreclosure, of such lender's security
interest or mortgage, provided that such holder or its successor or assign cures
all defaults of Tenant hereunder that can be cured by the expenditure of money.
(c) No sale of stock or transfer of any ownership interest of Tenant
shall be deemed to be an assignment of this Lease. Tenant shall have the right
to sublease or assign this Lease or Tenant's rights hereunder in whole or in
part, to any Affiliated Entity as hereinafter defined, without the consent of
Landlord and without first offering to assign or sublet to Landlord, and the
provisions of Subsection 16(a) shall not apply to any such assignment or
sublease. The term "Affiliated Entity" shall mean any limited liability
company, corporation, partnership, joint venture or other entity (x) of which
Tenant holds
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one hundred percent (100%) of the voting authority or ownership interests of
Tenant; or (y) any entity in which one hundred percent (100%) of the voting
authority or ownership interests are held by persons or entities holding one
hundred percent (100%) of the ownership interests or voting authority of Tenant.
Tenant shall promptly notify Landlord of the occurrence of any such sublease or
assignment of this Lease.
17. ALTERATIONS. Tenant shall not make any alterations to the Premises
without the prior written consent of Landlord, which shall not be unreasonably
withheld or delayed.
18. COMPLIANCE WITH LAWS. Tenant shall use and occupy the Premises in
accordance with all applicable federal, state, county and municipal laws, rules
and regulations and all rules and regulations imposed by Landlord.
19. QUIET ENJOYMENT. Landlord covenants and agrees that Tenant, upon
performing the terms and conditions of this Lease to be performed by Tenant
shall have peaceable and quiet enjoyment and possession of the Premises during
the term without interruption by Landlord or its successors or assigns or any
other person or company lawfully claiming by or through it.
20. SUBORDINATION. Tenant accepts this Lease subject and subordinate in
all respects to any mortgage which may now or hereafter be placed on or affect
the fee interest in the Property and/or Landlord's interest therein (each a
"Mortgage"), and to each advance made, or hereafter to be made, under any
Mortgage, and to all renewals, modifications, consolidations, replacements,
extensions and substitutions of and for any Mortgage, provided holder of any
Mortgage (each a "Mortgagee") shall agree not to disturb Tenant's use and
occupancy of the Premises so long as Tenant is not in substantial default
hereunder. Notwithstanding the aforesaid, if any Mortgagee elects to have
Tenant's interest in this Lease be superior to any Mortgage held by it, then by
notice to Tenant from such Mortgagee this Lease shall be deemed superior to such
Mortgage, whether this Lease is executed before or after same.
This Section 20 shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination,
however, Tenant shall execute and deliver promptly any certificate that Landlord
and/or any Mortgagee or their respective successors in interest may request.
Tenant hereby constitutes and appoints Landlord and/or any mortgagee and/or
their respective successors in interest as Tenant's attorney-in-fact to execute
and deliver any such certificate or certificates for and on behalf of Tenant if
Tenant shall fail to do so within ten (10) days after written request therefor.
21. EMINENT DOMAIN.
(a) If, after the execution prior to the expiration of the Term
hereof, the whole of the Premises shall be taken under the power of eminent
domain, then this Lease
10
<PAGE>
and the term thereof shall cease and terminate as of the date of taking of
possession by the taking authority, and any unearned rent or other charges, if
any, paid in advance shall be refunded to Tenant.
(b) If at any time during the Term of this Lease, a portion of the
Premises shall be so taken under the power of eminent domain so as to render the
Premises untenantable, then Landlord, at its own cost and expense, may, unless
this Lease is terminated pursuant to the provisions of this Section, repair and
restore the Premises, to the extent possible within the limits of damages paid
to Landlord, to substantiate the condition at which they were immediately prior
to such taking and within the period of time which, under all prevailing
circumstances, shall be reasonable, or it may terminate this Leases. During
such time as the Premises as a result of such taking cannot be occupied by
Tenant, the rent shall be equitably adjusted. Upon termination as aforesaid by
Landlord, this Lease and the term thereof shall cease and come to an end, and
any unearned Base Rent or other charges paid in advance shall be refunded to
Tenant.
(c) The entire award for any taking shall belong to Landlord without
any deduction for any leasehold estate or interest now or hereafter vested in
Tenant.
22. NOTICES. All notices given under this Lease shall be sent in writing
through certified mail, or via a reputable overnight carrier providing evidence
of receipt (e.g., Federal Express), postage prepaid, to Tenant and to Landlord
at their respective addresses shown on Exhibit C attached hereto or to such
other addresses which may be designated in writing from time to time.
23. BROKERS. Landlord and Tenant warrant and represent that they have
dealt with no real estate broker in connection with this Lease and that no
broker is entitled to any commission on account of this Lease. Each of Landlord
and Tenant shall indemnify and hold harmless the other from any loss, cost,
damage or expense, including reasonable attorney fees, which the other shall
incur on account of the falsity of the maker's foregoing representation and
warranty.
24. ENTIRE AGREEMENT. This Lease, the exhibits attached hereto, which are
hereby incorporated herein by reference, contain the entire agreement between
the parties concerning the Premises and supersede any other agreements between
the parties concerning the subject matter hereof, whether oral or written. This
Lease shall not be modified, cancelled or amended except by written agreement,
signed by both parties.
25. SUCCESSORS AND ASSIGNS. The obligations of this Lease shall bind and
benefit the successors and permitted assigns of the parties with the same effect
as if mentioned in each instance where a party hereto is named or referred to.
11
<PAGE>
26. GOVERNING LAW. This Lease shall be governed by the laws of the State
of California (without regard to its conflicts of laws rules).
12
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have set their hands and seals
hereto as of the day and year first above written.
Signed, Sealed and Delivered
in the Presence of: LANDLORD:
By:
- ------------------------- ----------------------------------
- ------------------------- Its Authorized Signatory
TENANT:
By:
- ------------------------- ----------------------------------
- ------------------------- Its Authorized Signatory
13
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of __________________, 1997, personally appeared
____________________________________, as Authorized Signatory of
____________________ signer and sealer of the foregoing instrument, and
acknowledged the same to be his/her free act and deed and the free act and deed
of said corporation, before me.
------------------------------------------
Notary Public
STATE OF )
) ss.
COUNTY OF )
On this ____ day of __________________, 1997, personally appeared
____________________________________, as Authorized Signatory of
______________________ signer and sealer of the foregoing instrument, and
acknowledged the same to be his/her free act and deed and the free act and deed
of said corporation, before me.
--------------------------------------
Notary Public
14
<PAGE>
EXHIBIT A
The "Property"
All that certain real property situate in the City of Santa Clara, County
of Santa Clara, State of California, described as follows:
Lots 1, 2, and 3 as shown on that certain Map entitled "Tract No. 1786 San
Ysidro Tract," which Map was filed for record in the office of the Recorder
of the County of Santa Clara, State of California on October 22, 1956 in
Book 73 of Maps, at page 25.
The real property has a building of 16,250 square feet thereon and is
identified as street address 2920 San Ysidro Way, Santa Clara, California
95051.
Property and building thereon are referred to by National Semiconductor
Corporation as Building #4. Space occupied is identified in attached
Exhibit A-1. Space still occupied by National shaded in gray.
2. All that certain property situate in the City of Santa Clara, County of
Santa Clara, State of California, described as follows:
Lot 8, as shown on that certain Map of Tract No. 1786, which Map was filed
for record in the office the Recorder of the County of Santa Clara, State
of California on October 22, 1956, in Book 73 of Maps, page(s) 25.
Property and building thereon are identified as 3697 Tahoe Way, Santa
Clara, California, and is referred to by National Semiconductor Corporation
as Building #9. Entire building to be occupied by Fairchild. See attached
Exhibit A-2.
<PAGE>
EXHIBIT A-1
[FLOORPLAN - BUILDING #4]
<PAGE>
EXHIBIT A-2
[FLOORPLAN - BUILDING #9]
<PAGE>
EXHIBIT B
BASE RENT SCHEDULE
BLDG# SPACE NET SQ FT COST/SQ FT RENT PER FOUR
TYPE WEEK PERIOD
4 Office 9,500 $2.65 $25,175.00
9 Type 1 13,648 $2.65 $36,167.20
9 Lab Type 2 300 $6.10 $ 1,830.00
---------- ----------
TOTALS: 23,448 $63,172.20
<PAGE>
EXHIBIT C
Notice Addresses
Landlord:
National Semiconductor Corporation
1120 Kifer Road
M/S 10-460
Sunnyvale, CA 94086-3737
Attention: Real Estate Manager
Tenant:
Fairchild Semiconductor Corporation
3693 Tahoe Way, M/S 9-150
Santa Clara, CA 95051
Attention: Foundry Manager
with a copy to:
Fairchild Semiconductor Corporation
333 Western Avenue, M/S 01-00
Portland, Maine 04106
Attention: General Counsel
<PAGE>
Exhibit 10.18
National Semiconductor Corporation
SHARED FACILITIES AGREEMENT
THIS AGREEMENT, made this 11th day of March, 1997 by and between
National Semiconductor Corporation ("National") and The Fairchild
Semiconductor Corporation ("Fairchild").
WHEREAS National owns and operates a semiconductor manufacturing
facility on Western Avenue in South Portland, Maine (the "South Portland
Facility"); and
WHEREAS the various components of the South Portland Facility have been
operated as a single integrated facility; and
WHEREAS the South Portland Facility is now to be divided into two
separately operated and managed facilities, to be know as the Fairchild Site
and the National Site, with the Fairchild Site to be transferred to
Fairchild; and
WHEREAS there are certain physical assets which will be shared between
the two sites and the parties wish to provide for a sharing of such
facilities and the costs relative thereto and to assign responsibilities for
providing such services from such facilities, all as herein set forth.
WHEREAS the parties have entered into certain other agreements regarding
the site being the Leases for Building 10 and Buildings 12/23, the
Declaration of Easements, the Asset Purchase Agreement, the Site Plan as
recorded, the Environmental Side Letter (the "Transaction Documents").
<PAGE>
NOW THEREFORE, in consideration of one dollar and other valuable
consideration and in consideration of the mutual covenants herein contained,
the parties do hereby agree as follows:
1. Division of Premises. The South Portland Facility will be divided
substantially as shown on the site plan entitled "Standard Boundary
Survey-Property Division Plan-Property of Fairchild Semiconductor
Corporation, 333 Western Avenue, South Portland, Maine and National
Semiconductor Corporation, 5 Foden Road, South Portland, Maine, Property
Division Plan C-01 and C-02," prepared by OEST Associates, Inc. dated
December 3, 1996, with revisions to March___, 1997, to be recorded in the
Cumberland County Registry of Deeds, a reduced photocopy of which is attached
hereto as Exhibit A, with Buildings 10, 11, 12, 18, 19, 21, 22 and 23 and the
MacBride building, approximately 49.26 acres of land and approximately 1473
parking spaces to be retained by National. The remainder of the Facility
will be transferred to Fairchild; provided that Buildings 14 and 24, while
located on the Fairchild Site, are owned and operated by British Oxygen
Corporation pursuant to an agreement with National. Easements for ingress
and egress will be agreed upon and provided to each party across the premises
of the other so as to allow each of the parties to travel across existing
roadways, truck yards and parking areas in order to get to and from their
respective facilities. Each of the parties shall cooperate with the other in
(a) seeing that property lines are properly drawn and in taking such other
action as is necessary in dividing the South Portland Facility in a way that
results in compliance to the maximum extent possible with existing zoning,
land use, environmental and similar laws and regulations, and (b) seeking
such permits, variances
2
<PAGE>
and changes to such existing laws and regulations as are necessary to
accomplish such division.
2. Shared Facilities. Set forth in Exhibit B hereto is a list and
description of shared facilities and services to be provided by each of the
parties to the other in connection with the use by the parties of the
physical facilities consisting of the South Portland Facility following the
division of that Facility between the two parties. Unless otherwise provided
in Exhibit B the following shall apply with respect to all shared services
or facilities and all services provided pursuant to this agreement:
a) Exhibit C attached hereto sets forth facilities which remain
to be completed. National shall complete construction of the new VOC
incinerator on the Fairchild Site as provided in Exhibit B. To the extent
that such facilities are now under construction or otherwise incomplete,
National shall, at its sole cost and expense, complete the facilities in
accordance with existing plans and specs in a good and workmanlike manner, as
modified from time to time by agreement among the parties, so that such
facilities will be operational and functional for the purposes intended.
b) A party obligated to perform a service or provide a product
under this Agreement shall do so using standards of care consistent with and
the high quality of performance historically experienced at the South
Portland Facility, substantially as now being provided, and with such
quantities as the other party may reasonably request. All facilities to be
operated by either party shall be operated and maintained in a manner
consistent with the obligations of that party to perform hereunder. Unless
otherwise agreed, all costs and expenses of operating and maintaining a
facility shall be paid by the
3
<PAGE>
party owning that facility, subject to allocations as herein provided or as
provided in the leases referred to in paragraph 3 hereof.
c) To the extent that (i) there are physical connections between
the two sites such as for piping, wiring, conduits and the like or (ii) there
is a physical flow from one site to the other of any substance such as water,
electricity, gas, stormwater, groundwater, or the like, each party grants to
the other an easement over, under and across its site for such purpose. Such
easements shall initially be located at the present location thereof but may
be relocated by the party whose site is affected thereby at such party's sole
cost and expense so long as such relocation does not interrupt or adversely
affect the service provided to the other party through such easement. The
easements required by this subparagraph are set forth in the Declaration of
Reciprocal Easements between Fairchild and National dated of even date
herewith, which Declaration of Easements shall control in the event of any
inconsistencies with this subparagraph.
d) Except as otherwise specifically provided herein or in the
Exhibits hereto, whenever a service or product is to be provided at a party's
cost of providing such service or product, all direct costs of providing that
service which standard cost accounting practices require to be included and
all depreciation costs shall be included in determining the cost, and such
costs shall be allocated to the recipient of the product or service based
upon actual usage. If the cost of providing the product or service to the
recipient cannot be separately determined, then the total cost to the
provider in supplying such product or service to itself and to the recipient
shall be allocated between the provider and the recipient based upon relative
usage between the two parties. Overhead
4
<PAGE>
not directly associated with a service or product shall not be included in
the allocated costs.
e) Each party shall render to the other a monthly statement for
amounts due for shared services and facilities under this Agreement for the
previous month. Each party shall keep complete and accurate books and
records of account relating to the cost of shared facilities pursuant to this
Agreement and make such books and records available to the other party for
inspection upon reasonable request.
3. Leases. National will rent to Fairchild, at a rental based on cost
per square foot to be agreed upon, space in Buildings 10 and 12 (including
the new loading dock adjacent to Building 12). No structural modifications
will be permitted without the prior written consent of National.
The lease for Building 10 will be for an initial term of three (3) years
and thereafter will renew automatically for additional one (1) year terms
unless terminated by written notice of either party delivered to the other at
least six (6) months prior to the end of any such one (1) year renewal term.
The lease for Building 12 also shall also be for an initial term of three (3)
years and thereafter will renew automatically for additional two (2) year
terms unless terminated by written notice of either party delivered to the
other at least eighteen (18) months prior to the end of any such two (2) year
renewal. The leases required by this paragraph are the Lease Agreement
Building 10 and the Lease Agreement Building 12 and Building 23 between
National as Landlord and Fairchild as Tenant dated of even date herewith,
which leases shall control in the event of an inconsistencies with this
paragraph.
5
<PAGE>
Under the lease for Building 10, Fairchild will be provided with parking
spaces for its occupants of Building 10 for the duration of the lease term.
The leases shall include such other terms and conditions as shall be
negotiated in good faith by the parties.
4. Entire Agreement. This Agreement is intended to be a complete and
integrated agreement with respect to the subject matter thereof, superseding
all prior agreements and understanding with respect thereto and may not be
amended or modified except by an instrument in writing signed by the parties
hereto.
5. Miscellaneous.
a) Assignment. Neither party may assign or delegate this
Agreement or the rights and obligations created hereunder without the prior
written consent of the other, whether by way of transfer, merger with or into
such party, consolidation, reorganization or otherwise except in connection
with a sale or transfer of the assigning party's entire interest in this
South Portland facility in which event such Assignment of this agreement to
the transferee of the property shall be permitted. Any purported assignment
without such consent shall be void and constitute a breach of this Agreement.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall be binding upon, and inure to the benefit of, and shall be enforceable
by, the respective successors and assigns of the parties hereto.
b) Waiver. No failure or delay on the part of either party in
the exercise of any power, right or privilege arising hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
6
<PAGE>
c) Severability. If any provision of this Agreement is for any
reason found to be ineffective, unenforceable or illegal, such condition
shall not affect the validity or enforceability of any of the remaining
portions hereof; provided, further, that the parties shall negotiate in good
faith to replace any ineffective, unenforceable or illegal provision with an
effective replacement as soon as is practical.
d) Multiple Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but both of
which together constitute one and the same instrument.
e) No Partnership Or Agency Created. Nothing contained herein
or done in pursuance of this Agreement shall constitute the parties as
entering upon a joint venture or partnership, or shall constitute either
party the agent for the other party for any purpose or in any sense
whatsoever.
f) Choice Of Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Maine, without
reference to the conflict of laws provisions thereof.
g) Consequential and Incidental Changes. NEITHER PARTY SHALL BE
LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF SAID
PARTY'S PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT.
h) Effect Of Headings. The headings of the Articles and
Sections contained herein are for convenience of reference only and are not
intended to be and shall not be construed as part of or to affect the meaning
or interpretation of this Agreement.
7
<PAGE>
i) Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall
be in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic
or digital transmission method; the day after it is sent, if sent for next
day delivery to a domestic address by recognized overnight delivery services
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
If to National , address to:
2900 Semiconductor Drive, M/S 16-135
Santa Clara, California 95052-8090
Attention: General Counsel
If to Fairchild, addressed to:
333 Western Avenue, M/S 01-00
South Portland, ME 04106
Attention: General Counsel
or to such other place and with such other copies as such party may designate
as to itself by written notice to the others.
j) Noise, Vibration, Etc. The parties agree that existing noise,
vibrations, odor, dust, gas fumes, glare and other emissions (collectively,
"emissions") at the sites are at acceptable levels and hereby waive any
rights either may have to contest or challenge such levels. The parties
further agree to allow each other to make reasonable modifications and/or
expansions of such emissions.
k) Controlling Documents. Any other provision of this Agreement to the
contrary notwithstanding, in the event of any inconsistencies between any
provision of this
8
<PAGE>
Agreement any of the Transaction Documents the provisions of the Transaction
Documents shall be controlling.
IN WITNESS WHEREOF, the parties hereto have had this Agreement executed
by their respective authorized officers as of the date first written above.
NATIONAL SEMICONDUCTOR CORPORATION
By:
-------------------------------
Its:
------------------------------
FAIRCHILD SEMICONDUCTOR
By:
-------------------------------
Its:
------------------------------
9
<PAGE>
EXHIBIT A
Shared Services and Facilities
Site Plan
10
<PAGE>
EXHIBIT B
Shared Services and Facilities
A. Bulk Gas.
1) Description of Service or Facility. The Nitrogen plant
is owned by British Oxygen Corporation ("BOC") and operated by
BOC under a contract with National. National will continue to be
the contracting party with BOC and supply nitrogen and oxygen
from the plant to all Fairchild buildings that require nitrogen
or oxygen. Nitrogen will be supplied from the existing nitrogen
plant (#14 on Exhibit A) until the new nitrogen plant (#24 on
Exhibit A) is completed and operating. Both plants are located
on the Fairchild site. Fairchild will grant appropriate access
easements with respect to operation and maintenance of the
nitrogen facilities. Nitrogen and oxygen will be piped from the
nitrogen plant to Buildings 10, 12 and 18 on the National
premises. Each party will be responsible for supplying its own
argon and hydrogen. Each party agrees to use good faith
commercially reasonable efforts to cause BOC to enter into an
agreement among BOC, Fairchild and National promptly after the
execution of this Agreement in which BOC acknowledges that
Fairchild is the owner of the sites on which the BOC plants are
located and that Fairchild is a third party beneficiary of the
On-Site Product Supply Agreement between National and BOC dated
as of August 1, 1996 and acknowledges that such agreement shall
remain in full force and effect.
2) Cost Allocation. Initially nitrogen and oxygen shall
be provided to the parties at the following formula for
allocating fixed and operating costs:
11
<PAGE>
System National/Fairchild
------ ------------------
Nitrogen/Oxygen 55%/45%
LN2 Tanks 50%/50%
Red. Volt. Starter 50%/50%
On-Site Support 75%/25%
Notwithstanding the foregoing, Fairchild's aggregate share of the
foregoing costs shall not exceed $77,150 per month.
Once National's usage of the nitrogen plant is such that, if the
parties' costs were determined by separate metering, Fairchild's total
monthly costs for three (3) consecutive months would be equal to or less than
$77,150, then all of the foregoing costs for gas usage shall thereafter be
allocated to the parties on the basis of actual usage of the gases as
determined by metering each party's usage, with fixed, electrical and other
related costs to be allocated in the same ratio. The cost of installing
meters for this purpose shall be shared equally by the parties.
Costs of any nitrogen plant expansion and/or costs of using liquid
nitrogen shall be allocated between the parties in the same ratio as the
average allocation of nitrogen/oxygen costs to each party over the six months
prior to such expansion (the "usage ratio"), unless the reason for the
expansion is an increase in one party's manufacturing capacity. In such
event, the estimated additional nitrogen/oxygen usage resulting from such
increased capacity shall be added to the expanding party's actual usage over
the previous six (6) months in calculating the usage ratio.
3) Duration. This service shall continue until terminated by mutual
agreement of the parties.
12
<PAGE>
B. Deionized Water
1) Description of Service. Fairchild will provide deionized water to
National for Building 10. Fairchild shall provide all deionized water that
it needs in connection with its occupancy of Building 12.
2) Cost. The services provided to National pursuant to this
paragraph for Building 10 shall be provided at Fairchild's cost thereof, with
usage to be determined by metering. Fairchild shall bear the cost of all
deionized water it uses in Building 12.
3) Duration. The services to be provided by Fairchild with respect to
Building 10 pursuant to this paragraph shall be provided through December,
1997 unless earlier terminated by National by 90 days written notice to
Fairchild. Fairchild will provide deionized water to Building 12 so long as
it occupies Building 12.
C. Acid Neutralization. Each party shall be responsible for neutralizing
its own waste.
D. Industrial Discharge.
1) Description. The existing industrial discharge capacity will be
divided between National and Fairchild, with 2 million gallons per day
available to National and 700,000 gallons per day available to Fairchild.
Each party shall maintain its own industrial discharge system and capacity.
2) Cost Allocation. Each party's usage will be determined by
separate meter and each party will pay the water district for its metered
charges.
3) Duration. Separate meters will be provided or soon as practicable
and thereafter each party shall continue on its separate meters.
13
<PAGE>
E. Waste Solvent.
Each party shall be responsible for collecting, storing and disposing of
its own waste solvents.
F. Fuel Oil.
Each party will be responsible for supplying its own fuel oil.
G. City Water.
1) Description. Fairchild will provide city water from the main
plant to Building 12 for its own use in connection with that Building and
shall bear all costs of same.
2) Duration. This shall continue so long as Fairchild is the primary
user of Building 12.
H. Steam.
1) Description. Fairchild will provide steam for heating Buildings
10 and 12 from the boiler in Fairchild's main plant.
2) Cost. Steam will be provided at Fairchild's cost with usage to be
determined by separate meter.
3) Duration. This service will be provided for a temporary period
only, through December, 1998, unless earlier terminated by 90 days written
notice from National to Fairchild.
I. Chilled Water.
1) Description. Fairchild will provide chilled water for air
conditioning to Building 12.
14
<PAGE>
2) Cost. Chilled water will be provided at Fairchild's cost;
provided that National shall give a credit to Fairchild under the lease
against rent payments for the portion of this cost allocable to National's
use of Building 12 based on square footage.
3) Duration. This service will be provided during the term of the
Fairchild lease of Building 12, or until National connects to its own system
for this purpose.
J. Fire Alarm, Facilities Management and Security Systems.
1) Description. Fairchild will provide monitoring for the fire alarm
system , facilities management system and security system for Buildings 10
and 12. National will provide same for Building 18 and Building 23. The
parties will cooperate in good faith on all of the foregoing issues. At such
time as National takes over the monitoring of the fire alarm system, the
facilities management system, and/or the security system, National will
permit Fairchild, at its sole costs and expense, to install such equipment as
may be necessary for Fairchild to receive alarm signals directly with respect
to Buildings 10, 12 and 23 for so long as Fairchild continues to lease space
in any such building.
2) Cost. System monitoring services to be provided to National at
Fairchild's cost, with joint costs to be allocated on building square
footage.
3) Duration. Fairchild monitoring services will be provided for a
temporary period through December, 1997 unless earlier terminated by National
by 90 days' written notice to Fairchild.
K. Storm Water Collection.
1) Description. Oest Associates has performed a stormwater analysis of
the sites for the parties dated January 14, 1997._The parties agree to take
all actions necessary
15
<PAGE>
and to grant all easements to the other necessary to meet state or local
requirements regarding stormwater drainage as indicated by the engineer's
report.
2) Cost. The cost of constructing, maintaining and repairing pipes or
other components of the stormwater system located solely on one party's
facility and serving only that facility will be borne by that party. All
other costs shall be shared by the parties in proportion to the serviced
surface area.
3) Duration. This service shall continue until terminated by mutual
agreement of the parties.
16
<PAGE>
L. Groundwater Collection and Treatment.
1) Description. The parties have entered into certain agreements
regarding groundwater collection and treatment and other matters which are
set forth in the Environmental Side Letter and the Declaration of Easements
between the parties of even date herewith.
M. Wellness Center.
1) Description of Services. The Wellness Center will be owned by
Fairchild, be staffed and operated by Fairchild and be available for use by
employees of both parties so long as it continues as a wellness center.
National and Fairchild shall have proportional representation on the Wellness
Center Advisory Board and Board of Directors based on total head count;
provided, however, that regardless of total head count, Fairchild shall
always maintain and be entitled to a majority of at least one (1) on the
Board of Directors. Use of this facility by NSC includes conference rooms
within the Wellness Center building.
2) Cost Allocation. The costs of operating the facility including
building expenses in excess of amounts paid by employees shall be shared in
proportion to the number of employees of each party on site, determined on a
monthly basis.
3) Duration. This arrangement shall continue until terminated by
mutual agreement of the parties so long as it remains a wellness center;
provided, however, that upon six (6) months' written notice, Fairchild may
change the use of said building, in which case National will no longer have
any rights to use it.
17
<PAGE>
N. VOC Incineration.
1) Description. The existing VOC incinerator will be owned by
National and operated by National for incineration of VOC's from the
operation of both National and Fairchild. National will, at its cost,complete
construction of the VOC incinerator for Fairchild on the Fairchild Site,
meeting all applicable requirements for VOC incinerators.
2) Cost. If both National and Fairchild are using the existing VOC
incinerator for any period, the costs during such period shall be shared
equally.
3) Duration. National will make the existing VOC incinerator
available for use by Fairchild until such time or the new VOC incinerator on
the Fairchild Site is completed and permitted, after which time each of the
parties will operate and use its own incinerator at its own cost and expense.
P. Power
1) Description. Subject to approval of the power supplier, National
will maintain the existing contract with Central Maine Power Co. and
Fairchild has granted National an easement for the land under the 35KV power
distribution system ; provided that after an initial three (3) year period,
and upon eighteen month notice (which Fairchild agrees to extend for a
reasonable period if necessary so as not to disrupt National's manufacturing
operation), Fairchild may require National to relocate its 35KV power
distribution system to another mutually acceptable site. Reasonable costs of
such relocation shall be borne by Fairchild. National will contract for
power for both sites and provide power to Fairchild through a separate
submeter. Fairchild will, through December, 1998, step down power from its
switch for buildings 10, 12, and 23 and other facilities currently served by
that switch unless National elects to terminate this
18
<PAGE>
arrangement prior to such date by 90 days prior written notice from National
to Fairchild. Fairchild will allow National to double its 35KV yard area and
run a future duct bank and wiring from the expanded yard to a future fab
facility, and either use existing underground ducts from Western Avenue or
run an overhead 35KV line. Fairchild and National each have entered into
separate agreements with Central Maine Power Company ("CMP") dated as of
March 10, 1997 with respect to the purchase of power, and National and
Fairchild agree to use good faith commercially reasonable efforts to enter
into a separate agreements between themselves with respect to the purchase
and allocation of power promptly after the execution of this Agreement (said
agreements collectively referred to as the "Electric Utility Service
Agreements"). The parties agree that in the event of any inconsistency
between this Agreement and the Electric Utility Service Agreements, the
Electric Utility Service Agreements shall control.
2) Cost. Direct charges from the power supplier for power will be
allocated based on usage, provided that a minimum of 56 million kilowatt
hours per year will be allocated to Fairchild through December, 2000. Usage
will be determined by metering. Each party shall be responsible for costs of
maintaining its own switch and the parties shall share costs of maintaining
the 40 MW line to the switch yard, proportional to usage.
3) Duration. This service will continue to be provided until
terminated by mutual agreement by the parties.
R. Fire Protection System and Fire Sprinkler Loop.
1) Description. Each party will be responsible for maintaining and
operating its own fire protection system. Each party may control the
divisional and riser values on
19
<PAGE>
its site, but no divisional values will be closed without appropriate notice
to the other party. Each party may draw from the other's fire pond as
needed.
2) Cost. Cost of operation, maintenance, repairs, testing shall be
borne by each party for its system.
3) Duration. This arrangement shall continue until terminated by
mutual agreement of the parties.
S. Parking.
1) Description. In addition to the parking spaces to be provided
under the Building 10 lease, National shall provide Fairchild with up to 100
additional parking spaces on the National Site at a location between Building
10 and the FSC plant or in Parking Area D shown on Exhibit A upon 60 days'
notice from Fairchild. During the term, any or all such spaces requested by
Fairchild may be canceled by 30 days' written notice from Fairchild and then
reinstated upon 60 days' notice by Fairchild.
2) Cost. $20 per month per space, payable monthly.
3) Duration. Three years from the date hereof.
T. Compressed Air
1) Description. National will provide compressed air from Building 10
to Fairchild Building 2 (Main Plant) at a maximum capacity of 500 CFM.
2) Cost. Fairchild to pay for compressed air at National's cost to be
determined using activity based costing methods.
3) Duration. Through December, 1997.
COR:87999-1.DOC
20
<PAGE>
Exhibit C
Shared Services and Facilities
1. VOC System #2
2. Oil Conversion for Building 2
3. Volleyball Courts
4. Landscaping Associated with 200 MM Project
5. BOC Plant D - including Roadway & Gate
6. Building 12 Renovations Associated with 200 MM Project
21
<PAGE>
Exhibit 10.19
Environmental Side Letter
March 11, 1997
National Semiconductor Corporation
Re: Asset Purchase Agreement dated March 11, 1997,
by and between National Semiconductor Corporation
("National") and Fairchild Semiconductor
Corporation ("Fairchild") ("Asset Purchase
Agreement")
Gentlemen and Ladies:
This will confirm our agreement with respect to certain
environmental matters relating to the West Jordan, Utah facility
("West Jordan Facility"), the South Portland, Maine facility
("South Portland Facility") the Cebu, Philippines facility ("Cebu
Facility") and the Penang, Malaysia facility ("Penang Facility")
(collectively referred to as the "Facilities"). Any terms used
but not defined herein have the meaning ascribed to them in the
Asset Purchase Agreement.
Subject to and in addition to the terms of the Asset
Purchase Agreement, the Parties agree to the following:
National has been conducting Remediation at the South
Portland and West Jordan Facilities before and up to Closing.
After the Closing Fairchild will perform or arrange for the
performance of the Remediation which was being conducted by
National at the South Portland and West Jordan Facilities.
Fairchild will perform the investigation and
decommissioning of the Dynacraft DCIP1 (the "DCIP1
Decommissioning") area at the Penang Facility which has already
been commenced by National and an investigation and clean-up of
the oil release near the powerhouse at the Cebu Facility.
National and the Maine Department of Environmental
Protection ("MDEP") are in the process of restating the
Administrative Agreement relating to the South Portland Facility
to incorporate the amendments that have occurred since the
original Administrative Agreement was signed. In connection with
such amendment, the parties have agreed that National will remain
the ordered party and it has so informed MDEP by letter dated
January 30, 1997. If the MDEP or other Governmental Authority
determines that new, additional or modified permits or approvals,
the cost or impact of which would be significant, Fairchild
agrees that, if required by the MDEP or other Governmental
Authority to avoid such permit obligations, Fairchild may be
added as an additional ordered party.
- ---------------------
1. Administrative Agreement Regarding Groundwater Improvement by and between
Fairchild Camera and Instrument Corporation and the State of Maine Board
of Environmental Protection (hereinafter referred to as the "MDEP"),
effective June 8, 1983, as subsequently amended (the "Administrative
Agreement").
<PAGE>
The parties agree that from and after the Closing Date
neither will deposit or stockpile additional soil, either
VOC-impacted or clean, at, on or about the other's portion of the
South Portland Facility. National agrees that if for any
commercially reasonable purpose related to the Business Fairchild
desires to excavate, move or alter the deposited and/or
stockpiled soil located on the Fairchild portion of the South
Portland Facility, National will, at National's sole cost and
expense, dispose of or arrange for the disposal of such soil in
full compliance with all applicable Environmental Laws, and will,
if permitted by Environmental Law, identify itself as the
generator of such soils.
National has agreed to prepay the presently anticipated
future costs of the Remediation projects at the Facilities.
Therefore, at Closing, National will pay Fairchild the present
value amount as set forth on Schedule I to pay the annual costs
of the Remediation projects at the National South Portland and
West Jordan Facilities and the costs specified on Schedule I for
the Cebu and Penang Facilities (the "Estimates" and each, an
"Estimate"). National will be responsible for any and all
losses, claims, demands, liabilities, obligations, causes of
action, damages, costs and expenses, fines or penalties
(including, without limitation, reasonable attorney fees and
other defense costs) asserted against or incurred by Fairchild
arising out of or relating to the Remediation projects
(including, without limitation, any resulting from amendments to
the Administrative Agreement), in excess of the applicable
Estimate on a pre-discounted basis whether or not the costs and
expenses were included in the Estimates. Fairchild will provide
National with annual updates of the costs incurred and an
accounting of the funds remaining for the Remediation projects
and will notify National reasonably promptly upon becoming aware
of any additional costs and expenses. Upon the completion of
each Remediation project, Fairchild will refund any amount of the
applicable Estimate not expended. Fairchild will not undertake
any new activity in connection with the aforementioned
Remediation projects which shall individually cost in excess of
$100,000 for which Fairchild intends to apply the prepaid amount
without the prior written consent of National, which consent
shall not be unreasonably withheld (taking into account
Fairchild's operations).
The parties agree to cooperate as necessary to
effectuate the agreements in this letter, including granting any
easements, if necessary. Fairchild will prepare and submit any
required submittals necessary in connection with the Remediation
projects; provided, however, that National shall execute any
documents for which its signature is required, and Fairchild will
provide National with copies of any final environmental reports
submitted to any Governmental Authority.
If a Governmental Authority determines that Fairchild
is not properly performing the Remediation at the South Portland
Facility or any other facility and if Fairchild fails to correct,
remedy, cure, appeal or contest such deficiency within such time
period as is reasonable under the circumstances (but in no event
in a time period in excess of the time provided by a Governmental
Authority) or demonstrate that the Governmental Authority's
concerns are unfounded, and a Governmental Authority determines
in writing that National is legally responsible for taking action
and the failure to do so will result in fines or penalties,
Fairchild will provide National access to such facility to
correct, remedy or cure such deficiency at National's sole cost
and expense. In connection with the foregoing, National agrees
to (1) provide Fairchild prior notice of its access requirements,
(2) inform Fairchild of any proposed activities prior to the
implementation thereof and provide Fairchild a reasonable
opportunity to review and comment on any such proposals prior to
their implementation, (3) perform activities so as not to
unreasonably interfere with Fairchild's operations, (4) keep
Fairchild reasonably informed about the progress of National's
activities, and (5) comply with all applicable Environmental Laws
and other laws and Fairchild's reasonable health and safety
requirements.
2
<PAGE>
To the extent either party is performing activities in
connection with the Remediation work it will: (i) perform such
work promptly, diligently and in a good and workmanlike manner
and in a manner consistent with industry standards relating to
such activities, (ii) comply with all laws, orders, rules and
regulations, including all Environmental Laws, and (iii) promptly
provide the other party with copies of (a) all agreements entered
into with any Governmental Authority and material correspondence
relating to such activities and (b) all contracts and agreements
with any third party in connection with such work (provided such
contract is for work in excess of $100,00), including (without
limitation) such contracts with contractors and consultants.
Fairchild will provide National reasonable access (upon prior
written notice) to Fairchild's facilities to inspect the progress
of such activities and to Fairchild's employees to discuss such
activities. National will provide Fairchild reasonable access to
monitoring wells on National's portion of the South Portland
Facility for monitoring pursuant to the Administrative Agreement.
National shall have the right to attend and participate in any
meetings with any Governmental Authority relating to the
Remediation project in connection with the South Portland
Facility or at any other facility because a Governmental
Authority determined that National is legally responsible for
performing Remediation as set forth above.
Each party will indemnify and hold harmless the other
(and all directors, officers, employees and agents thereof) from
all claims, liabilities, losses, expenses (including reasonable
attorney's fees) and costs arising out of or relating to its
negligence or willful misconduct or any of its agents,
contractors or employees in connection with the Remediation work
on the other party's property.
Please confirm your agreement to the above by signing
and returning a copy to the undersigned.
Very truly yours,
FAIRCHILD SEMICONDUCTOR CORPORATION
BY: KIRK P. POND
President and Chief
Executive Officer
The foregoing is hereby agreed to and accepted by:
NATIONAL SEMICONDUCTOR CORPORATION
BY: DONALD MACLEOD
Executive Vice President &
Chief Financial Officer
3
<PAGE>
2900 Semiconductor Drive
Santa Clara, CA 95052
March 11, 1997
Fairchild Semiconductor Corporation
333 Western Avenue
Portland, Maine 04106
Attention: Kirk P. Pond
Gentlemen:
Reference is hereby made to the Master Lease Agreement
(the "Lease"), dated as of December 13, 1994, between General
Electric Capital Corporation ("GECC") and National Semiconductor
Corporation ("NSC"), as amended by Amendment No. 1 thereto, dated
as of December 13, 1994, which Lease you hereby represent you
have read and fully understand.
Subject to the terms and conditions set forth below, we
hereby agree to sublease to you, and you hereby agree to sublease
from us, the equipment (the "Equipment") described in Annex A to
any schedule to the Lease as of the date hereof (any such
schedule, a "Schedule").
You hereby agree to pay to us as sublease payments an
amount equal to the amounts we pay to GECC as lease payments
pursuant to the Lease, such payments to be received by us on the
date payments by us are due under the Lease, and we agree to
remit such payments to GECC on such date.
We agree to continue the Lease for your benefit and to
exercise all of the rights under the Lease solely for your
benefit and at your request. You agree to perform or assist us
in performing our obligations under the Lease other than lease
payments which will be paid directly by us; provided, that you
make payments to us in accordance with the immediately preceding
paragraph. You shall look solely to GECC to satisfy all
obligations of GECC under the Lease. We shall use our reasonable
efforts to cooperate with you in seeking satisfaction from GECC
of GECC's obligations under the Lease; provided, however, that
you shall indemnify and hold us harmless from and against all
liabilities, claims, losses, costs and expenses (including,
without limitations, attorneys' fees) incurred by us in
connection with or arising out of such cooperation except to the
<PAGE>
extent resulting from our negligence or willful misconduct.
The term of this Sublease with respect to any piece of
Equipment shall be the period specified in the applicable
Schedule. You may terminate this Sublease at any time on the
same terms and conditions as we may terminate the Lease. We
agree not to terminate the Lease without your consent.
Upon expiration of this sublease and upon your timely
written request and our receipt of an amount equal to the amount
to be paid to exercise such option plus any costs and expenses to
be incurred by us in connection with such exercise, (i) we shall
use our best efforts to exercise, to the extent practicable, our
purchase option contained in and in accordance with Section XIX
of the Lease and (ii) we shall transfer the Equipment so
purchased to you pursuant to a mutually acceptable transfer
agreement.
Very truly yours,
NATIONAL SEMICONDUCTOR
CORPORATION
By: _____________________________
Name:
Title:
AGREED AND ACCEPTED:
FAIRCHILD SEMICONDUCTOR
CORPORATION
By: __________________________
Name:
Title:
<PAGE>
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of Dec. 13, 1994
("Agreement"), between General Electric Capital Corporation, with
an office at 2200 Powell Street Suite 600, Emeryville, CA 94608
(hereinafter called, together with its successors and assigns, if
any, "Lessor"), and National Semiconductor Corporation, a
corporation organized and existing under the laws of the State of
Delaware with its mailing address and chief place of business at
2900 Semiconductor Drive, Santa Clara, CA 95052 (hereinafter
called "Lessee").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below,
Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment ("Equipment") described in Annex A to any
schedule hereto ("Schedule"). Terms defined in a Schedule and
not otherwise defined herein shall have the meanings ascribed to
them in such Schedule.
(b) The obligation of Lessor to purchase Equipment from the
manufacturer or supplier thereof ("Supplier") and to lease the
same to Lessee under any Schedule shall be subject to receipt by
Lessor, prior to the Lease Commencement Date (with respect to
such Equipment), of each of the following documents in form and
substance satisfactory to Lessor: (i) a Schedule relating to the
Equipment then to be leased hereunder, (ii) a Purchase Order
Assignment and Consent in the form of Annex B to the applicable
Schedule, unless Lessor shall have delivered its purchase order
for such Equipment, (iii) evidence of insurance which complies
with the requirements of Section X, and (iv) such other documents
as Lessor may reasonable request. As a further condition to such
obligations to Lessor, Lessee shall, upon delivery of such
Equipment (but not later than the Last Delivery Date specified in
the applicable Schedule) execute and deliver to Lessor a
Certificate of Acceptance (in the form of Annex C to the
applicable Schedule) covering such Equipment, and deliver to
Lessor a bill of sale therefor (in form and substance
satisfactory to Lessor). Lessor hereby appoints Lessee its agent
for inspection and acceptance of the Equipment from the Supplier.
Upon execution by Lessee of any Certificate of Acceptance, the
Equipment described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Lessee for lease
hereunder.
II. TERM, RENT AND PAYMENT:
<PAGE>
(a) The rent payable hereunder and Lessee's right to use
the Equipment shall commence on the date of execution by Lessee
of the Certificate of Acceptance for such Equipment ("Lease
Commencement Date"). The term of this Agreement shall be the
period specified in the applicable Schedule. If any term is
extended, the word "term" shall be deemed to refer to all
extended terms, and all provisions of this Agreement shall apply
during any extended terms, except as may be otherwise
specifically provided in writing.
(b) Rent shall be paid to Lessor at its address stated
above, except as otherwise directed by Lessor. Payments of rent
shall be in the amount set forth in, and due in accordance with,
the provisions of the applicable Schedule. If one or more
Advance Rentals are payable, such Advance Rental shall be (i) set
forth on the applicable Schedule, (ii) due upon acceptance by
Lessor of such Schedule, and (iii) when received by Lessor,
applied to the first rent payment and the balance, if any, to the
final rental payment(s) under such Schedule. In no event shall
any Advance Rental or any other rent payments be refunded to
Lessee. If rent is not paid within ten days of its due date,
Lessee agrees to pay a late charge of five cents ($.05) per
dollar on, and in addition to, the amount of such rent but not
exceeding the lawful maximum, if any.
III. RENT ADJUSTMENT:
(a) The periodic rent payments in each Schedule have been
calculated on the assumption (which, as between Lessor and
Lessee, is mutual) that the maximum effective corporate income
tax rate (exclusive of any minimum tax rate) for calendar-year
taxpayers ("Effective Rate") will be thirty-five percent (35%)
each year during the lease term.
(b) If, solely as a result of Congressional enactment of
any law (including, without limitation, any modification of, or
amendment or addition to, the Internal Revenue Code of 1986, as
amended, (the "Code")), the Effective Rate is higher than
thirty-five percent (35%) for any year during the lease term,
then Lessor shall have the right to increase such rent payments
by requiring payment of a single additional sum equal to the
product of (i) the Effective Rate (expressed as a decimal) for
such year less .35 (or, in the event that any adjustment has been
made hereunder for any previous year, the Effective Rate
(expressed as a decimal) used in calculating the next previous
adjustment) times (ii) the adjusted Termination Value divided by
the difference between the new Effective Tax Rate (expressed as a
decimal) and one (1). The adjusted Termination Value shall be
the Termination Value (calculated as of the first rental due in
the year for which such adjustment is being made) less the Tax
<PAGE>
Benefits that would be allowable under Section 168 of the Code
(as of the first day of the year for which such adjustment is
being made and all subsequent years of the lease term). Lessee
shall pay to Lessor the full amount of the additional rent
payment on the later of (i) receipt of notice or (ii) the first
day of the year for which such adjustment is being made.
(c) Lessee's obligations under this Section III shall
survive any expiration or termination of this Agreement.
IV. TAXES: Except as provided in Sections III and XV(c), Lessee
shall have no liability for taxes imposed by the United States of
America or any State or political subdivision thereof which are
on or measured by the net income of Lessor. Lessee shall report
(to the extent that it is legally permissible) and pay promptly
all other taxes, fees and assessments due, imposed, assessed or
levied against any Equipment (or the purchase, ownership,
delivery, leasing, possession, use or operation thereof), this
Agreement (or any rentals or receipt hereunder), any Schedule.
Lessor or Lessee by any foreign, federal, state or local
government or taxing authority during or related to the term of
this Agreement, including, without limitation, all license and
registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties
and charges, together with any penalties, fines or interest
thereon (all hereinafter called "Taxes"). Lessee shall (i)
reimburse Lessor upon receipt of written request for
reimbursement for any Taxes charged to or assessed against
Lessor, (ii) on request of Lessor, submit to Lessor written
evidence of Lessee's payment of Taxes, (iii) on all reports or
returns show the ownership of the Equipment by Lessor, and (iv)
send a copy thereof to Lessor.
V. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10)
days after any tax or other lien shall attach to any Equipment,
of the full particulars thereof and of the location of such
Equipment on the date of such notification.
(b) Lessee will within ninety (90) days of the close of
each fiscal year of Lessee, deliver to Lessee, Lessee's balance
sheet and profit and loss statement, certified by a recognized
firm of certificate public accountants. Upon request Lessee will
deliver to Lessor quarterly, within ninety (90) days of the close
of each fiscal quarter of Lessee, in reasonable detail, copies of
Lessee's quarterly financial report certified by the chief
financial officer of Lessee.
<PAGE>
(c) Lessee will permit Lessor to inspect any Equipment
during normal business hours.
(d) Lessee will keep the Equipment at the Equipment
Location (specified in the applicable Schedule) and will promptly
notify Lessor of any relocation of Equipment. Upon the written
request of Lessor, Lessee will notify Lessor forthwith in writing
of the location of any Equipment as of the date of such
notification.
(e) Lessee will promptly and fully report to Lessor in
writing if any Equipment is lost or damaged (where the estimated
repair costs would exceed ten percent (10%) of its then fair
market value), or is otherwise involved in an accident causing
personal injury or property damage.
(f) Within sixty (60) days after any request by Lessor,
Lessee will furnish a certificate of an authorized officer of
Lessee stating that he has reviewed the activities of Lessee and
that, to the best of his knowledge, there exists no default (as
described in Section XII) or event which with notice or lapse of
time (or both) would become such a default.
VI. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the
Supplier to Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee
solely in the conduct of its business and in a manner complying
with all applicable federal, state and local laws and
regulations.
(c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR
HYPOTHECATE ANY EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER.
NOR SHALL LESSEE REMOVE ANY EQUIPMENT FOR THE CONTINENTAL UNITED
STATES, WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR.
(d) Lessee will keep the Equipment free and clear of all
liens and encumbrances other than those which result from acts of
Lessor.
VII. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of
Equipment in good operating order, repair, condition and
appearance in accordance with manufacturer's recommendations,
normal wear and tear excepted. Lessee shall, if at any time
requested by Lessor, affix in a prominent position on each unit
of Equipment plates, tags or other identifying labels showing
<PAGE>
ownership thereof by Lessor.
(b) Lessee will not, without the prior consent of Lessor,
affix or install any accessory, equipment or device on any
Equipment if such addition will impair the originally intended
function or use of such Equipment. All additions, repairs,
parts, supplies, accessories, equipment, and devices furnished,
attached or affixed to any Equipment which are not readily
removable shall be made only in compliance with applicable law,
including Internal Revenue Service guidelines, and shall become
the property of Lessor. Lessee will not, without the prior
written consent of Lessor and subject to such conditions as
Lessor may impose for its protection, affix or install any
Equipment to or in any other personal or real property.
(c) Any alterations or modifications to the Equipment that
may, at any time during the term of this Agreement, be required
to comply with any applicable law, rule or regulation shall be
made at the expense of Lessee.
VIII. STIPULATED LOSS VALUE: Lessee shall promptly and fully
notify Lessor in writing if any unit of Equipment shall be or
become worn out, lost, stolen, destroyed, irreparably damaged in
the reasonable determination of Lessee, or permanently rendered
unfit for use from any cause whatsoever (such occurrences being
hereinafter called "Casualty Occurrences"). On the rental
payment date next succeeding a Casualty Occurrence (the "Payment
Date"), Lessee shall pay Lessor the sum of (x) the Stipulated
Loss Value of such unit calculated as of the rental next
preceding such Casualty Occurrence ("Calculation Date"); and (y)
all rental and other amounts which are due hereunder as of the
Payment Date. Upon payment of all sums due hereunder, the term
of this lease as to such unit shall terminate and (except in the
case of the loss, theft or complete destruction of such unit)
Lessor shall be entitled to recover possession of such unit.
IX. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the
entire risk of any loss, theft, damage to, or destruction of, any
unit of Equipment from any cause whatsoever from the time the
Equipment is shipped to Lessee.
X. INSURANCE: Lessee agrees, at its own expense, to keep all
Equipment insured for such amounts and against such hazards as
Lessor may require, including, but not limited to, insurance for
damages to or loss of such equipment and liability coverage for
personal injuries, death or property damage, with Lessor named as
additional insured and with a loss payable clause in favor of
Lessor, as its interest may appear, irrespective of any breach of
warranty or other act or omission of Lessee. All such policies
<PAGE>
shall be with companies, and on terms, satisfactory to Lessor.
Lessee agrees to deliver to Lessor evidence of insurance
satisfactory to Lessor. No insurance shall be subject to any
co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance,
and to make adjustments with insurers and to receive payment of
and execute or endorse all documents, checks or drafts in
connection with payments made as a result of such insurance
policies. Any expense of Lessor in adjusting or collecting
insurance shall be borne by Lessee. Lessee will not make
adjustments with insurers except (i) with respect to claims for
damage to any unit of Equipment where the repair costs do not
exceed ten percent (10%) of such unit's fair market value, or
(ii) with Lessor's written consent. Said policies shall provide
that the insurance may not be altered or canceled by the insurer
until after thirty (30) days written notice to Lessor. Lessor
may, at its option, apply proceeds of insurance, in whole or in
part, to (i) repair or replace Equipment or any portion thereof,
or (ii) satisfy any obligation of Lessee to Lessor hereunder.
XI. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or
any Schedule, Lessee shall promptly, at its own cost and expense:
(i) perform any testing and repairs required to place the
affected units of Equipment in the same condition and appearance
as when received by Lessee (reasonable wear and tear excepted)
and in good working order for their originally intended purpose;
(ii) if deinstallation, disassembly or crating is required, cause
such units to be deinstalled, disassembled and crated by an
authorized manufacturer's representative or such other service
person as is satisfactory to Lessor, and (iii) return such units
to a location within the continental United States as Lessor
shall direct.
(b) Until Lessee has fully complied with the requirements
of Section XI(a) above, Lessee's rent payment obligation and all
other obligations under this Agreement shall continue from month
to month notwithstanding any expiration or termination of the
lease term. Lessor may terminate such continued leasehold
interest upon ten (10) days notice to Lessee.
XII. DEFAULT:
(a) Lessor may in writing declare this Agreement in default
if: Lessee breaches its obligation to pay rent or any other sum
when due and fails to cure the breach within ten (10) days;
Lessee breaches any of its insurance obligations under Section X;
Lessee breaches any of its other obligations and fails to cure
that breach within thirty (30) days after written notice thereof;
<PAGE>
any representation or warranty made by Lessee in connection with
this Agreement shall be false or misleading in any material
respect; Lessee becomes insolvent or ceases to do business as a
going concern; any Equipment is illegally used; or a petition is
filed by or against Lessee or any guarantor of Lessee's
obligations to Lessor under any bankruptcy or insolvency laws.
Such declaration shall apply to all Schedules except as
specifically excepted by Lessor.
(b) After default, at the request of Lessor, Lessee shall
comply with the provisions of Section XI(a). Lessee hereby
authorizes Lessor to enter, with or without legal process, any
premises where any Equipment is believed to be and take
possession thereof. Lessee shall, without further demand,
forthwith pay to Lessor (i) as liquidated damages for loss of a
bargain and not as a penalty, the Stipulated Loss Value of the
Equipment (calculated as of the rental next preceding the
declaration of default), and (ii) all rentals and other sums then
due hereunder. Lessor may, but shall not be required to, sell
Equipment at private or public sale, in bulk or in parcels, with
or without notice, and without having the Equipment present at
the place of sale; or Lessor may, but shall not be required to,
lease, otherwise dispose of or keep idle all or part of the
Equipment; and Lessor may use Lessee's premises for any or all of
the foregoing without liability for rent, costs, damages or
otherwise. The proceeds of sale, lease or other disposition, if
any, shall be applied in the following order of priorities: (1)
to pay all of Lessor's costs, charges and expenses incurred in
taking, removing, holding, repairing and selling, leasing or
otherwise disposing of Equipment; then, (2) to the extent not
previously paid by Lessee, to pay Lessor all sums due from Lessee
hereunder; then (3) to reimburse to Lessee any sums previously
paid by Lessee as liquidated damages; and (4) any surplus shall
be retained by Lessor. Lessee shall pay any deficiency in (1)
and (2) forthwith.
(c) The foregoing remedies are cumulative, and any or all
thereof may be exercised in lieu of or in addition to each other
or any remedies at law, in equity, or under statute. Lessee
waives notice of sale or other disposition (and the time and
place thereof), and the manner and place of any advertising.
Lessee shall pay Lessor's actual attorney's fees incurred in
connection with the enforcement, assertion, defense or
preservation of Lessor's rights and remedies hereunder, or if
prohibited by law, such lesser sum as may be permitted. Waiver
of any default shall not be a waiver of any other or subsequent
default.
(d) Any default under the terms of this or any other
agreement between Lessor and Lessee may be declared by Lessor a
<PAGE>
default under this and any such other agreement.
XIII. ASSIGNMENT: Lessor may, without the consent of Lessee,
assign this Agreement or any Schedule. Lessee agrees that if
Lessee receives written notice of an assignment from Lessor,
Lessee will pay all rent and all other amounts payable under any
assigned Equipment Schedule to such assignee or as instructed by
Lessor. Lessee further agrees to confirm in writing receipt of
the notice of assignment as may be reasonably requested by
assignee. Lessee hereby waives and agrees not to assert against
any such assignee any defense, set-off, recoupment claim or
counterclaim which Lessee has or may at any time have against
Lessor for any reason whatsoever.
XIV. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease.
Lessee's obligation to pay rent and other amounts due hereunder
shall be absolute and unconditional. Lessee shall not be
entitled to any abatement or reductions of, or set-offs against,
said rent or other amounts, including, without limitation, those
arising or allegedly arising out of claims (present or future,
alleged or actual, and including claims arising out of strict
tort or negligence of Lessor) of Lessee against Lessor under this
Agreement or otherwise. Nor shall this Agreement terminate or
the obligations of Lessee be affected by reason of any defect in
or damage to, or loss of possession, use or destruction of, any
Equipment from whatsoever cause. It is the intention of the
parties that rents and other amounts due hereunder shall continue
to be payable in all events in the manner and at the times set
forth herein unless the obligation to do so shall have been
terminated pursuant to the express terms hereof.
XV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep
harmless Lessor, its agents, employees, successors and assigns
from and against any and all losses, damages, penalties,
injuries, claims, actions and suits, including legal expenses, of
whatsoever kind and nature, in contract or tort, whether caused
by the active or passive negligence of Lessor or otherwise, and
including, but not limited to, Lessor's strict liability in tort,
arising out of (i) the selection, manufacture, purchase,
acceptance or rejection of Equipment, the ownership of Equipment
during the term of this Agreement, and the delivery, lease,
possession, maintenance, uses, condition, return or operation of
Equipment (including, without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any
claim of patent, trademark or copyright infringement or
environmental damage) or (ii) the condition of Equipment sold or
disposed of after use by Lessee, any sublessee or employees of
<PAGE>
Lessee. Lessee shall, upon request, defend any actions based on,
or arising out of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that
(i) on the Lease Commencement Date for any unit of Equipment,
such unit will qualify for all of the items of deduction and
credit specified in Section C of the applicable Schedule ("Tax
Benefits") in the hands of Lessor (all references to Lessor in
this Section XV include Lessor and the consolidated taxpayer
group of which Lessor is a member), and (ii) at no time during
the term of this Agreement will Lessee take or omit to take, nor
will it permit any sublessee or assignee to take or omit to take,
any action (whether or not such act or omission is otherwise
permitted by Lessor or the terms of this Agreement), which will
result in the disqualification of any Equipment for, or recapture
of, all or any portion of such Tax Benefits.
(c) If as a result of a breach of any representation,
warranty or covenant of the Lessee contained in this Agreement or
any Schedule (x) tax counsel of Lessor shall determine that
Lessor is not entitled to claim on its Federal income tax return
all or any portion of the Tax Benefits with respect to any
Equipment, or (y) any such Tax Benefit claimed on the Federal
income tax return of Lessor is disallowed or adjusted by the
Internal Revenue Service, or (z) any such Tax Benefit is
recomputed or recaptured (any such determination, disallowance,
adjustment, recomputation or recapture being hereinafter called a
"Loss"), then Lessee shall pay to Lessor, as an indemnity and as
additional rent, such amount as shall, in the reasonable opinion
of Lessor, cause Lessor's after tax economic yields and cash
flows, computed on the same assumptions, including tax rates
(unless any adjustment has been made under Section III hereof, in
which case the Effective Rate used in the next preceding
adjustment shall be substituted), as were utilized by Lessor in
originally evaluating the transaction (such yields and flows
being hereinafter called the "Net Economic Return") to equal the
Net Economic Return that would have been realized by Lessor if
such Loss had not occurred. Such amount shall be payable upon
demand accompanied by a statement describing in reasonable detail
such Loss and the computation of such amount.
(d) All of Lessor's rights, privileges and indemnities
contained in this Section XV shall survive the expiration of
other termination of this Agreement and the rights, privileges
and indemnities contained herein are expressly made for the
benefit of, and shall be enforceable by Lessor, its successors
and assigns.
XVI. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE
<PAGE>
EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR
EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE
DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION,
EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH
SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION,
SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE.
All such risks, as between Lessor and Lessee, are to be borne by
Lessee. Without limiting the foregoing, Lessor shall have no
responsibility or liability to Lessee or any other person with
respect to any of the following, regardless of any negligence of
Lessor (i) any liability, loss or damage caused or alleged to be
caused directly or indirectly by any Equipment, any inadequacy
thereof, any deficiency or defect (latent or otherwise) therein,
or any other circumstance in connection therewith; (ii) the use,
operation or performance of any Equipment or any risks relating
thereto; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement
or replacement of any Equipment. If, and so long as, no default
exists under this Lease, Lessee shall be, and hereby is,
authorized during the term of this Lease to assert and enforce,
at Lessee's sole cost and expense, from time to time, in the name
of and for the account of Lessor and/or Lessee, as their
interests may appear, whatever claims and rights Lessor may have
against any Supplier of the Equipment.
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee
hereby represents and warrants to Lessor that on the date hereof
and on the date of execution of each Schedule:
(a) Lessee has adequate power and capacity to enter into,
and perform under, this Agreement and all related documents
(together, the "Documents") and is duly qualified to do business
wherever necessary to carry on its present business and
operations, including the jurisdiction(s) where the Equipment is
or is to be located.
(b) The Documents have been duly authorized, executed and
delivered by Lessee and constitute valid, legal and binding
agreements, enforceable in accordance with their terms, except to
the extent that the enforcement of remedies therein provided may
be limited under applicable bankruptcy and insolvency laws.
(c) No approval, consent or withholding of objections is
required from any governmental authority or instrumentality with
respect to the entry into or performance by Lessee of the
<PAGE>
Documents except such as have already been obtained.
(d) The entry into and performance by Lessee of the
Documents will not: (i) violate any judgment, order, law or
regulation applicable to Lessee or any provision of Lessee's
Certificate of Incorporation or By-Laws; or (ii) result in any
breach of, constitute a default under or result in the creation
of any lien, charge, security interest or other encumbrance upon
any Equipment pursuant to any indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument (other than
this Agreement) to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened
in court or before any commission, board or other administrative
agency against or affecting Lessee, which will have a material
adverse effect on the ability of Lessee to fulfill its
obligations under this Agreement.
(f) The Equipment accepted under any Certificate of
Acceptance is and will remain tangible personal property.
(g) Each Balance Sheet and Statement of Income delivered to
Lessor has been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent such
Balance Sheet and Statement of Income, there has been no material
adverse change.
(h) Lessee is and will be at all times validly existing and
in good standing under the laws of the State of its incorporation
(specified in the first sentence of this Agreement).
(i) The Equipment will at all times be used for commercial
or business purposes.
XVIII. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in
the applicable Schedule), Lessee may, so long as no default
exists hereunder, terminate this Agreement as to all (but not
less than all) of the Equipment on such Schedule as of a rent
payment date ("Termination Date") upon at least ninety (90) days
prior written notice to Lessor.
(b) Lessee shall, and Lessor may, solicit cash bids for the
Equipment on an AS IS, WHERE IS BASIS without recourse to or
warranty from Lessor, express or implied ("AS IS BASIS"). Prior
to the Termination Date, Lessee shall (i) certify to Lessor any
bids received by Lessee and (ii) pay to Lessor (A) the
Termination Value (calculated as of the rental due on the
Termination Date) for the Equipment, and (B) all rent and other
<PAGE>
sums due and unpaid as of the Termination Date.
(c) Provided that all amounts due hereunder have been paid
on the Termination Date. Lessor shall (i) sell the Equipment on
an AS IS BASIS for cash to the highest bidder and (ii) refund the
proceeds of such sale (net of any related expenses) to Lessee up
to the amount of the Termination Value. If such sale is not
consummated, no termination shall occur and Lessor shall refund
the Termination Value (less any expenses incurred by Lessor) to
Lessee.
(d) Notwithstanding the foregoing, Lessor may elect by
written notice, at any time prior to the Termination Date, not to
sell the Equipment. In that event, on the Termination Date
Lessee shall (i) return the Equipment (in accordance with Section
XI) and (ii) pay to the Lessor all amounts required under Section
XVIII(b) less the amount of the highest and bid certified by
Lessee to Lessor.
XIX. PURCHASE OPTION:
(a) So long as no default exists hereunder and the lease
has not been earlier terminated, Lessee may at lease expiration,
upon at least one hundred eighty (180) days prior written notice
to Lessor, purchase all (but not less than all) of the Equipment
in any Schedule on an AS IS BASIS for cash equal to its then Fair
Market Value (plus all applicable sales taxes).
(b) "Fair Market Value" shall mean the price which a
willing buyer (who is neither a lessee in possession nor a used
equipment dealer) would pay for the Equipment in an arm's-length
transaction to a willing seller under no compulsion to sell;
provided, however, that in such determination: (i) the Equipment
shall be assumed to be in the condition in which it is required
to be maintained and returned under this Agreement; (ii) in the
case of any installed Equipment, that Equipment shall be valued
on an installed basis; and (iii) costs of removal from current
location shall not be a deduction from such valuation. If Lessor
and Lessee are unable to agree on the Fair Market Value at least
one hundred thirty-five (135) days before lease expiration,
Lessor shall appoint an independent appraiser (reasonably
acceptable to Lessee) to determine Fair Market Value, and that
determination shall be final, binding and conclusive. Lessee
shall bear all costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option
unless it provides Lessor with written notice of its irrevocable
election to exercise the same within fifteen (15) days after Fair
Market Value is determined (by agreement or appraisal).
<PAGE>
XX. MISCELLANEOUS:
(a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE
AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY
RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS LEASE MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Unless and until Lessee exercises its rights under
Section XIX above, nothing herein contained shall give or convey
to Lessee any right, title or interest in and to any Equipment
except as a lessee. Any cancellation or termination by Lessor,
pursuant to the provision of this Agreement, any Schedule,
supplement or amendment hereto, or the lease of any Equipment
hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder. All Equipment shall at all
times remain personal property of Lessor regardless of the degree
of its annexation to any real property and shall not by reason of
any installation in, or affixation to, real or personal property
become a part thereof.
(c) Time is of the essence of this Agreement, Lessor's
failure at any time to require strict performance by Lessee of
any of the provisions hereof shall not waive or diminish Lessor's
right thereafter to demand strict compliance therewith. Lessee
agrees, upon Lessor's request, to execute any instrument
necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder
shall be deemed adequately given if sent by registered or
certified mail to the addressee at its address stated herein, or
at such other place as such addressee may have designated in
writing. This Agreement and any Schedule and Annexes thereto
constitute the entire agreement of the parties with respect to
the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS
AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS,
SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE PARTIES HERETO.
<PAGE>
(d) In case of a failure of Lessee to comply with any
provision of this Agreement, Lessor shall have the right, but
shall not be obligated to, effect such compliance, in whole or in
part; and all moneys spent and expenses and obligations incurred
or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after
the date Lessor sends notice to Lessee requesting payment.
Lessor's effecting such compliance shall not be a waiver of
Lessee's default.
(e) Any rent or other amount not paid to Lessor when due
hereunder shall bear interest, both before and after any judgment
or termination hereof, at the lesser of eighteen percent (18%)
per annum or the maximum rate allowed by law. Any provisions in
this Agreement and any Schedule which are in conflict with any
statute, law or applicable rule shall be deemed omitted, modified
or altered to conform thereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Agreement to be executed by their duly authorized representatives
as of the date first above written.
LESSOR: LESSEE:
General Electric Capital Corporation National Semiconductor Corporation
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
<PAGE>
AMENDMENT NO. 1
TO
MASTER LEASE AGREEMENT
DATED Dec. 13, 1994 (the "Lease")
BY AND BETWEEN
NATIONAL SEMICONDUCTOR CORPORATION ('Lessee')
AND
GENERAL ELECTRIC CAPITAL Co M RATION ("GE CAPITAL") ("Lessor")
WHEREAS, Lessor and Lessee have entered into or simultaneously
herewith are entering into the Lease; and
WHEREAS, Lessor and Lessee desire to amend certain provisions of
the Lease as hereinafter provided;
NOW THEREFORE, for good and valuable consideration, Lessor and
Lessee hereby agree to amend the Lease as follows:
1. Section II(b) is amended by deleting the last sentence
thereof and replacing with the following:
(b) if rent is not paid within ten days of its due date,
and such delay in caused by the acts or omissions of Lessee,
Lessee agrees to pay a late charge of five cents ($0.05) per
dollar on, and in addition to, the amount of such rent but
not exceeding the lawful maximum, if any.
2. Section III of the Lease in deleted in its entirety.
3. Section V(c) is deleted and replaced with the following:
(c) Lessee will permit Lessor to inspect any Equipment
during normal business hours upon not less than 2 days prior
notice by Lessor to Lessee.
4. Section VII(b) is amended by adding at the and thereof,
"except as necessary to put the Equipment in working order for
its originally intended purpose."
5. Section X is amended by inserting the following as a new
sixth sentence after the sentence that begins "Lessee hereby
appoints .":
Notwithstanding any provision hereof to the contrary, Lessor
shall not exercise its power as Lessee's attorney-in-fact
unless Lessee shall be in default under this Lease.
6. Section XI(a) is amended deleting clause (ii) of the last
sentence and replacing with the following:
(ii) if deinstallation, disassembly or crating is required,
cause such units to be deinstalled, disassembled and crated
in accordance with the manufacturer's standards and
<PAGE>
reasonable recommendations, if any, and in any case in
accordance with industry standards applicable to Equipment
of that kind.
7. Section XII(b) is amended by deleting the second sentence
thereof and replacing with the following
Leases hereby authorized Lessor to enter, with or without
legal process, any premises where any Equipment is
reasonably believed to be located and take possession
thereof, provided Lessor complies with Lessee's reasonable
worksite and security rules while on Lessee's premises.
8. Section XII(c) is amended by deleting "actual" after
"Lessor's" and before "attorney's" and replacing with
"reasonable".
9. Section XII(d) is deleted and replaced with the following:
Any default by Lessee of its obligations under this Lease or
any Schedule hereunder may be declared by Lessor to be a
default under all Schedules.
10. Section XIII is amended by deleting the second sentence
thereof and replacing with the following:
Lessee agrees that if Lessee receives written notice of an
assignment from Lessor, Lessee will pay all rent and all
other amounts payable under any assigned Equipment Schedule
to such assignee or as instructed by Lessor, but Lessee
shall not be responsible to pay any assignee unless so
notified.
and is further amended by adding the following at the and of the
Section:
Nothing in this Section shall limit Lessee's rights to
commence a proceeding against Lessor before any tribunal of
competent jurisdiction to seek damages or other remedies for
any claim Lessee may have against Lessor, nor shall this
Section have any effect on Lessee's rights against any
assignee with respect to any acts or omissions of that
assignee.
10. Section XV(a) is amended by adding the following at the end
thereof:
Defense and indemnification under this Section is
conditioned upon Lessor giving Lessee timely written notice
of any claim against which Lessor wishes to be indemnified
hereunder (unless Lessee learns of any such claim from a
third party, or unless Lessor does not learn of such claim
until such time as Lessor, acting prudently on its own
behalf, would be precluded from defending by applicable law
<PAGE>
or rules), and Lessor giving Lessee necessary and
appropriate information and assistance in the defense of
same. Lessee's obligation to pay or reimburse reasonable
fees of counsel selected by Lessor to defend any such claim
shall be conditioned upon Lessee's approval of such counsel,
which approval shall not be unreasonably withheld or
delayed. Lessor shall provide Lessee with periodic status
reports on the defense or settlement of such claim, upon
Lessee's reasonable request, and Lessor shall seek Lessee's
consent to any proposed settlement of such claim. If Lessee
does not consent to a proposed settlement of a claim, it
shall advise Lessor of its specific objections to the
proposed settlement and shall identify with particularity
the terms, if any, upon which it would consent to a
settlement of the claim. If Lessor settles any such claim
without Lessee's consent and Lessee objects to indemnifying
Lessor for such settlement, then Lessor and Lessee agree to
submit the question of the reasonableness of the settlement
to binding arbitration. In such arbitration, the arbitrator
shall be jointly selected by the parties (or, if they cannot
agree on an arbitrator, one shall be selected according to
the rules of the American Arbitration Association), and the
arbitrator shall determine to what extent, if any, Lessee
shall indemnify Lessor for both the settlement and any
attorneys' fees incurred in connection with the defense and
settlement of the claim. The decision of the arbitrator
shall be final and binding upon both parties, and neither
party shall seek recourse to a court of law or other
authorities to appeal for revision of such decision or any
other ruling of the arbitrator. The cost of the arbitration
shall be borne by both parties in equal amounts.
12. Section XVII(g) is amended by inserting "in Lessee's
financial condition" at the end thereof.
13. Section XIX(a) is amended by deleting "one hundred eighty
(180)" and replacing with "sixty (60)".
14. Section XIX(b) is deleted and replaced with the following:
(b) "Fair Market Value", shall mean the price which a
willing buyer (who is neither a lessee in possession nor a
used equipment dealer buying at wholesale) would pay for the
Equipment in an arm's-length transaction to a willing seller
under no compulsion to sell; provided, however, that in such
determination: (i) the Equipment shall be assumed to be in
the condition in which it is required to be maintained and
returned under this Agreement; (ii) in the case of any
installed Equipment, that Equipment shall be valued on an
installed basis; and (iii) costs of removal from current
location shall not be a deduction from such valuation. If
Lessor and Lessee are unable to agree on the Fair Market
Value at least forty-five (45) days before lease expiration,
Lessor and Lessee shall each appoint an independent
<PAGE>
appraiser to provide an estimate of the Fair Market Value.
If the estimates differ by an amount that is less than or
equal to 15% of the lower estimate, the Fair Market Value
shall be conclusively determined to be the average of the
two estimates. If the estimates differ by more than 15% of
the lower estimate, the two appraisers shall jointly appoint
a third appraiser, who shall provide an estimate of the Fair
Market Value, and the Fair Market Value shall be the average
of the two estimates that differ by the least amount,
provided, however, if the middle estimate differs from the
lowest and the highest by the same amount, than the Fair
Market Value shall be conclusively determined to be the
amount of the middle estimate. Each party shall bear the
expense of the appraiser appointed by it, and the parties
shall equally bear the expense of the third appraiser.
15. Section XX(e) is amended by deleting "eighteen percent (18%)
per annum" in the second line, and replacing with "a per annum
rate equal to the sum of the "prime rate" as published in the
"Money Rates" column of the Wall Street Journal, Western Edition,
on the business day preceding the due date of such payment, plus
2% per annum (200 basic points)."
This Amendment shall be deemed to have been entered into
contemporaneously with and integrated into the terms and
conditions of the Lease.
Except as set out herein, Lessor and Lessee hereby agree that the
terms and conditions of the Lease shall remain in full force and
effect an entered into by the parties on or prior to the date
hereof.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:--------------------------- By:----------------------------
Its:-------------------------- Its:---------------------------
Dated:------------------------ Dated:-------------------------
<PAGE>
(Article 2A notice letter)
November 21, 1994
National Semiconductor Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052
Attn: Mr. Richard Crowley
Dear Mr. Crowley:
General Electric Capital Corporation is entering into a lease
Agreement dated December 13, 1994 (the "Agreement") with National
Semiconductor Corporation for the lease of certain equipment set
forth on the attached Annex A (the "Equipment") to the Agreement.
In accordance with the requirements of Article 2A of the Uniform
Commercial Code, Lessor hereby makes the following disclosures to
Lessee prior to execution of the Agreement, (a) the person
supplying the Equipment is See Annex A (the "Supplier"), (b)
Lessee is entitled to the promises and warranties, including
those of any third party, provided to the Lessor by Supplier,
which is supplying the Equipment in connection with or as part of
the contract by which Lessor acquired the Equipment and (c) with
respect to such Equipment, Lessee may communicate with Supplier
and receive an accurate and complete statement of such promises
and warranties, including any disclaimers and limitations of them
or of remedies.
General Electric Capital Corporation
By:
---------------------------------
Its: Senior Operations Analyst
--------------------------------
Acknowledged and Agreed:
National Semiconductor Corporation
By:
----------------------------
Its:
---------------------------
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall,. at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
lease provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagrams, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shaft, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
By: By:
---------------------------- ----------------------------
<PAGE>
ANNEX A
TO
SCHEDULE NO. 008
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
Vendor Name Invoice # Inv. Date Equipment Cost
- ----------- --------- --------- --------- ----
Applied 112459 3/16/94 (1) Precision 5000 $1,659,620.00
Materials Mark II Tungsten
System and
attachments and
accessories described
more fully on invoice
#112459 attached
hereto and made a
part hereof. $3,451.76
Freight
Applied 112459 3/16/94 (2) 5000 Tungsten-Etch $56,930.00
Materials Back CES
(2) Window/A1203 $4,315.00
(1) Tyland MFC $48,300.00
LESS DISCOUNT {$85,827.50}
Varian 035460 10/19/93 Varian 64120 System $2,902,157.00
Assoc. and attachments and
accessories described
more fully on invoice
#035460 attached
hereto and made a part
hereof.
Varian 035460 11/04/93 Process Development $24,000.00
Assoc.
Varian 034988D 2/25/94 Varian Products $33,611.00
Assoc. described more fully
on invoice #034988D
attached hereto and
made a part hereof.
Freight $83.40
Varian 0349883 3/2/94 0981-F8473-301, Helium $1,314.03
Assoc. Calibrated Leak, 10-7
Range
Varian 034988G 3/17/94 0960-L6910-301 $28,347.00
Assoc. LD-Pump,
960T0/50-60HZ/115V
Freight $83.40
Varian 04952## 4/12/94 (6) 982-1111 (Y224) $48,504.00
Assoc. BTO Assembly for
Edwards Scroll Pump
INVOICE $4,724,889.09
COST
<PAGE>
ANNEX B
TO
SCHEDULE NO. 008
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of Four Million Seven Hundred
Twenty-four Thousand Eight Hundred Eighty-nine Dollars and Nine
Cents Dollars ($4,724,889.09) plus sales taxes in the amount of
zero Dollars ($00.00) (if exemption from sales tax is claimed, an
exemption certificate must be furnished to Buyer herewith), paid
by General Electric Capital Corporation (the "Buyer"), receipt of
which is acknowledged, hereby grants, sells, assigns, transfers
and delivers to Buyer the equipment (the "Equipment") described
in the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
________ day of ________, 19__.
SELLER:
National Semiconductor Corporation
<PAGE>
By:_______________________________
Title:____________________________
<PAGE>
ANNEX C
TO
SCHEDULE NO. 008
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Manufacturer Serial Type and
Numbers Model of Number of Cost Per
Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
________________________________
Authorized Representative
Dated: December 13, 1994
--------------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 008
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.789 107.973
2 103.052 107.328
3 102.306 106.674
4 101.546 106.006
5 100.773 105.325
6 99.986 104.631
7 99.186 103.922
8 98.377 103.205
9 97.554 102.474
10 96.717 101.730
11 95.872 100.976
12 95.013 100.209
13 94.140 99.428
14 93.258 98.638
15 92.367 97.840
16 91.467 97.032
17 90.557 96.214
18 89.638 95.387
19 88.709 94.550
20 87.772 93.704
21 86.824 92.849
22 85.867 91.984
23 84.901 91.110
24 83.925 90.226
25 82.940 89.332
26 81.945 88.429
27 80.941 87.517
28 79.930 86.598
29 78.911 85.672
30 77.886 84.738
31 76.853 83.798
32 75.810 82.847
33 74.761 81.890
34 73.704 80.925
35 72.638 79.951
36 71.564 78.969
37 70.480 77.977
38 69.060 76.649
39 67.627 75.308
40 66.186 73.959
41 64.736 72.601
42 63.277 71.234
43 61.809 69.858
44 60.328 68.469
45 58.838 67.072
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
46 57.340 65.665
47 55.829 64.246
48 54.308 62.817
49 52.778 61.380
50 51.236 59.929
51 49.681 58.466
52 48.118 56.995
53 46.548 55.517
54 44.970 54.032
55 43.385 52.539
56 41.787 51.033
57 40.182 49.519
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our sale to you
of certain Equipment as evidenced on the attached Bill of Sale to the
following parties in the amount(s) designated below.
National SemiConductor $4,724,889.09
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-
8090
For reimbursement of funds
previously paid to various
vendors for equipment plus
attachments and
accessories including
labor described on Annex A
attached hereto and made a
part hereof.
Very truly yours,
National Semiconductor Corporation
By:_____________________________
Title:______________________________
Date:_______________________________
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a Master Lease
Agreement dated as of December 13, 1994 (the "Lease") by and between the
undersigned as Lessee and General Electric Capital Corporation as Lessor,
Lessee hereby agrees to one of the following options with respect to the
payment of personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the initials and
signature of an authorized agent of Lessee in the appropriate spaces provided
below:
Please choose one of the options below by placing an "X" in the appropriate
box and initialing where indicated. Initial ONLY ONE Choice of Option
OPTION 1
Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment): Lessee
agrees that it will not list any of such Equipment for property tax purposes
or report any property tax assessed against such Equipment until otherwise
directed in writing by Lessor. Upon receipt of any property tax bill
pertaining to such Equipment from the appropriate taxing authority, Lessor
will pay such tax and will invoice Lessee for the expense. Upon receipt of
such invoice, Lessee will promptly reimburse Lessor for such expense;
OPTION 2
Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List Equipment): Lessee
agrees that it will (a) list all such Equipment, (b) report all property
taxes assessed against such Equipment and (c) pay all such taxes when due
directly to the appropriate taxing authority until Lessor shall otherwise
direct in writing.
LESSEE:
National Semiconductor Corporation
By:____________________________
Title:________________________________
Date:_________________________________
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 008
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined herein shall have the meanings assigned to them
in the Master Lease Agreement identified above ("Agreement"; said Agreement
and this Schedule being collectively referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire and lease
to Lessee the Equipment listed on Annex A attached hereto and made a
part hereof.
B. Financial Terms
1. Advance Rent (if any): $69,039.61
2. Capitalized Lessor's Cost: $4,724,889.09
3. Basic Term Lease Rate Factor: Mons. 1-36 1.46119,
Mons. 37-72 1.78557
4. Daily Lease Rate Factor: Mons. 1-36 .04871, Mons.
37-72 .05952
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commencement Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Method (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commence Date to the Basic Term Commencement Date
("Interim Period"), Lessee shall pay as rent ("Interim
Rent") for each unit of Equipment, an amount equal to
(a) the product of the "Prime Rate" as published in the
"Money Rates" column of the Wall Street Journal,
Western Edition, on the business day preceding the
Acceptance Date, times the Capitalized Lessor's Cost of
such unit times the number of days in the Interim
Period, divided by (b) 360. Interim Rent shall be on
12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commencement Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PCBs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or export
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee's
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to a proposed
settlement of a claim, it shall advise Lessor of its
specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
The decision of the arbitrator shall be final and binding
<PAGE>
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, ad at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such financing shall not in any event create a
security interest in, or lien or other encumbrance on,
Lessor's Equipment.
<PAGE>
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $
1,448,887.24 (the "FMV Early Option Price"), plus
all applicable sales taxes on an AS IS BASIS. Lessor
and Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:_________________________________ By:__________________________________
______ ______
<PAGE>
____________________________________ _____________________________________
______ ______
(Typed or printed name and (Typed or printed name and
title) title)
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 001
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined shall have the meanings assigned to
them in the Master Lease Agreement identified above ("Agreement";
said Agreement and this Schedule being collectively referred to
as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $15,919.72
2. Capitalized Lessor's Cost: $1,103,933.71
3. Basic Term Lease Rate Factor: Mons. 1-36 1.44209,
Mons. 37-72 1.76223
4. Daily Lease Rate Factor: Mons. 1-36 .04807, Mons.
37-72 .05874
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Method (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commence Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PCBs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or export
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Lessor and its Affiliates, successors and
assigns, directors, officers, employees and agents from and against any
Environmental Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee timely
written notice of any claim against which Lessor wishes to be
indemnified hereunder (unless Lessee learns of any such claim from a
third party, or unless Lessor does not learn of such claim until such
time as Lessor, acting prudently on its own behalf, would be precluded
from defending by applicable law or rules), and Lessor giving Lessee
necessary and appropriate information and assistance in the defense of
same. Lessee's obligation to pay or reimburse reasonable fees of
counsel selected by Lessor to defend any such claim shall be conditioned
upon Lessee'' approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide Lessee with
periodic status reports on the defense or settlement of such claim, upon
Lessee's reasonable request, and Lessor shall seek Lessee's consent to a
proposed settlement of a claim, it shall advise Lessor of its specific
objections to the proposed settlement and shall identify with
particularity the terms, if any, upon which it would consent to a
settlement of the claim. If Lessor settles any such claim without
Lessee's consent and Lessee objects to indemnifying Lessor for such
settlement, then Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In such
arbitration, the arbitrator shall be jointly selected by the parties
(or, if they cannot agree on an arbitrator, one shall be selected
according to the rules of the American Arbitration Association), and the
arbitrator shall determine to what extent, if any, Lessee shall
indemnify Lessor for both the settlement and any attorneys' fees
incurred in connection with the defense and settlement of the claim. The
decision of the arbitrator shall be final and binding
<PAGE>
upon both parties, and neither party shall seek recourse to a court of
law or other authorities to appeal for revision of such decision or any
other ruling of the arbitrator. The cost of the arbitration shall be
borne by both parties in equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, and at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such
<PAGE>
financing shall not in any event create a security interest
in, or lien or other encumbrance on, Lessor's Equipment.
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $
354,417.92 (the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
<PAGE>
By:______________________________ By:____________________________
_______ _______
_________________________________ _______________________________
_______ _______
(Typed or printed name and (Typed or printed name and
title) title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall, at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
least provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagrams, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
By:__________________________ By:_________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE
VENDOR NAME # INV. DATE EQUIPMENT COST
- ------------- --------- --------- ---------------------------------------------------------- ---------------
<S> <C> <C> <C> <C>
Opal 93209 11/28/93 Opal 7830 CD-SEM and attachments and accessories described $ 1,098,.091.00
more fully on invoice #93209 attached hereto and made a
part hereof.
Freight: $ 1,892.71
Neslab 399823 6/22/94 Spare Parts $ 2,700.00
Opal 94028 5/18/94 Vibration, EMI and acoustic survey $ 1,250.00
</TABLE>
INVOICE COST: $1,103,933.71
<TABLE>
<S> <C>
Initials: -------------------------------------- --------------------------------------
Lessor Lessee
</TABLE>
<PAGE>
ANNEX B
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million One Hundred Three
Thousand Nine Hundred Thirty-three Dollars and Seventy-one Cents
Dollars ($1,103,933.71) plus sales taxes in the amount of zero
Dollars ($00.00) (if exemption from sales tax is claimed, an
exemption certificate must be furnished to Buyer herewith), paid
by General Electric Capital Corporation (the "Buyer"), receipt of
which is acknowledged, hereby grants, sells, assigns, transfers
and delivers to Buyer the equipment (the "Equipment") described
in the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
- ----------- ------------
SELLER:
National Semiconductor Corporation
<PAGE>
By:_______________________________
Title:____________________________
<PAGE>
ANNEX C
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Manufacturer Serial Type and Number of Cost Per
Numbers Model of Units Unit
Equipment
See Annex A Attached hereto and Made A Part Hereof
_____________________________
Authorized Representative
Dated: December 13, 1994
--------------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 008
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.788 107.923
2 103.070 107.272
3 102.343 106.613
4 101.602 105.940
5 100.848 105.254
6 100.081 104.554
7 99.300 103.840
8 98.510 103.118
9 97.707 102.383
10 96.890 101.633
11 96.064 100.875
12 95.225 100.103
13 94.372 99.318
14 93.510 98.524
15 92.640 97.721
16 91.760 96.909
17 90.871 96.087
18 89.972 95.256
19 89.064 94.415
20 88.147 93.566
21 87.220 92.707
22 86.284 91.838
23 85.339 90.961
24 84.384 90.073
25 83.420 89.177
26 82.447 88.271
27 81.464 87.356
28 80.475 86.434
29 79.478 85.505
30 78.474 84.569
31 77.463 83.625
32 76.443 82.673
33 75.416 81.713
34 74.381 80.746
35 73.337 79.770
36 72.286 78.786
37 71.225 77.793
38 69.832 76.467
39 68.427 75.130
40 67.013 73.783
41 65.590 72.428
42 64.159 71.065
43 62.719 69.692
44 61.266 68.307
45 59.805 66.913
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
46 58.335 65.510
47 56.852 64.095
48 55.360 62.671
49 53.859 61.238
50 52.346 59.792
51 50.820 58.333
52 49.286 56.867
53 47.746 55.394
54 46.198 53.914
55 44.643 52.426
56 43.075 50.926
57 41.499 49.418
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,103,933.71
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:_______________________________
Title:____________________________
Date:_____________________________
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of December 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:_______________________________
Title:____________________________
Date:_____________________________
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 002
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined shall have the meanings assigned to
them in the Master Lease Agreement identified above ("Agreement";
said Agreement and this Schedule being collectively referred to
as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $36,202.71
2. Capitalized Lessor's Cost: $2,515,037.57
3. Basic Term Lease Rate Factor: Mons. 1-36 1.43945,
Mons. 37-72 1.75901
4. Daily Lease Rate Factor: Mons. 1-36 .04798, Mons.
37-72 .05863
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Methods (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be due on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commence Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
and the regulation promulgated pursuant thereto.
<PAGE>
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or export
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee''
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to a proposed
settlement of a claim, it shall advise Lessor of its
specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
<PAGE>
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, and at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such
<PAGE>
financing shall not in any event create a security interest
in, or lien or other encumbrance on, Lessor's Equipment.
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $
812,432.59 (the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
<PAGE>
By:____________________________ By:____________________________
_______________________________ _______________________________
(Typed or printed name and title) (Typed or printed name and title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall,. at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
lease provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagram, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
By:__________________________ By:_________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 002
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE INV.
VENDOR NAME # DATE EQUIPMENT COST
- ------------------------------------ --------- --------- ------------------------------------ ---------------
<S> <C> <C> <C> <C>
Integrated Solutions 320124 5/10/94 GCA 8500-003 Stepper 2142 G- Line
8500SE (NSC) $ 750,000.00
Freight: $ 1,200.00
Anderson DeBartolo Pan 41016 5/13/94 Professional Services $ 17,658.00
Anderson DeBartolo Pan 40915 4/29/94 Professional Services $ 1,962.00
Tylan General 66965 4/12/94 Misc. Repairs $ 1,775.00
Lam Research Corp 171405 9/15/93 TCP 9600 S/N#4058 $ 1,374,623.25
Matheson Elect. Products Group 16847 7/15/94 Auto-purge system for 8C13 for LAM
9600 and attachments and accessories
described more fully on invoice
16847 attached hereto and made a $ 63,263.25
part hereof. Freight $1,529.41
Vector Tech. 047741 10/4/93 ES-400 Base Unit, Type-7 Entry Kit,
ES-Series Elec Cont. Box Assbly $ 17,085.00
Semix Inc. 15536 2/9/93 Sog Spin Coater, Indexers Basic
repair parts kit, Cleaning and $ 285,122.00
consumable kit Freight $819.66
</TABLE>
INVOICE COST: $2,515,037.57
Initials: ------------------------------ ---------------------------------
Lessor Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 002
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of Two Million Five Hundred Fifteen
Thousand Thirty-Seven Dollars and Fifty-seven Cents Dollars
($2,515,037.57) plus sales taxes in the amount of zero Dollars
($00.00) (if exemption from sales tax is claimed, an exemption
certificate must be furnished to Buyer herewith), paid by General
Electric Capital Corporation (the "Buyer"), receipt of which is
acknowledged, hereby grants, sells, assigns, transfers and
delivers to Buyer the equipment (the "Equipment") described in
the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
SELLER:
National Semiconductor
<PAGE>
Corporation
By:
---------------------------
Title: Assistant Treasurer
------------------------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 002
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Manufacturer Serial Type and
Numbers Model of Number of Cost Per
Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
--------------------------
Authorized Representative
Dated: December 13, 1994
-----------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 002
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.788 107.916
2 103.072 107.265
3 102.348 106.605
4 101.610 105.931
5 100.859 105.244
6 100.094 104.543
7 99.315 103.829
8 98.529 103.106
9 97.728 102.370
10 96.914 101.620
11 96.091 100.861
12 95.254 100.089
13 94.404 99.303
14 93.545 98.508
15 92.677 97.704
16 91.800 96.892
17 90.914 96.069
18 90.018 95.238
19 89.113 94.396
20 88.198 93.546
21 87.275 92.687
22 86.342 91.818
23 85.399 90.940
24 84.448 90.052
25 83.486 89.155
26 82.516 88.249
27 81.536 87.334
28 80.550 86.411
29 79.556 85.482
30 78.556 84.545
31 77.548 83.602
32 76.531 82.649
33 75.506 81.689
34 74.475 80.721
35 73.434 79.745
36 72.386 78.761
37 71.328 77.767
38 69.939 76.442
39 68.537 75.105
40 67.127 73.759
41 65.709 72.405
42 64.281 71.041
43 62.845 69.669
44 61.396 68.285
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
45 59.939 66.891
46 58.472 65.489
47 56.993 64.074
48 55.505 62.651
49 54.008 61.218
50 52.499 59.773
51 50.977 58.315
52 49.448 56.850
53 47.911 55.378
54 46.367 53.898
55 44.816 52.411
56 43.252 50.911
57 41.681 49.404
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $2,515,037.57
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:
---------------------------------
Title: Assistant Treasurer
------------------------------
Date: December 13, 1994
-------------------------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of December 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:
-------------------------------
Title: Assistant Treasurer
----------------------------
Date: December 13, 1994
-----------------------------
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 003
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital Corporation National Semiconductor Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined herein shall have the meanings
assigned to them in the Master Lease Agreement identified above
("Agreement"; said Agreement and this Schedule being collectively
referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $15,531.46
2. Capitalized Lessor's Cost: $1,109,397.74
3. Basic Term Lease Rate Factor: Mons. 1-36 1.39999,
Mons. 37-72 1.71079
4. Daily Lease Rate Factor: Mons. 1-36 .04667, Mons.
37-72 .05703
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Methods (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
------------------------
c. Basis: 100% of Capitalized Lessor's Cost.
------------------------
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be due on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commencement Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or export
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee''
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to any proposed
settlement of such claim. If Lessee does not consent to a
proposed settlement of a claim, it shall advise Lessor of
its specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
<PAGE>
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, ad at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such
<PAGE>
financing shall not in any event create a security interest
in, or lien or other encumbrance on, Lessor's Equipment.
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $391,484.27
(the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:_______________________________ By:_______________________________
__________________________________ __________________________________
(Typed or printed name and title) (Typed or printed name and title)
<PAGE>
. ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall, at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
lease provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagram, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
By:___________________________ By:__________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 003
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE
VENDOR NAME # INV. DATE EQUIPMENT COST
- ------------ --------- --------- ------------------------------------------------------------ ---------------
<S> <C> <C> <C> <C>
Lam 172965 10/27/93 851-010003-101 Assembly System R4520 Oxide Etch System $ 1,066,575.00
Research SN#2736 and attachments and accessories described more fully
Corp. on invoice #172965 attached hereto and made a part hereof
Lam 179955 4/25/94 Spare Parts to 4520 System described more fully on invoice $ 38,732.10
Research #179955 attached hereto and made a part hereof.
Corp.
Lam 180409 5/4/94 Encoder Shaft Freight $ 561.54 $6.00
Research
Corp.
Lam 180170 4/28/94 Funnel, Quartz P.S. Module $ 3,523.10
Research
Corp.
</TABLE>
INVOICE COST: $1,109,397.74
Initials: --------------------------- ------------------------------
Lessor Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 003
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million One Hundred Nine Thousand
Three Hundred Ninety-seven Dollars and Seventy-four Cents Dollars
($1,109,397.74) plus sales taxes in the amount of zero Dollars
($00.00) (if exemption from sales tax is claimed, an exemption
certificate must be furnished to Buyer herewith), paid by General
Electric Capital Corporation (the "Buyer"), receipt of which is
acknowledged, hereby grants, sells, assigns, transfers and
delivers to Buyer the equipment (the "Equipment") described in
the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
SELLER:
National Semiconductor
<PAGE>
Corporation
By:_____________________
Title: Assistant Treasurer
-------------------------
- ------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 003
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Type and
Manufacturer Serial Model of Number of Cost Per
Numbers Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
______________________________
Authorized Representative
Dated: December 13,
1994 ----------------------
- --------
<PAGE>
ANNEX D
TO
SCHEDULE NO 003
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
STIPULATED
TERMINATION VALUE LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ------------------------- --------------
1 103.793 107.820
2 103.116 107.157
3 102.431 106.485
4 101.733 105.800
5 101.021 105.102
6 100.296 104.391
7 99.558 103.666
8 98.811 102.933
9 98.051 102.186
10 97.277 101.426
11 96.496 100.658
12 95.700 99.876
13 94.891 99.080
14 94.074 98.276
15 93.248 97.464
16 92.413 96.643
17 91.569 95.812
18 90.715 94.972
19 89.853 94.123
20 88.982 93.265
21 88.101 92.398
22 87.211 91.522
23 86.313 90.637
24 85.405 89.742
25 84.487 88.838
26 83.561 87.926
27 82.626 87.005
28 81.685 86.077
29 80.736 85.142
30 79.781 84.200
31 78.818 83.251
32 77.847 82.293
33 76.869 81.328
34 75.883 80.356
35 74.889 79.375
36 73.888 78.388
37 72.877 77.390
38 71.544 76.071
39 70.199 74.739
40 68.846 73.400
<PAGE>
STIPULATED
TERMINATION VALUE LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ------------------------- --------------
41 67.484 72.052
42 66.114 70.695
43 64.735 69.330
44 63.344 67.952
45 61.945 66.567
46 60.537 65.172
47 59.117 63.766
48 57.689 62.351
49 56.251 60.927
50 54.802 59.491
51 53.340 58.043
52 51.872 56.588
53 50.396 55.126
54 48.914 53.657
55 47.424 52.181
56 45.922 50.692
57 44.413 49.196
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,109,397.74
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:
-------------------------------
Title: Assistant Treasurer
---------------------------
Date: December 13, 1994
----------------------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of December 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:
-------------------------------
Title: Assistant Treasurer
----------------------------
Date: December 13, 1994
---------------------------
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 004
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined shall have the meanings assigned to
them in the Master Lease Agreement identified above ("Agreement";
said Agreement and this Schedule being collectively referred to
as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $16,503.52
2. Capitalized Lessor's Cost: $1,178,831.45
3. Basic Term Lease Rate Factor: Mons. 1-36 1.39999,
Mons. 37-72 1.71079
4. Daily Lease Rate Factor: Mons. 1-36 .04667, Mons.
37-72 .05703
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Methods (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
------------------------------
c. Basis: 100% of Capitalized Lessor's Cost.
---------------
D. Rent
1. Interim Rent. For the period from and including the
Lease Commence Date to the Basic Term Commencement Date
("Interim Period"), Lessee shall pay as rent ("Interim
Rent") for each unit of Equipment, an amount equal to
(a) the product of the "Prime Rate" as published in the
"Money Rates" column of the Wall Street Journal,
Western Edition, on the business day preceding the
Acceptance Date, times the Capitalized Lessor's Cost of
such unit times the number of days in the Interim
Period, divided by (b) 360. Interim Rent shall be on
12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commence Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or from the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or export
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee's
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to any proposed
settlement of such claim. If Lessee does not consent to a
proposed settlement of a claim, it shall advise Lessor of
its specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
<PAGE>
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, ad at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such financing shall not in any event create a
security interest in, or lien or other encumbrance on,
Lessor's Equipment.
<PAGE>
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $
415,986.04 (the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:_______________________________ By:_______________________________
<PAGE>
__________________________________ __________________________________
(Typed or printed name and title) (Typed or printed name and title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall,. at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
lease provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagram, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
By:__________________________ By:_________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 004
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE INV.
VENDOR NAME # DATE EQUIPMENT COST
- ------------- --------- --------- ------------------------------------------------------------ ---------------
<S> <C> <C> <C> <C>
Lam Research 183107 6/30/94 850-010000-151 R4520S Oxide Etch System SN#2953 and $ 1,058,898.75
Corp. attachments and accessories described more fully on invoice
#183107 attached hereto and made a part hereof.
Freight: $ 2,719.53
Lam Research 187044 9/21/94 Ring Filler $ 4,180.00
Corp.
Lam Res. 187077 9/23/94 (2) Silicon 6" Electrodes $ 11,450.00
Corp.
Lam Res. 187947 10/10/9 4 Quartz Funnel, 8.12 Dim. $ 4,325.00
Corp.
Lam Research 187519 9/30/94 Spare Parts and attachments and accessories described more $ 30,044.00
Corp. fully on invoice #187519 attached hereto and made a part
hereof.
Ebara Tec h. 105987 8/8/94 40x20 Dry Pump, Plugs/Cords $ 21,165.00
Inc.
Freight $ 196.62
Ebara Tec h. 106006 8/10/94 80, 280V 4520S 4520I $ 38,080.00
Inc.
Freight $ 329.07
Ebara Tec h. 106001 8/10/94 Cont. PNL, 208V, 80, 4040, LAM4520S $ 7,404.00
Inc.
Freight $ 39.48
</TABLE>
INVOICE COST: $1,178,831.45
Initials: ------------------------- ------------------------------
Lessor Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 004
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million One Hundred Seventy-eight
Thousand Eight Hundred Thirty-one Dollars and Forty-five Cents
Dollars ($1,178,831.45) plus sales taxes in the amount of zero
Dollars ($00.00) (if exemption from sales tax is claimed, an
exemption certificate must be furnished to Buyer herewith), paid
by General Electric Capital Corporation (the "Buyer"), receipt of
which is acknowledged, hereby grants, sells, assigns, transfers
and delivers to Buyer the equipment (the "Equipment") described
in the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
SELLER:
National Semiconductor
<PAGE>
Corporation
By:_______________________
Title: Assistant Treasurer
------------------------
- -----
<PAGE>
ANNEX C
TO
SCHEDULE NO. 004
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Type and
Manufacture Serial Model of Number of Cost Per
Numbers Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
_____________________________
Authorized Representative
Dated: December 13, 1994
---------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 004
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.793 107.820
2 103.116 107.157
3 102.431 106.485
4 101.733 105.800
5 101.021 105.102
6 100.296 104.391
7 99.558 103.666
8 98.811 102.933
9 98.051 102.186
10 97.277 101.426
11 96.496 100.658
12 95.700 99.876
13 94.891 99.080
14 94.074 98.276
15 93.248 97.464
16 92.413 96.643
17 91.569 95.812
18 90.715 94.972
19 89.853 94.123
20 88.982 93.265
21 88.101 92.398
22 87.211 91.522
23 86.313 90.637
24 85.405 89.742
25 84.487 88.838
26 83.561 87.926
27 82.626 87.005
28 81.685 86.077
29 80.736 85.142
30 79.781 84.200
31 78.818 83.251
32 77.847 82.293
33 76.869 81.328
34 75.883 80.356
35 74.889 79.375
36 73.888 78.388
37 72.877 77.390
38 71.544 76.071
39 70.199 74.739
40 68.846 73.400
41 67.484 72.052
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
42 66.114 70.695
43 64.735 69.330
44 63.344 67.952
45 61.945 66.567
46 60.537 65.172
47 59.117 63.766
48 57.689 62.351
49 56.251 60.927
50 54.802 59.491
51 53.340 58.043
52 51.872 56.588
53 50.396 55.126
54 48.914 53.657
55 47.424 52.181
56 45.922 50.692
57 44.413 49.196 cont.
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,178,831.45
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:
--------------------------------
Title: Assistant Treasurer
-----------------------------
Date: December 13, 1994
------------------------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of December 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:
-------------------------------
Title: Assistant Treasurer
----------------------------
Date: December 13, 1994
-----------------------------
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 005
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined herein shall have the meanings
assigned to them in the Master Lease Agreement identified above
("Agreement"; said Agreement and this Schedule being collectively
referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $15,318.40
2. Capitalized Lessor's Cost: $1,078,009.08
3. Basic Term Lease Rate Factor: Mons. 1-36 1.42099,
Mons. 37-72 1.73644
4. Daily Lease Rate Factor: Mons. 1-36 .04737, Mons.
37-72 .05788
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Methods (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commence Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or from the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or expert
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee's
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to a proposed
settlement of a claim. If Lessee does not consent a
proposed settlement of a claim, it shall advise Lessor of
its specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
<PAGE>
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, ad at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such financing shall not in any event create a
security interest in, or lien or other encumbrance on,
Lessor's Equipment.
<PAGE>
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OF LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $ 363,235.16
(the "FMV Early Option Price"), plus all applicable sales
taxes on an AS IS BASIS. Lessor and Lessee agree that the
FMV Early Option Price is a reasonable prediction of the Fair
Market Value (as such term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:______________________________ By:______________________________
<PAGE>
_________________________________ _________________________________
(Typed or printed name and title) (Typed or printed name and title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall, at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
lease provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagrams, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION NATIONAL SEMICONDUCTOR CORPORATION
<PAGE>
By:_________________________________ By:______________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 005
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE
VENDOR NAME # INV. DATE EQUIPMENT COST
- ------------- ----------- --------- --------------------------------------------------------- -------------
<S> <C> <C> <C> <C>
Lam Research 171404 9/15/93 LAM 4420 S/N #2686 $ 773,527.30
Corp
Lam Research 171860 9/27/93 Software, Lamstation/4420/4500 $ 13.195.00
Corp
Ebara Tech., 103990 10/14/93 (2) 80x25 H-100, SN#932496 (2) 40x20 w/o Cooler $ 118,490.00
Inc.
Ebara Tech, 104011 10/18/93 (1) 208V Flsw PS Sol Crds/Plug $ 21,165.00
Inc.
Ebara Tech, 104048 10/25/93 (1) 40#2 208V Sol Cords & Plugs and attachments and $ 78,795.00
Inc. accessories described more fully on invoice #104048
attached hereto and made a part hereof.
Ebara Tech, 104122 11/9/93 Pump System, 40x20, SN#932590 and attachments and $ 42,488.10
Inc. accessories described more fully on invoice #104122
attached hereto and made a part hereof.
MG Industries G00485 11/24/93 (1) Guardian 4 Gas Protection System, Natural Gas and $ 29,334.74
attachments and accessories described more fully on
invoice #G00485 attached hereto and made a part hereof.
Freight $658.86
Freight 355.08
</TABLE>
<PAGE>
INVOICE COST: $1,078,009.08
Initials: --------------------------- -------------------------------
Lessor Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 005
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million Seventy-eight Thousand
Nine Dollars and Eight Cents Dollars ($1,078,009.08) plus sales
taxes in the amount of zero Dollars ($00.00) (if exemption from
sales tax is claimed, an exemption certificate must be furnished
to Buyer herewith), paid by General Electric Capital Corporation
(the "Buyer"), receipt of which is acknowledged, hereby grants,
sells, assigns, transfers and delivers to Buyer the equipment
(the "Equipment") described in the above schedule (said schedule
and related lease being collectively referred to as "Lease"),
along with whatever claims and rights Seller may have against the
manufacturer and/or supplier of the Equipment (the "Supplier"),
including but not limited to all warranties and representations.
At Buyer's request, Seller will cause Supplier to execute the
attached Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
- ----------- ------------
SELLER:
National Semiconductor Corporation
<PAGE>
By:
----------------------------
Title: Assistant Treasurer
-------------------------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 005
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Type and
Manufacturer Serial Model of Number of Cost Per
Numbers Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
--------------------------
Authorized Representative
Dated: December 13, 1994
--------------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 005
TO MASTER LEASE AGREEMENT
DATED AS OF
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.787 107.868
2 103.089 107.211
3 102.384 106.546
4 101.664 105.867
5 100.931 105.175
6 100.185 104.469
7 99.425 103.750
8 98.657 103.022
9 97.876 102.281
10 97.080 101.526
11 96.277 100.763
12 95.459 99.986
13 94.628 99.196
14 93.789 98.397
15 92.941 97.589
16 92.083 96.773
17 91.217 95.946
18 90.341 95.111
19 89.455 94.266
20 88.561 93.413
21 87.658 92.550
22 86.745 91.677
23 85.823 90.796
24 84.892 89.905
25 83.951 89.005
26 83.001 88.096
27 82.043 87.178
28 81.077 86.253
29 80.104 85.321
30 79.125 84.382
31 78.138 83.436
32 77.143 82.480
33 76.140 81.518
34 75.130 80.549
35 74.111 79.570
36 73.085 78.585
37 72.049 77.589
38 70.686 76.267
39 69.311 74.932
40 67.927 73.589
41 66.535 72.238
42 65.134 70.878
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
43 63.725 69.509
44 62.304 68.128
45 60.873 66.738
46 59.434 65.340
47 57.983 63.929
48 56.523 62.509
49 55.054 61.081
50 53.572 59.640
51 52.078 58.187
52 50.578 56.726
53 49.070 55.259
54 47.554 53.784
55 46.032 52.302
56 44.497 50.808
57 42.955 49.306 cont.
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,078,009.08
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:___________________________
Title: Assistant Treasurer
---------------------------------
- ----------------
Date: December 13, 1994
----------------------------------
- ----------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of Dec. 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 / /
---------
Lessee's Initials:
--------------
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 / /
---------
Lessee's Initials:
--------------
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:____________________________
Title: Assistant Treasurer
-------------------------------
- -------------
Date: December 13, 1994
--------------------------------
- -------------
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 006
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital National Semiconductor
Corporation Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined herein shall have the meanings
assigned to them in the Master Lease Agreement identified above
("Agreement"; said Agreement and this Schedule being collectively
referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $18,090.04
2. Capitalized Lessor's Cost: $1,273,059.02
3. Basic Term Lease Rate Factor: Mons. 1-36 1.42099,
Mons. 37-72 1.73644
4. Daily Lease Rate Factor: Mons. 1-36 .04737, Mons.
37-72 .05788
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commencement Date.
C. Tax Benefits
Depreciation Methods (check one):
a. Depreciation Deductions:
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commence Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or expert
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee's
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to a proposed
settlement of a claim. If Lessee does not consent to a
proposed settlement of a claim, it shall advise Lessor of
its specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
<PAGE>
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, ad at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such financing shall not in any event create a
security interest in, or lien or other encumbrance on,
Lessor's Equipment.
<PAGE>
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $428,957.24
(the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:____________________________ By:____________________________
_______ _______
<PAGE>
_______________________________ _______________________________
_______ _______
(Typed or printed name and (Typed or printed name and
title) title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall, at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
least provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagrams, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shaft, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
<PAGE>
CORPORATION CORPORATION
By:_________________________ By:__________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 006
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE
VENDOR NAME # INV. DATE EQUIPMENT COST
- ------------- ----------- --------- --------------------------------------------------------- -------------
<S> <C> <C> <C> <C>
Applied 111260 & 12/23/93 Precision 5000 Mark II CVD $ 870,510.00
Materials 111259 Freight $ 2,950.49
Ebara Tech, 104370 1/7/94 (4) 50x20 208 Volt Dry Pumps (2) 40x20 (#2) Dry Pumps $ 157,050.00
Inc. Freight $ 1,397.88
Ebara Tech, 104882 2/18/94 (1) 50x20 208 Volt Dry Pump (1) 40x20 (#2) Dry Pumps $ 48,600.00
Inc.
104928 2/25/94 (1) 50x20 208 Volt Dry Pump $ 29,925.00
Freight $ 619.96
Ebara Tech, 104903 2/24/94 (1) 50x20 208 Volt Dry Pump $ 29,925.00
Inc. Freight $ 325.50
Ebara Tech, 104942 2/28/94 (1) 40x20W/CLRS, 208V, 3/8" Exhpurge $ 23,715.00
Inc. Freight $ 382.80
MG Industries G00464 10/25/93 (3) Guardian 4 Gas Protection System, Natural Gas and $ 107,657.39
attachments and accessories described more fully on
invoice #G00464 attached hereto and made a part hereof.
</TABLE>
INVOICE COST: $1,273,059.02
<PAGE>
Initials: ---------------------------- --------------------------------
Lessor Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 006
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million Two Hundred Seventy-three
Thousand Fifty-nine Hundred Dollars and Two Cents Dollars
($1,273,059.02) plus sales taxes in the amount of zero Dollars
($00.00) (if exemption from sales tax is claimed, an exemption
certificate must be furnished to Buyer herewith), paid by General
Electric Capital Corporation (the "Buyer"), receipt of which is
acknowledged, hereby grants, sells, assigns, transfers and
delivers to Buyer the equipment (the "Equipment") described in
the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
SELLER:
National Semiconductor Corporation
<PAGE>
By:
---------------------------
Title: Assistant Treasurer
------------------------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 006
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Type and
Manufacturer Serial Model of Number of Cost Per
Numbers Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
--------------------------------
Authorized Representative
Dated: December 13, 1994
--------------------------
<PAGE>
ANNEX D
TO
SCHEDULE NO 006
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.787 107.868
2 103.089 107.211
3 102.384 106.546
4 101.664 105.867
5 100.931 105.175
6 100.185 104.469
7 99.425 103.750
8 98.657 103.022
9 97.876 102.281
10 97.080 101.526
11 96.277 100.763
12 95.459 99.986
13 94.628 99.196
14 93.789 98.397
15 92.941 97.589
16 92.083 96.773
17 91.217 95.946
18 90.341 95.111
19 89.455 94.266
20 88.561 93.413
21 87.658 92.550
22 86.745 91.677
23 85.823 90.796
24 84.892 89.905
25 83.951 89.005
26 83.001 88.096
27 82.043 87.178
28 81.077 86.253
29 80.104 85.321
30 79.125 84.382
31 78.138 83.436
32 77.143 82.480
33 76.140 81.518
34 75.130 80.549
35 74.111 79.570
36 73.085 78.585
37 72.049 77.589
38 70.686 76.267
39 69.311 74.932
40 67.927 73.589
41 66.535 72.238
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
42 65.134 70.878
43 63.725 69.509
44 62.304 68.128
45 60.873 66.738
46 59.434 65.340
47 57.983 63.929
48 56.523 62.509
49 55.054 61.081
50 53.572 59.640
51 52.078 58.187
52 50.578 56.726
53 49.070 55.259
54 47.554 53.784
55 46.032 52.302
56 44.497 50.808
57 42.955 49.306 cont.
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,273,059.02
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:
-----------------------------
Title: Assistant Treasurer
--------------------------
Date: December 13, 1994
--------------------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of Dec. 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 / / Lessee's Initials:
----- -----
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 / / Lessee's Initials:
----- -----
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:
-----------------------------
Title: Assistant Treasurer
--------------------------
Date: December 13, 1994
--------------------------
<PAGE>
ELECTRONIC AND TEST EQUIPMENT SCHEDULE
SCHEDULE NO. 007
DATED THIS DECEMBER 13, 1994
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 13, 1994
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital Corporation National Semiconductor Corporation
2200 Powell Street, Suite 600 2900 Semiconductor Drive
Emeryville, CA 94608 Santa Clara, CA 95052
Capitalized terms not defined herein shall have the meanings
assigned to them in the Master Lease Agreement identified above
("Agreement"; said Agreement and this Schedule being collectively
referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire
and lease to Lessee the Equipment listed on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $15,634.76
2. Capitalized Lessor's Cost: $1,100,272.07
3. Basic Term Lease Rate Factor: Mons. 1-36 1.42099,
Mons. 37-72 1.73644
4. Daily Lease Rate Factor: Mons. 1-36 .04737, Mons.
37-72 .05788
5. Basic Term (No. of Months): 72
6. Basic Term Commencement Date: 01/03/95
7. Equipment Location: 333 Western Avenue, South
Portland, ME
8. Lessee Federal Tax ID No.: 952095071
9. Last Delivery Date:
10. First Termination Date: Sixty (60) months after
the Basic Term Commence Date.
C. Tax Benefits
Depreciation Deductions:
a. Depreciation Methods (check one):
X The 200% declining balance method, switching to
straight line method for the 1st taxable year for which
using the straight line method with respect to the adjusted
basis as of the beginning of such year will yield a larger
allowance; OR
____ The method determined by applying to the unadjusted
<PAGE>
basis the applicable percentages set forth in Section
168(b)(1) of the Code, as in effect prior to the adoption of
the Tax Reform Act of 1986.
b. Recovery Period: Five Years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Rent
1. Interim Rent. For the period from and including the
Lease Commencement Date to the Basic Term Commencement
Date ("Interim Period"), Lessee shall pay as rent
("Interim Rent") for each unit of Equipment, an amount
equal to (a) the product of the "Prime Rate" as
published in the "Money Rates" column of the Wall
Street Journal, Western Edition, on the business day
preceding the Acceptance Date, times the Capitalized
Lessor's Cost of such unit times the number of days in
the Interim Period, divided by (b) 360. Interim Rent
shall be on 12/13/94 .
2. Basic Term Rent. Commencing on 01/03/95
and on the same day of each month thereafter
(each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the
Capitalized Lessor's Cost of all Equipment on this
Schedule.
3. [Deleted]
E. Insurance
1. Public Liability: $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the
higher of the Stipulated Loss Value or the full
replacement cost of the Equipment.
F. Modifications and Additions to Lease
For purposes of this Schedule only, the Agreement is amended
as follows:
1. Section I(b) of the Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(b) The obligation of Lessor to purchase the Equipment
from Lessee and to lease the same to Lessee shall be
subject to receipt by Lessor, on or prior to the
earlier of the Lease Commencement Date or Last Delivery
Date therefor, of each of the following documents in
<PAGE>
form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B
to the applicable Schedule, transferring title to the
Equipment to Lessor, (iii) evidence of insurance which
complies with the requirements of Section X, and (iv)
such other documents as Lessor may reasonably request.
Simultaneously with the execution of the Bill of Sale,
Lessee shall also execute a Certificate of Acceptance,
in the form of Annex C to the applicable Schedule,
covering all of the Equipment described in the Bill of
Sale.
2. Section VI(a) shall be deleted and the following
substituted in its stead:
(a) The parties acknowledge that this is a
sale/leaseback transaction and the Equipment is in
Lessee's possession as of the Lease Commencement
Date.
3. Section VII of the Lease is amended by adding the
following as the third sentence in subsection (a):
Lessee agrees that upon return of the Equipment,
it will be in good condition and working order, giving
consideration to reasonable wear and tear and the age
of the Equipment. Lessee shall, if requested by Lessor
and if reasonably possible, obtain a service report
from the manufacturer attesting to such condition.
4. Each reference contained in this Agreement to:
(a) "Adverse Environmental Condition" shall refer to
(i) the existence or the continuation of the existence,
of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or
non-accidental Environmental Emission), of, or exposure
to, any substance, chemical, material, pollutant,
Contaminant, odor or audible noise or other release or
emission in, into or onto the environment (including,
without limitation, the air, ground, water or any
surface) at, in, by, from or related to any Equipment
from the time it leaves the Supplier's possession for
delivery to lessee until the time it is delivered to
Lessor, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of
materials in connection with the operation of any
Equipment by Lessee or Lessee's agents or (iii) the
violation, or alleged violation by Lessee of any
statutes, ordinances, orders, rules regulations,
permits or licenses of, by or from any governmental
authority, agency or court relating to environmental
matters connected with any Equipment.
<PAGE>
(b) "Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such
Person.
(c) "Contaminant" shall refer to those substances
which are regulated by or form the basis of liability
under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
("PBCs"), and radioactive substances, or other material
or substance which has in the past or could in the
future constitute a health, safety or environmental
hazard to any Person, property or natural resources.
(d) "Environmental Claim" shall refer to any
accusation, allegation, notice of violation, claim,
demand, abatement or other order on direction
(conditional or otherwise) by any governmental
authority or any Person for person injury (including
sickness, disease or death), tangible or intangible
property damage, damage to the environment or other
adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon
any Adverse Environmental Condition.
(e) "Environmental Emission" shall refer to any actual
or threatened release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement
of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property.
(f) "Environmental Law" shall mean any federal,
foreign, state or local law, rule or regulation
pertaining to the protection of the environment,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the
Resource Conversation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 1361 et seq.), and the Occupational Safety and
Health Act (19 U.S.C. section 651 et seq.), as these
laws have been amended or supplemented, and any
analogous foreign, federal, state or local statutes,
<PAGE>
and the regulation promulgated pursuant thereto.
(g) "Environmental Loss" shall mean any loss, cost,
damage, liability, deficiency, fine, penalty or expense
(including without limitation, reasonable attorneys'
fees, engineering and other professional or expert
fees), investigation, removal, cleanup and remedial
costs (voluntarily or involuntarily incurred) and
damages to, loss of the use of or decrease in value of
the Equipment arising out of or related to any Adverse
Environmental Condition.
(h) "Person" shall include any individual,
partnership, corporation, trust, unincorporated
organization, government or department or agency
thereof and any other entity.
5. Lessee shall fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Lessor and
its Affiliates, successors and assigns, directors, officers,
employees and agents from and against any Environmental
Claim or Environmental Loss. Defense and indemnification
under this Section is conditioned upon Lessor giving Lessee
timely written notice of any claim against which Lessor
wishes to be indemnified hereunder (unless Lessee learns of
any such claim from a third party, or unless Lessor does not
learn of such claim until such time as Lessor, acting
prudently on its own behalf, would be precluded from
defending by applicable law or rules), and Lessor giving
Lessee necessary and appropriate information and assistance
in the defense of same. Lessee's obligation to pay or
reimburse reasonable fees of counsel selected by Lessor to
defend any such claim shall be conditioned upon Lessee's
approval of such counsel, which approval shall not be
unreasonably withheld or delayed. Lessor shall provide
Lessee with periodic status reports on the defense or
settlement of such claim, upon Lessee's reasonable request,
and Lessor shall seek Lessee's consent to a proposed
settlement of a claim. If Lessee does not consent to a
proposed settlement of a claim, it shall advise Lessor of
its specific objections to the proposed settlement and shall
identify with particularity the terms, if any, upon which it
would consent to a settlement of the claim. If Lessor
settles any such claim without Lessee's consent and Lessee
objects to indemnifying Lessor for such settlement, then
Lessor and Lessee agree to submit the question of the
reasonableness of the settlement to binding arbitration. In
such arbitration, the arbitrator shall be jointly selected
by the parties (or, if they cannot agree on an arbitrator,
one shall be selected according to the rules of the American
Arbitration Association), and the arbitrator shall determine
to what extent, if any, Lessee shall indemnify Lessor for
both the settlement and any attorneys' fees incurred in
connection with the defense and settlement of the claim.
<PAGE>
The decision of the arbitrator shall be final and binding
upon both parties, and neither party shall seek recourse to
a court of law or other authorities to appeal for revision
of such decision or any other ruling of the arbitrator. The
cost of the arbitration shall be borne by both parties in
equal amounts.
6. ADDITIONS AND ALTERATIONS. Subject to the conditions
set out in this paragraph, Lessor hereby agrees, if so
requested by Lessee, to purchase alterations, additions or
Features for the Equipment and lease them to Lessee under
the same terms and conditions and with the same expiration
date of the Initial Term as the applicable Equipment
Schedule, and at a periodic Rental Payment that shall be
mutually satisfactory to Lessor and Lessee. Lessor's
obligation to purchase and lease such alterations, additions
or Features shall be conditioned on the following: no
default hereunder by Lessee shall have occurred and be
continuing; there shall have been no material adverse change
(as determined by Lessor in its reasonable exercise of
business judgment) in Lessee's financial condition or
business prospects from the Commencement Date of the
applicable Schedule; and such alterations, additions or
Features shall be acceptable for acquisition and lease under
Lessor's then standard business practices. Lessee may
obtain financing for such alterations, additions or Features
from third parties provided that (i) such alterations,
additions or Features can be undone or removed without
damaging or impairing the functionality, utility or value of
the Equipment as compared to Equipment on which such
alterations, additions or Features had never been installed,
and (ii) such financing shall not in any event create a
security interest in, or lien or other encumbrance on,
Lessor's Equipment.
<PAGE>
7. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier
terminated and provided further that Lessee is not in
default under the Lease or any other agreement between
Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS
BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO
LESSOR OR LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase all (but not less than all) of
the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which
is 60 months from the Basic Term Commencement
Date of the Schedule for a price equal to $370,736.67
(the "FMV Early Option Price"), plus all
applicable sales taxes on an AS IS BASIS. Lessor and
Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such
term is defined in Section XIX(b) hereof) of the
Equipment at the time the option is exercisable.
Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which is not
leased by Lessor to Lessee and which increases the
value of the Equipment and is not required or permitted
by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being
exercised, Lessor and Lessee shall adjust the purchase
price to reflect any addition to the price anticipated
to result from such improvement. (The purchase option
granted by this subsection shall be referred to herein
as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with
respect to the Equipment leased hereunder, then on the
Early Purchase Option Date, Lessee shall pay to Lessor
any Rent and other sums due and unpaid on the Early
Purchase Option Date and Lessee shall pay the FMV Early
Option Price, plus all applicable sales taxes, to
Lessor in cash.
Except as expressly modified hereby, all terms and provisions of
the Agreement shall remain in full force and effect. This
Schedule is not binding or effective with respect to the
Agreement or Equipment until executed on behalf of Lessor and
Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSEE: LESSOR:
NATIONAL SEMICONDUCTOR GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
By:______________________________ By:____________________________
<PAGE>
_________________________________ _________________________________
(Typed or printed name and title) (Typed or printed name and title)
<PAGE>
ADDENDUM NO, 01
TO SCHEDULE NO. 001,002,003,004,005,006,007&008
TO
MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
RETURN CONDITIONS - ELECTRONICS EQUIPMENT
In addition to the provisions provided for in Section XI of
the Lease, and provided that the Lessee has not elected its
option to purchase the Equipment, Lessee shall, at its expense:
(A) Upon the request of Lessor, Lessee shall no later than
180 days prior to the expiration or other termination of the
least provide:
1. a detailed inventory of the Equipment (including
the model and serial number of each major component thereof),
including, without limitation, all internal circuit boards,
module boards, and software features;
2. a complete and current set of all manuals, blue
prints, process flow diagrams, equipment configuration diagrams,
maintenance records and other data reasonably requested by Lessor
concerning the configuration and operation of the Equipment; and
(B) Upon the request of Lessor, Lessee shall, not later
than 120 days prior to the expiration or other termination of the
Lease make the Equipment available for on-site operational
inspection by persons designated by the Lessor who shall be duly
qualified to inspect the Equipment in its operational
environment.
(C) All Equipment shall be cleaned and treated with respect
to rust, corrosion and appearance in accordance with
manufacturer's recommendations and consistent with the best
practices of dealers in used equipment similar to the Equipment;
shall have no Lessee installed markings of labels which are not
necessary for the operation, maintenance or repair of the
Equipment, and shall be in compliance with all applicable
government laws, rules and regulations.
(D) The Equipment shall be de-installed and packed in
accordance with manufacturer's recommendations. Without
limitation, all internal fluids will either be drained and
disposed of or filled and secured in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations.
(E) The Equipment will be transported in accordance with
manufacturer's recommendations and applicable government laws,
rules and regulations to not more than one individual location
within the continental United States selected by Lessor.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL NATIONAL SEMICONDUCTOR
CORPORATION CORPORATION
<PAGE>
By:_________________________ By:_________________________
<PAGE>
ANNEX A
TO
SCHEDULE NO. 007
TO MASTER LEASE AGREEMENT
DATED AS OF
DESCRIPTION OF EQUIPMENT
<TABLE>
<CAPTION>
INVOICE INV.
VENDOR NAME # DATE EQUIPMENT COST
- ------------- --------- --------- ------------------------------------------------------------ ---------------
<S> <C> <C> <C> <C>
Applied 298232 & 3/30/94 Refurbished 5000 TEOS Three Chamber System S/N 5268 $ 1,072,500.00
Materials, 330809 Freight: $ 4,057.07
Inc.
Ebara Tech., 105212 4/13/94 (1) 40x20W/CLRS, 208V, 3/8" Exhpurge S/N 916651 $ 23,715.00
Inc.
INVOICE COST: $1,100,272.07
Initials: ------------------------------ -------------------------------
Lessor Lessee
</TABLE>
<PAGE>
ANNEX B
TO
SCHEDULE NO. 007
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
BILL OF SALE
National Semiconductor Corporation (the "Seller"), in
consideration of the sum of One Million One Hundred Thousand Two
Hundred Seventy-two Dollars and Seven Cents Dollars
($1,100,272.07) plus sales taxes in the amount of zero Dollars
($00.00) (if exemption from sales tax is claimed, an exemption
certificate must be furnished to Buyer herewith), paid by General
Electric Capital Corporation (the "Buyer"), receipt of which is
acknowledged, hereby grants, sells, assigns, transfers and
delivers to Buyer the equipment (the "Equipment") described in
the above schedule (said schedule and related lease being
collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or
supplier of the Equipment (the "Supplier"), including but not
limited to all warranties and representations. At Buyer's
request, Seller will cause Supplier to execute the attached
Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller
pursuant to the Lease. Seller represents and warrants to Buyer
that (1) Buyer will acquire by the terms of this Bill of Sale
good title to the Equipment free from all liens and encumbrances
whatsoever; (2) Seller has the right to sell the Equipment; and
(3) the Equipment has been delivered to Seller in good order and
condition, and conforms to the specifications, requirements and
standards applicable thereto; and (4) the equipment has been
accurately labeled, consistent with the requirements of 40 CFR
part 82 Subpart E, with respect to products manufactured with a
controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against
any and all federal, state, municipal and local license fees and
taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal
property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims,
actions and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the
Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
thirteenth day of December ,1994.
SELLER:
National Semiconductor
<PAGE>
Corporation
By:________________________
Title: Assistant Treasurer
------------------------
- ------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 007
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease
(collectively, the "Lease"), Lessee hereby certifies and warrants
that (a) all Equipment listed in the related Bill of Sale is in
good condition and appearance, installed (if applicable) and in
working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant
documents.
Lessee does further certify that as of the date hereof (i)
Lessee is not in default under the Lease; (ii) the
representations and warranties made by Lessee pursuant to or
under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for
the Equipment, if any.
DESCRIPTION OF EQUIPMENT
Type and
Manufacturer Serial Model of Number of Cost Per
Numbers Equipment Units Unit
See Annex A Attached hereto and Made A Part Hereof
________________________________
Authorized Representative
Dated: December 13,
----------------------
1994
- --------
<PAGE>
ANNEX D
TO
SCHEDULE NO 007
TO MASTER LEASE AGREEMENT
DATED AS OF December 13, 1994
STIPULATED LOSS AND TERMINATION VALUE TABLE*
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
1 103.787 107.868
2 103.089 107.211
3 102.384 106.546
4 101.664 105.867
5 100.931 105.175
6 100.185 104.469
7 99.425 103.750
8 98.657 103.022
9 97.876 102.281
10 97.080 101.526
11 96.277 100.763
12 95.459 99.986
13 94.628 99.196
14 93.789 98.397
15 92.941 97.589
16 92.083 96.773
17 91.217 95.946
18 90.341 95.111
19 89.455 94.266
20 88.561 93.413
21 87.658 92.550
22 86.745 91.677
23 85.823 90.796
24 84.892 89.905
25 83.951 89.005
26 83.001 88.096
27 82.043 87.178
28 81.077 86.253
29 80.104 85.321
30 79.125 84.382
31 78.138 83.436
32 77.143 82.480
33 76.140 81.518
34 75.130 80.549
35 74.111 79.570
36 73.085 78.585
37 72.049 77.589
38 70.686 76.267
39 69.311 74.932
40 67.927 73.589
41 66.535 72.238
42 65.134 70.878
43 63.725 69.509
44 62.304 68.128
45 60.873 66.738
<PAGE>
TERMINATION VALUE STIPULATED LOSS VALUE
RENTAL PERCENTAGE PERCENTAGE
- ------------- ---------------------- --------------------------
46 59.434 65.430
47 57.983 63.929
48 56.523 62.509
49 55.054 61.081
50 53.572 59.640
51 52.078 58.187
52 50.578 56.726
53 49.070 55.259
54 47.554 53.784
55 46.032 52.302
56 44.497 50.808
57 42.955 49.306 cont.
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
2200 Powell Street Suite 600
Emeryville, CA 94608
You are hereby authorized to pay the proceeds from our
sale to you of certain Equipment as evidenced on the attached
Bill of Sale to the following parties in the amount(s) designated
below.
National Semiconductor $1,100,272.07
Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052-8090
For reimbursement of funds
previously paid to various
vendors for equipment plus plus
attachments and accessories
including labor described on
Annex A attached hereto and
made a part hereof.
Very truly yours,
National Semiconductor Corporation
By:_____________________________
Title: Assistant Treasurer
------------------------------
- --------------------------
Date: December 13, 1994
-------------------------------
- --------------------------
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a
Master Lease Agreement dated as of December 13, 1994 (the
"Lease") by and between the undersigned as Lessee and General
Electric Capital Corporation as Lessor, Lessee hereby agrees to
one of the following options with respect to the payment of
personal property taxes on the Equipment described in Annex A to
the Lease, such agreement to be conclusively evidenced by the
initials and signature of an authorized agent of Lessee in the
appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the
appropriate box and initialing where indicated. Initial ONLY ONE
Choice of Option
OPTION 1 Lessee's Initials:
(Applicable in Jurisdictions Requiring Lessor to List Equipment):
Lessee agrees that it will not list any of such Equipment for
property tax purposes or report any property tax assessed against
such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay
such tax and will invoice Lessee for the expense. Upon receipt
of such invoice, Lessee will promptly reimburse Lessor for such
expense;
OPTION 2 Lessee's Initials:
(Applicable in Jurisdictions Permitting Lessee to List
Equipment): Lessee agrees that it will (a) list all such
Equipment, (b) report all property taxes assessed against such
Equipment and (c) pay all such taxes when due directly to the
appropriate taxing authority until Lessor shall otherwise direct
in writing.
LESSEE:
National Semiconductor Corporation
By:____________________________
Title: Assistant Treasurer
-------------------------------
- -------------------------
Date: December 13, 1994
--------------------------------
- -------------------------
<PAGE>
Exhibit 10.21
FAIRCHILD NSC DEFERRED COMPENSATION PLAN TRUST
(Established Effective March 11, 1997)
(Also Rabbi Trust)
<PAGE>
TABLE OF CONTENTS
Section 1. Establishment of Trust............................................1
Section 2. Payments to Plan Participants and Their Beneficiaries.............2
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When the Company Is Insolvent.........................3
Section 4. Payments to the Company...........................................4
Section 5. Investment Authority..............................................4
Section 6. Disposition of Income.............................................5
Section 7. Accounting by Trustee.............................................6
Section 8. Responsibility of Trustee.........................................6
Section 9. Compensation and Expenses of Trustee..............................7
Section 10. Resignation and Removal of Trustee................................8
Section 11. Appointment of Successor..........................................8
Section 12. Amendment or Termination..........................................9
Section 13. Miscellaneous.....................................................9
Section 14. Effective Date....................................................9
<PAGE>
FAIRCHILD NSC DEFERRED COMPENSATION PLAN TRUST
This Agreement is made effective as of the 11th day of March,
1997 by and between Fairchild Semiconductor Corporation, a Delaware
corporation (the "Company"), and H.M. Payson & Co., a Maine corporation (the
"Trustee").
WHEREAS, the Company has assumed sponsorship of the National
Semiconductor Corporation Deferred Compensation Plan (the "Plan"), a
nonqualified supplemental deferred compensation plan, as amended, effective
January 30, 1997, a true and complete copy of which is attached hereto as
Schedule A;
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plan with respect to the individuals
participating in such Plan;
WHEREAS, pursuant to its reserved powers under the Plan, the
Company wishes to establish a trust (the "Trust"), to which National
Semiconductor Corporation shall contribute on behalf of the Company, in
accordance with certain benefit deferrals made under or subject to the Plan,
which Trust assets shall be held therein, subject to the claims of the
Company's creditors in the event of the Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such
manner and at such times as specified in the Plan;
WHEREAS, the Company wishes to appoint the Trustee to serve as
trustee of the Trust, and the Trustee wishes to serve as trustee of the
Trust, pursuant to the terms hereof;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the status of
the Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended;
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of funds to assist
it in the meeting of its liabilities under the Plan;
WHEREAS, the Plan and this Trust may be assumed and continued
by FSC Semiconductor Corporation, a Delaware corporation (the corporate
parent of the Company), immediately after the assumption of the Plan and
establishment of this Trust by the Company;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) Pursuant to participating employee deferrals made under
or subject to the Plan, National Semiconductor Corporation shall deposit with
the Trustee a certain sum of cash, which shall become the initial principal
of the Trust to be held, administered and disposed of by the Trustee as
provided in this Trust Agreement.
1
<PAGE>
(b) The Trust hereby established is irrevocable.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter
J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the Company and shall be
used exclusively for the uses and purposes of Plan participants and general
creditors of the Company as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any benefit rights created under the
Plan and this Trust Agreement shall be mere unsecured contractual rights of
Plan participants and their beneficiaries against the Company. Any assets
held by the Trust will be subject to the claims of the Company's general
creditors under federal and state law in the event of Insolvency, as defined
in Section 3(a) herein.
(e) The Company, in its sole discretion, in accordance with
the Plan, may at any time, or from time to time, make additional deposits of
cash or other property in trust with the Trustee to augment the principal to
be held, administered and disposed of by the Trustee as provided in this
Trust agreement. Neither the Trustee nor any Plan participant or beneficiary
shall have any right to compel such additional deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries
(a) The Company, by action of the Committee designated as the
Plan Administrator under the Plan (the "Committee"), shall from time to time
deliver to the Trustee a schedule and any amendments thereto (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan, including both in kind and cash distributions), and
the time of commencement for payment of such amounts; provided, however, that
no such Payment Schedule shall be inconsistent with the terms of the
Stockholders Agreement (as hereinafter defined) or applicable law. The
Trustee shall be entitled to rely on any schedule signed by the Committee as
the Payment Schedule, or any amendment thereto. Except as otherwise provided
herein, the Trustee shall make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule as from time to time
in effect. Subject to the next succeeding sentence, the Trustee shall make
provision for the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company. Each Plan participant or
beneficiary shall be given the opportunity to elect whether to have taxes
withheld from any distribution to him or her from the Trust, and Trust assets
may be liquidated (if FSC Stock (as defined herein), then by such price and
method provided under the Stockholders Agreement referenced in Section 5
below) to provide for such withholding and payment of taxes. The foregoing
provisions of this paragraph (a) to the contrary notwithstanding,
2
<PAGE>
in the event that the Trust assets consist of FSC Stock, or any other assets
that the Trustee is unable to liquidate, then (i) the Payment Schedule must
provide for in-kind distributions and (ii) the Company shall be solely
responsible for the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by the
Committee, and any claim for such benefits shall be considered and reviewed
by the Committee under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of its decision to make payment
of benefits directly prior to the time amounts are payable to Plan
participants or their beneficiaries, and shall amend the Payment Schedule
accordingly. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with
the terms of the Plan, the Company shall make the balance of each such
payment as it falls due. The Trustee shall notify the Company if principal
and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
the Company Is Insolvent
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent. The
Company shall be considered "Insolvent" for purposes of this Trust Agreement
if (i) the Company is unable to pay its debts as they become due, or (ii) the
Company is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the Trust shall
be subject to claims of general creditors of the Company under federal and
state law as set forth below.
(1) The Board of Directors and the President of the
Company shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If the Trustee receives a notice in writing from any Director or
the President of the Company that the Company is Insolvent, the Trustee may
conclusively rely on such notice as a determination that the Company is
Insolvent. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee
shall determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is Insolvent, the Trustee
shall have no duty to inquire whether the Company is Insolvent. The Trustee
may in all events rely on such evidence concerning the Company's
3
<PAGE>
solvency as may be furnished to or obtained by the Trustee and that provides
the Trustee with a reasonable basis for making a determination concerning the
Company's solvency, including without limitation the advice of experts
retained by the Trustee pursuant to Section 8 hereof.
(3) If at any time the Trustee has determined that the
Company is Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the Trust to
cover the expenses of administering the Trust and for the benefit of the
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of the Company with respect to benefits due
under the Plan or otherwise.
(4) The Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(5) To determine whether the Company is Insolvent, as
provided in Parts (1) and (2) above, or not Insolvent (or no longer
Insolvent) as provided in Part (4) above, the Trustee may at any time retain
an independent public accounting firm to analyze whether the Company is
Insolvent, and the Trustee shall be entitled to conclusively rely on the
findings of such independent public accounting firm. If the Trustee at any
time retains an independent public accounting firm for this purpose, the
Company shall fully cooperate and provide such firm with any information that
it may reasonably request to perform its analysis.
(c) If the Trustee discontinues the payment of benefits from
the Trust pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their
beneficiaries under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance. The
Committee shall amend the Payment Schedule to reflect how payment should be
made of the amount remaining in this Trust.
Section 4. Payments to the Company
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to direct the
Trustee to return to the Company or to divert to others any of the Trust
assets before all payment of benefits have been made to Plan participants and
their beneficiaries pursuant to the terms of the Plan, as reflected in the
Payment Schedule.
Section 5. Investment Authority
It is understood and agreed that consistent with the purposes
of the Plan and the measurement of earnings designated by Plan Participants
under the Plan (as set forth on Schedule A hereto), the Trustee may invest
all of the assets of the Trust in securities or obligations of the Company or
an affiliate of the Company including an investment of all of the assets of
the Trust in
4
<PAGE>
common or preferred stock of FSC Semiconductor Corporation (the
"FSC Stock"), and FSC Stock may continue to be held or invested in by the
Trust even after the issuer ceases to be an affiliate of the Company). As
deposits are made to the Trust, the Trustee may apply each deposit (or such
portion thereof as instructed by the Company) promptly toward the purchase of
shares of FSC Stock, although the Trustee shall have discretion to invest
other than as directed by the Committee in order to fulfill the purposes of
the Plan. Except as otherwise provided herein, all rights associated with
assets of the Trust shall be exercised by the Trustee or any person(s)
designated by the Trustee; provided, however, such rights shall in no event
be exercisable by or rest with Plan participants. The Company shall have the
right, at any time and from time to time, in its sole discretion, to
substitute assets of equal fair market value (with respect to FSC Stock,
using the per share price determined in accordance with the Securities
Purchase and Holders Agreement (the "Stockholders Agreement") by and among
FSC Semiconductor Corporation, Sterling Holding Company, LLC, National
Semiconductor Corporation and certain Management Investors entered into on or
about the effective date of this Trust, unless such Stock is then
publicly-traded) for any asset held by the Trust; provided, however, that if
the Company exercises such right, or if FSC Semiconductor Corporation redeems
any FSC Stock held by the Trust or exchanges any FSC Stock held by the Trust
for debentures or any other securities, the Trustee shall have no obligation
to achieve the measurement of earnings designated by Plan participants and
shall not bear any responsibility for the performance of the assets
transferred to the Trust. This right is exercisable by the Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
If the Trustee becomes the holder of shares of FSC Stock, it
is authorized and directed to execute and deliver the Stockholders Agreement
and Registration Rights Agreement for Common Stock, and to perform its
obligations thereunder.
Notwithstanding the foregoing, the Committee shall direct the
Trustee how to respond to a tender offer or other discretionary offer to
purchase of any FSC Stock held by the Trust. The Committee may direct the
Trustee in the exercise of any voting rights appurtenant to any FSC Stock
held by the Trust; in the absence of such direction, the Trustee may abstain
from voting such FSC Stock.
Section 6. Disposition of Income
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
5
<PAGE>
Section 7. Accounting by Trustee
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to
be made, including such specific records as shall be agreed upon in writing
between the Company and the Trustee. Within 60 days following the close of
each calendar year and within 60 days after the removal or resignation of the
Trustee, the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year
or as of the date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee; Indemnification
(a) The duties and obligations of the Trustee shall be
limited to those expressly set forth in this Trust Agreement, notwithstanding
any reference herein to the Plan. The Trustee shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims,
provided, however, that the Trustee shall not be responsible for and shall
incur no liability to any person for any action taken pursuant to a
direction, request or approval given by the Company or the Committee or any
action taken by the Company or the Committee which is contemplated by, and in
conformity with, the terms of the Plan or this Trust and is given in writing.
The Trustee may rely and act upon any certificate, notice or direction of
the Committee, or of a person authorized to act on its behalf, or of the
Company which the Trustee believes to be genuine and to have been signed by
person or persons duly authorized to sign such certificate, notice or
direction. The Trustee shall be under no duty or obligation to review any
action to be taken, nor to recommend any action to be taken, at the direction
of the Company or the Committee.
(b) In the event of any dispute or question concerning the
administration of this Trust, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute or question. In any such action, it
shall be necessary to join as parties thereto only the Trustee, the Company
and (where relevant) the Committee; any judgment or decree entered in such
action shall be deemed conclusive upon all persons having or claiming any
interest in the Trust assets or the Plan. If the Trustee undertakes or
defends any litigation arising in connection with this Trust, the Company
agrees to indemnify the Trustee against the Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and expenses)
relating thereto and to be primarily liable for such payments.
(c) The Trustee may consult with legal counsel (who may also
be counsel for the Company generally) with respect to any question which may
arise under this Trust Agreement or the Plan. An opinion of such counsel
shall be full and complete protection with respect to any
6
<PAGE>
action taken, or omitted, by the Trustee hereunder in good faith in
accordance with the opinion of such counsel.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist
it in performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as an asset of
the Trust, the Trustee shall have no power to name a beneficiary of the
policy other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a successor
Trustee, or to loan to any person the proceeds of any borrowing against such
policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the Trustee shall not
have any power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of section
301.7701-2 of the Procedure and Administrative Regulations promulgated
pursuant to the Internal Revenue Code.
(g) Notwithstanding any other provision of this Trust
Agreement and to the fullest extent permitted by law, the Company agrees to
indemnify, defend and hold harmless the Trustee, and each of its officers,
managing directors, directors and agents, against any and all costs, damages,
liabilities and expenses incurred by or imposed upon it or them in connection
with any pending or threatened action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (including any arbitration or
other dispute resolution proceeding), in which it or they may be involved by
reason of (i) the Trustee being, or having been, a trustee under the Plan; or
(ii) any action or inaction by it or them in connection with this Trust
Agreement, other than acts of willful or reckless misconduct. Indemnified
expenses shall include, without limitation, attorneys' fees, costs of
investigation, expert witness fees, judgments, fines, amounts paid in
settlement, and other similar or related expenses reasonably incurred by the
Trustee in connection with the action, suit or proceeding.
(h) If fiduciary liability insurance is purchased by or on
behalf of the Company, the Trustee shall be added as a covered insured.
Section 9. Compensation and Expenses of Trustee
The Company agrees to pay the Trustee the compensation set
forth on Schedule B hereto (as the same may be adjusted from time to time by
written agreement of the Company and the Trustee), and to pay or promptly
reimburse all fees and expenses reasonably incurred by or on behalf of the
Trustee hereunder (including, without limitation, those arising under Section
8 and any indemnifiable expenses). If the Company has not paid any such
amount within 30 days of receipt of an invoice for payment, the Trustee may
pay such amount from the Trust. The Trustee is authorized to sell Trust
assets in order to fund such liabilities, subject however to any applicable
restrictions on sale of FSC Stock.
7
<PAGE>
Section 10. Resignation and Removal of Trustee
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 30 days after receipt of such notice
unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days'
written notice, or upon shorter written notice, accepted by the Trustee.
Such removal shall be only for cause, consisting of the Trustee's breach of a
material obligation under this Trust Agreement which breach the Trustee fails
or refuses to cure within a reasonable period after notice thereof by the
Company.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within
30 days after receipt of notice of resignation, removal or transfer, unless
the Company extends the time limit. Notwithstanding the foregoing, the
Trustee may reserve such money or other assets as it shall in its sole and
absolute discretion deem advisable for payment of its fees and all expenses,
and any balance of such reserve remaining after the payment of such charges
shall be paid over to the successor Trustee. Upon completion of the
succession and the rendering of its final accounts, the Trustee shall have no
further responsibilities whatsoever under this Trust Agreement or the Plan.
(d) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraph (a) or (b) of this section. If no
such appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All
expenses of the Trustee in connection with the proceeding shall be paid by
the Company or, if the Company fails to pay, allowed as administrative
expenses of the Trust.
Section 11. Appointment of Successor
(a) If the Trustee resigns, or is removed, in accordance with
Section 10(a) or (b) hereof, the Company may appoint any third party, such as
a bank trust department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee upon
resignation or removal. The appointment shall be effective when accepted in
writing by the new Trustee, who shall have all of the rights and powers of
the former Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or reasonably requested
by the Company or the successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing Trust assets,
subject to Sections 7 and 8 hereof. The successor Trustee shall not be
responsible for, and the Company shall indemnify and defend the successor
Trustee from, any claim or liability resulting from any action or inaction of
any prior Trustee or from any other past event, or any condition existing at
the time it becomes successor Trustee.
8
<PAGE>
Section 12. Amendment or Termination
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Plan or
shall make the Trust revocable after it has become irrevocable in accordance
with Section 1(b) hereof.
(b) Except in accordance with (c) below, the Trust shall not
terminate until the earlier of (i) the date on which Plan participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plan, or (ii) the date on which there are no assets remaining in the
Trust. Upon termination of the Trust, any assets remaining in the Trust shall
be returned to the Company.
(c) Upon written approval of the Plan participants entitled
to payment of benefits pursuant to the terms of the Plan, the Company may
terminate this Trust by providing written notice to the Trustee prior to the
time all benefit payments under the Plan have been made. The Trustee may
rely conclusively on a written notice from the Committee that the Plan
participants have so approved a termination of the Trust. All assets in the
Trust upon such a termination shall be returned to the Company.
Section 13. Miscellaneous
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of the State of Maine.
(d) Any communication to the Trustee, including any notice,
direction, designation, certification, order, instruction or objection, shall
be in writing and signed by the Company or another person authorized under
the Plan to give the communication. Any such communication shall be deemed
effective upon receipt or, if earlier, on the fourth business day after
mailing thereof by U.S. registered or certified mail, return receipt
requested, to H.M. Payson & Co., One Portland Square, P.O. Box 31, Portland,
ME 04112, Attn: President.
Section 14. Effective Date
The effective date of this Trust Agreement shall be March 11,
1997.
9
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Trust Agreement to be executed and delivered as of the effective date.
FAIRCHILD SEMICONDUCTOR H.M. PAYSON & CO.
CORPORATION acting solely as Trustee
By: ____________________________ By: ___________________________
Its: ____________________________ Its: __________________________
<PAGE>
SCHEDULE A
Plan Document
NATIONAL SEMICONDUCTOR CORPORATION
DEFERRED COMPENSATION PLAN
1. Purpose. This plan is the National Semiconductor
Corporation Deferred Compensation Plan (the "Plan"), established by National
Semiconductor Corporation (the "Company"), a Delaware corporation, to permit
certain employees ("Employees" or, singly, an "Employee") of the Memory,
Discrete and Logic divisions of the Company ("Fairchild") to defer certain
payments relating to the recapitalization of Fairchild, and to consolidate
and restate certain deferrals. This Plan is expressly conditional upon the
consummation of the reorganization of Fairchild pursuant to the Agreement and
Plan of Recapitalization (the "Recapitalization Agreement") between the
Company and Sterling Holding Company, LLC dated as of January 24, 1997 (the
"Transaction"), and will be null and void if the Transaction is not so
consummated. Subject to the preceding condition, the Plan shall be effective
as of the date it is adopted by the Company. It is understood that the
corporation that succeeds to the Fairchild business shall, as a part of the
consummation of the Transaction, assume this Plan and all liabilities of the
Company with respect to the payments due hereunder ("Plan Liabilities").
2. Eligible Employees. The group of Employees eligible to
participate in this Plan shall consist of each Employee (i) who is expected
to become an employee of the corporation that will succeed to the Fairchild
business pursuant to the Recapitalization Agreement, (ii) who has
participated in and deferred amounts under the Company's Key Employee
Incentive Plan ("KEIP"), who is a participant in the Discrete Retention Bonus
Plan ("Retention Bonus Plan") and/or the enhanced benefits under the Discrete
Performance Incentive Plan ("DPIP") -Executive Level as described in a
memorandum dated August 21, 1996, or who has entered into any one of the
letter agreements the Company issued concerning certain Employees' continued
employment with the Company and certain payments relating to the Transaction
(a "Transaction Letter"), and (iii) who is a member of a select group of
management or highly compensated employees of the Company who is selected to
participate in this Plan by the Retirement and Savings Program Administrative
Committee of the Company.
3. Deferrals. Each eligible Employee who is selected to
participate in the Plan may previously have made one or more irrevocable
elections to defer amounts that otherwise would have become payable pursuant
to KEIP prior to the Company's 1997 fiscal year (a "Prior Deferral"). In
addition, each eligible Employee may be electing, by completing his Schedule
of Deferrals, to defer amounts that otherwise would become payable pursuant
to KEIP for the Company's 1997 fiscal year, the Retention Bonus Plan, DPIP,
and/or a Transaction Letter (the term "Transaction Letter" shall also include
a certain Retention Agreement by and between the Company and Kirk P. Pond,
dated July 2, 1996, as amended) (the "Payments"). The Prior Deferrals and
the Payments that each Employee elects to defer (the "Deferrals") shall be
listed on the Employee's Schedule of Deferrals, each of which shall
<PAGE>
constitute a part of this Plan, a form of which is attached hereto as
Schedule A. Each Employee who participates in this Plan also shall elect by
so designating on his Schedule of Deferrals the proportion (if any) of each
Prior Deferral and of each Payment that shall be subject to deferral pursuant
to, and all of the terms and conditions of, this Plan. Further, each Employee
who participates in this Plan shall enter into a new written payment election
form, a new written beneficiary designation form, and a new measurement of
earnings form, which will set forth the terms and conditions of payment
applicable to the Deferrals as of the effective date of this Plan, which
elections, together with this Plan, shall restate the terms of each Prior
Deferral agreement, except those terms relating to the election to defer
amounts otherwise payable. Finally, each Employee, by executing his Schedule
of Deferrals, shall consent to the assumption of this Plan and the Plan
Liabilities by the corporation that succeeds to the Fairchild business and
shall release the Company from the Plan Liabilities when those liabilities
are assumed by that corporation in connection with the Transaction. A form
of Payment Election Form, a form of Designation of Beneficiary Form, and a
form of Measurement of Earnings Form are attached to this Plan as Schedules
B, C and D, respectively.
4. Administration. This Plan shall be administered by the
Retirement and Savings Program Administrative Committee of the Company, or
such other Committee as may be appointed from time to time ("Committee") by
the Company or, upon consummation of the Transaction, by the Committee
appointed by the corporation that succeeds to the Fairchild business, or by
such other committee as may be appointed from time to time by that
corporation or any other successor corporation that assumes this Plan (as
applicable, the "Employer"). The Committee may, from time to time, adopt or
rescind rules and regulations for carrying out the provisions and purposes of
this Plan. Subject to the express provisions of this Plan, the Committee
shall have authority and discretion to do everything necessary or appropriate
to administer this Plan, including, without limitation, interpreting the
provisions of this Plan and the election forms thereunder. All
determinations made by the Committee with respect to this Plan shall be
final, binding and conclusive. No member of the Committee shall be liable
for any act or omission of the Committee or any other member of the
Committee, or for any act or omission on his own part, in connection with the
administration of this Plan, unless it resulted from the member's own willful
misconduct.
5. Deferral Account. Each Employee's Deferral amounts shall
be credited to a separate deferred compensation account that shall be
established on the books of the Employer (the "Account"). Each Employee's
Deferrals shall be credited to the Account on the day following the effective
date of the Plan or such later date as such Deferrals otherwise would have
been payable to the Employee had he not elected to defer receipt of them.
The Account shall be used solely as a device for the measurement and
determination of the amount of the Deferrals and earnings to be paid to the
Employee in accordance with this Plan. The Account shall not constitute or be
treated as a trust fund of any kind, the Employer shall be under no
obligation to segregate any of its assets for purposes of the Account, and
all amounts at any time credited to the Account shall be and remain the sole
property of the Employer. No Employee shall have by virtue of his Account
any ownership interest or rights of any nature with respect to specific
assets of the Employer. Each Employee's rights shall be limited to those of
a recipient of an unfunded, unsecured promise to pay amounts in the future
and the Employee's position with respect to the amounts credited to his
Account shall be that of a general unsecured creditor of the Employer. The
amounts credited to each Employee's Account shall not be subject to seizure
for the payment of any debts or judgments against him, and the Employee shall
have
<PAGE>
no right to transfer, modify, anticipate, assign or encumber any of such
amounts. Any purported seizure, transfer, modification, anticipation,
assignment, encumbrance or transfer by operation of law shall be void. The
Employer may establish one or more trusts (a so-called "rabbi trust") to
provide a source for payments of Deferrals under this Plan but any assets
owned or held by any such trust shall at all times and for all purposes be
and remain unsegregated general assets that are the sole property of the
Employer, as described in this Section 5.
6. Earnings Credited to Account. Each Employee's Account
shall be credited with earnings and losses, gains and expenses in accordance
with the terms of his Measurement of Earnings Form, attached hereto as
Schedule D.
7. Payment of Account. The amount credited to each
Employee's Account shall be paid or commence to be paid to the Employee at
such time(s) and in accordance with such method(s) of payment as the Employee
and the Employer agree in a written election in substantially the form
attached hereto as Schedule B, which election shall be valid only if entered
into at least thirteen consecutive calendar months prior to the date when the
first payment is to be made. To the extent that the earnings and losses,
gains and expenses on any amounts payable were measured as though the amounts
were invested in Employer stock, those amounts shall be paid in Employer
stock, other than any fractional shares, and all other amounts payable shall
be paid in cash.
Notwithstanding the immediately preceding paragraph, the
total unpaid amount credited to an Employee's Account shall be paid as soon
as practicable in a single lump sum in cash upon the occurrence of any of the
following events:
a. a liquidation or dissolution of the Employer, any sale
of 50% or more of the equity interests in the Employer in a
single transaction or a related series of transactions, the
consummation of any consolidation or merger of the Employer
with or into another entity, or any sale of all or
substantially all the assets of the Employer, other than
the Transaction;
b. to the Employee's beneficiary, upon the death of the
Employee. "Beneficiary" shall mean the person(s) (which may
include an individual, a trust, a corporation, or any other
entity) the Employee designates as such in substantially the
form attached hereto as Schedule C or, if there is no such
designated beneficiary in existence at the time of the
Employee's death, the Employee's spouse or, if none, the
Employee's estate.
c. the one year anniversary of the lapse of the last of all
the restrictions on the transfer of securities under the
Securities Purchase and Holders Agreement by and among FSC
Semiconductor Corporation, Sterling Holding Company, LLC,
the Company, and certain management investors entered into
as of the date of closing of the Transaction, to the extent
all amounts credited to each Employee's Account have not
then been paid.
8. Hardship. The Employer, in its sole discretion, may
accelerate payments of amounts credited to an Employee's Account if requested
to do so. Such acceleration may occur only in the event of unforeseeable
financial emergency or severe hardship resulting from one or more recent
events
<PAGE>
beyond the control of the Employee and is limited to the amount deemed
reasonably necessary to satisfy the emergency or hardship. Any such
acceleration must be approved by the members of the Committee.
9. Taxes. Each Employee, by signing his Schedule of
Deferrals, agrees that, at the time the amount deferred is paid or, where
required, earned, the Employer may withhold from any compensation or other
payment made to the Employee the amount necessary, and/or that the Employee
(whether or not he is then an employee of the Employer) otherwise will make
appropriate arrangements with the Employer, for satisfaction of such tax
withholding as may be required under federal, state, or local law with
respect to such payment or deferred amount pursuant to any law or
governmental regulation, ruling or order, and the Employer shall pay when due
any taxes the Employer is required to pay with respect to the amount deferred.
10. No Alienation. Except as otherwise provided herein,
amounts credited to an Employee's Account shall not in any way be subject to
the debts or other obligations of the Employee and may not be voluntarily or
involuntarily sold, transferred or assigned by him.
11. No Promise of Continuation. Nothing in this Plan shall
confer upon any Employee the right to continue in the employment of the
Employer or to receive any, or any particular rate of, compensation for
services rendered as such; nor shall it interfere with or restrict in any way
the rights of the Employer to discharge any Employee at any time for any
reason whatsoever, with or without cause; nor shall it impose any obligation
on any Employee to remain in the employ of the Employer.
12. Amendment and Termination. The Employer may at any time
and from time to time modify, amend or terminate this Plan in any respect
effective as of any date the Employer determines; provided, that no such
action may adversely affect the rights of any Employee or beneficiary with
respect to any amount credited to the Employee's Account on or before the
date of such action.
13. Headings. The titles and headings used in this Plan are
included for convenience only and shall not be construed as in any way
affecting or modifying the text of this Plan, which text shall control.
14. Governing Law. This Plan, and all determinations made
and actions taken pursuant to the Plan, shall be governed by and construed in
accordance with the laws of the State of Maine, without giving effect to the
conflicts of laws provisions thereof.
15. Claims Procedure. Claims for benefits under the Plan
shall be filed in writing with the Committee. Written notice of the
Committee's disposition of a claim generally shall be furnished to the
claimant within 60 days after the application therefor is filed. However, if
special circumstances exist of which the Committee notifies the claimant
within such 60 day period, the Committee may extend such period to the extent
necessary, but in no event beyond 120 days after the claim is filed. In the
event the claim is denied, the reasons for the denial shall be specifically
set forth in writing, pertinent provisions of the Plan shall be cited and,
where appropriate, an explanation as to how the claimant can perfect the
claim will be provided. Any claimant who has been denied a benefit shall be
entitled, upon
<PAGE>
request to the Committee, to appeal the denial of his claim
within 60 days following the Committee's determination described in the
preceding sentence. Upon such appeal, the claimant, or his representative,
shall be entitled to examine pertinent documents, submit issues and comments
in writing to the Committee, and meet with the Committee. The Committee
shall review its decision and issue a final decision to the claimant in
writing, generally within 60 days following such appeal. However, if special
circumstances exist of which the Committee notifies the claimant within such
60 day period, the Committee may extend such period to the extent necessary,
but in no event beyond 120 days following such appeal.
<PAGE>
SCHEDULE A
DEFERRED COMPENSATION PLAN
Schedule of Deferrals
Employee:____________
Kind of Deferral Applicable? (Y/N) Deferral (% or $)
- ---------------- ----------------- -----------------
Prior KEIP Deferrals: No
1.
2.
Fiscal Year 1997 KEIP
Retention Bonus Plan
DPIP
Transaction Letter:
1. Stay-On Bonus
2. Participation Pool
3. Sales Bonus
Retention Agreement
By signing and dating this Schedule, I hereby consent, agree
and elect that all amounts of the Deferrals (including Prior Deferrals that
are deferred hereunder) shall be governed, as of the Plan's effective date,
by the terms of the Plan, which shall constitute a restatement of the Prior
Deferrals to the extent provided in Sections 1 and 3 of the Plan. I further
consent to the assumption of the Plan and the Plan Liabilities by the
corporation that succeeds to the Fairchild business and shall release the
Company from the Plan Liabilities when those liabilities are assumed by that
corporation in connection with the Transaction.
Date:_______________ ____________________________________
[Signature of Employee]
<PAGE>
Instruction: Return signed Schedule to Nancy Ludgus, NSSC M/S 16-135 by
February 21, 1997. Unless alternative arrangements are made in advance,
applicable social security and medicare taxes will be withheld from deferrals.
2
<PAGE>
SCHEDULE B
DEFERRED COMPENSATION PLAN
Payment Election Form
Employee:____________
I hereby elect to receive the amount credited to my deferred
compensation Account under the attached Deferred Compensation Plan as follows:
1. With respect to the amount credited to my Account the
earnings and losses, gains and expenses ("Earnings") on which are
determined as though the amounts were invested in either Class A
common or Series A cumulative compounding preferred stock of
the Employer:
a. I elect that in no event shall I receive a payment prior to
a date as soon as practicable following the date that any
such shares, if actually held, would be redeemed by the
Employer at that time either upon written request or in
accordance with other agreements or governing instruments to
which the Employer is then subject ("Agreements") to the
extent that at that time all restrictions on the transfer of
such shares imposed by law or under any Agreements have
lapsed.
b. In addition, I further elect to receive payment (you must
select one item from this list):
/ / i. In all events as stated in (a) above.
/ / ii. If later than the date stated in (a), as soon as
practicable following my termination of service with
the Employer and its affiliates for any reason;
/ / iii. If later than the date stated in (a), as soon as
practicable following the date I attain age .
/ / iv. Upon the later of (ii) or (iii) above.
/ / v. Upon the earlier of (ii) or (iii) above.
2. With respect to the amount credited to my Account that is
credited with Earnings based on the yield on the Federated U.S.
Trust Short-Term Government Money Market Fund, as reported by
that fund I elect to receive payment (you must select one item
from this list):
/ / i. As soon as practicable following the date that any
such shares, if actually held, would be redeemed by the
Employer at that time either upon written request or in
accordance with other agreements or governing
instruments to which the Employer is then subject
("Agreements") to the extent that at that time all
restrictions on the transfer of such shares imposed
by law or under any Agreements have lapsed.
3
<PAGE>
/ / ii. As soon as practicable following my termination
of service with the Employer and its affiliates for
any reason;
/ / iii. As soon as practicable following the date I
attain age.
/ / iv. Upon the latest of (i), (ii) or (iii) above.
/ / v. Upon the earliest of (i), (ii) or (iii) above.
Date:_______________ ______________________________________________
[Name of Employee]
4
<PAGE>
SCHEDULE C
DEFERRED COMPENSATION PLAN
Designation of Beneficiary Form
Employee:____________
If my death occurs before all amounts credited to my deferred
compensation Account under the attached Deferred Compensation Plan have been
distributed, I hereby designate the following person(s) as my primary and, if
desired, secondary beneficiary(ies) to receive such amounts, in the
percentages indicated, pursuant to Section 7 of the Plan. If no percentages
are indicated, the balance of my deferred compensation Account is to be
distributed in equal portions to each Beneficiary.
Primary Beneficiary(ies)
_______________% ________________________________________
Name
________________________________________
Address
________________________________________
Social Security Number
_______________% ________________________________________
Name
________________________________________
Address
________________________________________
Social Security Number
Secondary Beneficiary(ies)
_______________% ________________________________________
Name
________________________________________
Address
________________________________________
Social Security Number
_______________% ________________________________________
Name
________________________________________
Address
________________________________________
Social Security Number
Date:_______________ ________________________________________
[Signature of Employee]
Instruction: Return signed Schedule to Nancy Ludgus, NSSC M/S 16-135 by
February 21, 1997.
5
<PAGE>
SCHEDULE D
DEFERRED COMPENSATION PLAN
Measurement of Earnings Form
Employee:________________
I hereby elect, effective as of the date I become a
participant in the Plan, that 100% of my Account shall be credited with
interest set at the rate for long term A-rated corporate bonds, as reported
by the investment banking firm of Salomon Brothers Inc. of New York City (or
such other investment banking firm as the Committee hereafter may specify).
I hereby elect, effective as of the closing date of the
Transaction, to have earnings, losses, gains, and expenses of the amount
credited to my deferred compensation Account under the Plan measured as
follows:
___%/$___of my Account shall be credited with earnings,
losses, gains, and expenses as if said amount were invested
in shares of Series A Cumulative Compounding Preferred
Stock, par value $.01 per share, of the Employer
("Preferred Stock"), based on the price per share being
paid by Sterling Holding Company, LLC and the management
investors under Section 2.2(e) and (f) of the Recapitalization
Agreement, and remained invested in Preferred Stock at all times. If
any dividends are paid on Preferred Stock during the deferral period
under the Plan in cash or stock, my Account will be credited with the
amount of cash or the number of shares of Preferred Stock,
respectively, that would have been paid had I actually owned the
shares then credited to my Account. Any amount credited to the
Account as a result of cash dividends shall be credited thereafter
with earnings, losses, gains, and expenses based on the yield on the
Federated U.S. Trust Short-Term Government Money Market Fund, as
reported by that fund.
____%/$___of my Account shall be credited with earnings,
losses, gains, and expenses as if said amount were invested in shares
of Class A Common Stock, par value $.01 per share, of the Employer (
"Common Stock"), based on the price per share being paid by Sterling
Holding Company, LLC and the management investors under Section 2.2(e)
and (f) of the Recapitalization Agreement, and remained invested in
Common Stock at all times. If any dividends are paid on Common Stock
during the deferral period under the Plan in cash or stock, my Account
will be credited with the amount of cash or the number of shares of
Common Stock, respectively, that would have been paid had I actually
owned the shares then credited to my Account. Any amount credited to
the Account as a result of cash dividends shall be credited thereafter
with earnings, losses, gains, and expenses based on the yield on the
Federated U.S. Trust Short-Term Government Money Market Fund, as
reported by that fund.
___%/$___ of my Account shall be credited with earnings, losses,
gains, and expenses based on the yield on the Federated U.S. Trust
Short-Term Government Money Market Fund, as reported by that fund.
Date:_______________ ______________________________________________
[Name of Employee]
6
<PAGE>
First Amendment to
Fairchild NSC Deferred Compensation Plan
Effective January 30, 1997
WHEREAS, National Semiconductor Corporation established the
National Semiconductor Corporation Deferred Compensation Plan (the "Plan"),
effective January 30, 1997, pursuant to the terms of that certain Agreement
and Plan of Recapitalization, dated January 24, 1997; and
WHEREAS, Fairchild Semiconductor
Corporation (together with FSC Semiconductor Corporation, its parent
corporation, the "Employer") is assuming the Plan and establishing a grantor
trust in connection with the Plan as of March 10, 1997; and
WHEREAS, the Employer and certain Plan participants are
parties, with others, to a Securities Purchase and Holders Agreement, of even
date herewith, which agreement contains limitations that could, under certain
circumstances, conflict with the terms of the Plan and the obligations of the
trustee under the associated trust; and
WHEREAS, the Employer wishes to amend the Plan to cause the
Plan (including all schedules thereto) to conform to the limitations set
forth in the Securities Purchase and Holders Agreement; and
WHEREAS, the Employer has reserved the right to amend the
Plan, in its sole discretion, under Section 12 of the Plan document, subject
to certain limitations; and
WHEREAS, as of the date hereof, no amounts have been credited
to the account of any participant under the Plan, or associated trust.
NOW, THEREFORE, the Employer hereby amends the Plan, effective
January 30, 1997, as follows:
1. The second paragraph of Section 7 is hereby amended and
restated in its entirety to read as follows:
"Notwithstanding the immediately preceding paragraph, the
unpaid amount credited to an Employee's Account shall be paid upon the
occurrence of any of the following events as follows:
a. the total unpaid amount shall be paid as soon as practicable upon a
liquidation or dissolution of the Employer without an assumption and
continuation of the Plan by another entity; a payment in this event
shall be made in cash except that, to the extent an Employee has
elected pursuant to Section 6 that earnings and losses, gains and
expenses ("Earnings") be
7
<PAGE>
credited to his Account as if it were invested in shares of
stock of the Employer ("Shares"), the amount credited to the
Employee's Account shall be payable in cash only to the extent
such Shares if actually held would be redeemed, repurchased
or otherwise retired or cancelled for cash by the Employer at that
time either upon written request or in accordance with other
agreements or governing instruments to which the Employer is then
subject ("Redeemed"), and the remainder of the amount credited to the
Employee's Account, if any, shall be paid in such Shares.
b. in cash upon any sale of 50% or more of the equity interests in the
Employer's stock in a single transaction or a related series of
transactions, the consummation of any consolidation or merger of the
Employer with or into another entity, or any sale of all or
substantially all of the assets of the Employer, other than the
Transaction; a payment in this event shall be made as soon as
practicable except that, to the extent an Employee has elected
pursuant to Section 6 that Earnings be credited to his Account as if
it were invested in Shares, the portion of the Employee's Account so
credited shall be payable only to the extent such Shares, if actually
held, would be Redeemed in connection with any such transaction, and
the remainder of the amount credited to the Employee's Account shall
not be paid by reason of this clause (b) of Section 7;
c. in cash to the Employee's beneficiary upon the death of the Employee;
a payment in this event shall be made as soon as practicable except
that, to the extent the Employee has elected pursuant to Section 6
that Earnings be credited to his Account as if it were invested in
Shares, the portion of the Employee's Account so credited shall be
payable only to the extent such Shares, if actually held, would be
Redeemed, and the remainder of the amount credited to the Employee's
Account shall be paid as soon as practicable in cash each time any
additional portion of such Shares would be Redeemed;
d. the total unpaid amount credited to each Employee's Account shall be
paid in cash as soon as practicable upon the Employer's mandatory
redemption of its Series A Cumulative Compounding Preferred Stock, par
value $.01 per share, pursuant to the applicable provisions of the
Employer's Certificate of Incorporation.
2. The first sentence of Section 4 of the Plan is amended by
adding the following proviso at the end thereof:
"provided, however, that no member of the Committee may be a
participant in the Plan or an employee who may become
eligible to participate in the Plan."
8
<PAGE>
3. The election forms attached to the Plan as Schedules A,
B, C, and D shall be modified (and, if necessary, new forms shall be executed
by participants) as and to the extent necessary to reflect the foregoing
amendments. In particular, the last sentence of each of the first two
indented paragraphs on Schedule D is hereby amended and restated in its
entirety to read as follows:
"Any amount credited to the Account as a result of cash dividends shall be
credited thereafter with interest set at the rate of for long-term A-rated
corporate bonds, as reported by the investment banking firm of Salomon
Brothers Inc., of New York City (as reported by such other investment
banking firm as the Committee may specify in its sole discretion)."
IN WITNESS WHEREOF, this Amendment, having first been duly
adopted by the Board of Directors of the Employer, has been executed by a
duly authorized officer of the Employer on this 10th day of March, 1997, to
be effective as of January 30, 1997.
FAIRCHILD SEMICONDUCTOR CORPORATION
___________________________________
By:
Its:
9
<PAGE>
SCHEDULE B
Trustee Fees
START UP FEE $2,000.00 (payable at inception)
CUSTODY FEE $2,400.00 per annum (payable
(for Trust assets quarterly)
consisting of common or
preferred stock of FSC
Semiconductor
Corporation)
TRUST SERVICE FEE 8/10 percent for first $1 Million;
(for Trust assets other 6/10 percent for second $1 Million;
than common or preferred 4/10 percent for amounts greater
stock of FSC than $2 Million
Semiconductor
Corporation)
INCOME FEE 2% of income collected
(not including accrued
but unpaid dividends on
preferred stock of FSC
Semiconductor Corporation
paid upon termination of
Trust)
10
<PAGE>
Exhibit 10.23
FAIRCHILD BENEFIT RESTORATION PLAN
Effective March 10, 1997
<PAGE>
FAIRCHILD BENEFIT RESTORATION PLAN
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS.................................................1
ARTICLE II - ELIGIBILITY................................................3
2.01 Eligibility....................................................3
ARTICLE III - BENEFITS..................................................3
3.01 Benefits.......................................................3
3.02 Savings Restoration Amount.....................................3
3.03 Matching Restoration Amount....................................4
3.04 Participant's Account..........................................4
3.05 Allocation to Participant Account and Interest.................4
ARTICLE IV - DISTRIBUTION OF BENEFIT....................................4
4.01 Separation from Service........................................4
4.02 Hardship.......................................................5
ARTICLE V - ADMINISTRATION; AMENDMENTS AND TERMINATION;
RIGHTS AGAINST THE COMPANY..............................................5
5.01 Administration.................................................5
5.02 Amendment and Termination......................................5
5.03 Rights Against the Employer....................................6
ARTICLE VI - GENERAL AND MISCELLANEOUS..................................6
6.01 Spendthrift Clause.............................................6
6.02 Severability...................................................6
6.03 Construction of Plan...........................................6
6.04 Gender.........................................................6
6.05 Governing Law..................................................6
6.06 Unfunded Top Hat Plan..........................................7
6.07 Divestment for Cause...........................................7
i
<PAGE>
FAIRCHILD BENEFIT RESTORATION PLAN
THIS BENEFIT RESTORATION PLAN ("Plan") is adopted by FSC Semiconductor
Corporation, a corporation organized and existing under the laws of the State of
Delaware, (hereinafter referred to as the "Employer"), effective as of March 10,
1997.
WITNESSETH:
WHEREAS, the Employer desires to establish a benefit restoration income
plan for the exclusive benefit of certain participants in the Fairchild
Semiconductor Corporation Personal Savings and Retirement Plan (the "Retirement
Plan") so as to reward them for their loyal and faithful service to the Employer
and to aid them in increasing their economic security by providing additional
funds at retirement with respect to those benefits that are reduced because of
the limitations of Sections 401(a)(17), 402(g)(1), 401(k) and 415 of the
Internal Revenue Code of 1986, as amended; and
WHEREAS, the Employer has been authorized by its Board of Directors to adopt
this Plan in order to provide for the benefits specified; and
WHEREAS, this Plan is intended to be an unfunded plan primarily for the
benefit of a select group of management or highly compensated employees, so
as to fall within the "top-hat" plan exemption from most ERISA regulation;
NOW, THEREFORE, in consideration of the premises herein contained, it is
hereby declared as follows:
ARTICLE 1 -
DEFINITIONS
When used herein, the words and phrases defined hereinafter shall have the
following meaning unless a different meaning is clearly required by the context.
1.01 "Account" shall mean the Accounts and subaccounts established pursuant
to Section 3.05 of the Plan.
1.02 "Beneficiary" shall mean the person or persons last designated by a
Participant, by written notice filed with the Committee, to receive a Plan
benefit upon his or her death. In the event a Participant fails to designate a
person or persons as provided above or if no Beneficiary so designated survives
the Participant, then for all purposes of this Plan, the Beneficiary shall be
the person(s) designated as the beneficiaries by the Participant under the
Retirement Plan, and, if none, the Participant's estate. The Beneficiary of a
married Participant shall be the Participant's spouse unless the spouse consents
in writing to the Participant's designation of some other Beneficiary.
1.03 "Board" shall mean the Board of Directors of FSC Semiconductor
Corporation, or of any corporate successor or assign.
<PAGE>
1.04 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.05 "Committee" shall mean the Retirement Plan Administrative Committee,
as determined by the Board.
1.06 "Elected Contribution" shall mean the amount the Participant agrees to
defer under this Plan, pursuant to procedures established by the Committee, up
to the maximum permitted deferral pursuant to Section 3.02 of the Plan.
1.07 "Employer" shall mean FSC Semiconductor Corporation, or any successor
or assign that adopts or assumes the Plan. For purposes of all Plan Sections
except 5.02, the term "Employer" also shall refer to any subsidiary or affiliate
of FSC Semiconductor Corporation which adopts the Plan with the approval of FSC
Semiconductor Corporation.
1.08 "Interest" shall mean the rate for long-term A-rated corporate bonds,
reported by the investment banking firm of Salomon Brothers of New York City (or
such other investment banking firm as the Committee may specify) during the
first week of each Plan Year. The interest rate will be reset at the beginning
of each Plan Year.
1.09 "Matching Restoration Amount" shall mean the amount determined in
accordance with Section 3.03 of the Plan.
1.10 "Participant" shall mean an employee of the Employer participating in
the Retirement Plan, who satisfies the eligibility requirements of Section 2.01
of the Plan and such other conditions that are established from time to time by
the Committee.
1.11 "Plan" shall mean the Fairchild Benefit Restoration Plan, as set forth
in this document and as amended from time to time.
1.12 "Plan Year" shall mean the twelve consecutive month period ending on
the last day of May, which period also corresponds to the Employer's fiscal
year. The first Plan Year, however, shall be a short year beginning on the
effective date of the Plan and ending on the last day of the Employer's
then-current fiscal year.
1.13 "Retirement Plan" shall mean the Fairchild Personal Savings and
Retirement Plan, effective March 10, 1997 (as it may subsequently be amended).
1.14 "Savings Restoration Amount" shall mean the amount determined in
accordance with Section 3.02 of the Plan.
1.15 Capitalized Terms not defined herein shall have the meaning attributed
to them in the Retirement Plan.
2
<PAGE>
ARTICLE II -
ELIGIBILITY
2.01 Eligibility.
An employee of the Employer who is participating in the Retirement Plan
shall be eligible to participate in this Plan if the employee (i) elects a
salary deferral contribution to the Retirement Plan which equals or exceeds the
maximum such contribution that employee is legally permitted to make to the
Retirement Plan, and (ii) is an exempt status employee in job grade 9 or higher
with the Employer. An employee who is eligible for this Plan may participate in
the Plan by filing a written salary deferral contribution election under this
Plan in accordance with Section 3.02. Once an employee commences participation
in this Plan he shall remain a Participant until no account balance remains in
his name under the Plan, but the Participant shall not be eligible to elect
salary deferral contributions to this Plan for any Plan Year or portion thereof
for which (i) the Participant is not making the maximum permissible salary
deferral contribution under the Retirement Plan, or (ii) the Participant does
not satisfy the job grade and exempt status eligibility conditions stated above.
ARTICLE III -
BENEFITS
3.01 Benefits.
Except as provided in Sections 4.02 and 6.07, a Participant's benefit under
the Plan shall equal the final balance of the Participant's Accounts as
determined upon the date or event which triggers his right to a benefit
distribution. All benefit distributions shall be made in accordance with
Article IV.
3.02 Savings Restoration Amount.
The maximum Savings Restoration Amount from which an eligible Participant may
make an Elected Contribution for a Plan Year shall be equal to the difference,
if any, between (a) and (b) below:
(a) The maximum salary deferral contribution the Participant could make
under the Retirement Plan but for the statutory limits on compensation and
deferral amounts from time to time applicable to the Retirement Plan; less
(b) The amount of the Participant's actual deferral contribution allocated
to his credit under the Retirement Plan for the Plan Year.
The Participant's Savings Restoration Amount shall be equal to the
Participant's Elected Contribution for the Plan Year. The Participant's
election shall be made in writing, signed by the Participant and filed with the
Committee prior to its taking effect. Each deferral election shall apply only
to payroll periods commencing after the date the election is filed, and may be
changed
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by a superseding election of the Participant at any time. Any Participant who
suspends deferrals during a Plan Year may not resume such deferrals before the
next Plan Year.
3.03 Matching Restoration Amount.
The Matching Restoration Amount which shall be credited to a Participant's
Account for a Plan Year shall equal the difference between the matching
contribution actually credited to his account under the Retirement Plan for that
Plan Year (as adjusted, if necessary, for legal limits) and the matching
contribution that would have been made to his Retirement Plan account, based on
his aggregate salary deferrals for the Plan Year to the Retirement Plan and this
Plan, but for the statutory limits applicable to matching contributions under
the Retirement Plan.
3.04 Participant's Account.
The Committee shall create and maintain adequate records to reflect the
interest of each Participant in the Plan. Such records shall be in the form of
individual Accounts. When appropriate, a Participant's Account shall consist of
a savings restoration account, a matching restoration account, a transfer
account, and any other account or subaccounts deemed necessary by the Committee.
Such Accounts shall be kept for recordkeeping purposes only and shall not be
construed as providing for assets to be held in trust or escrow or any other
form of asset segregation for the Participant or Beneficiary to whom benefits
are to be paid pursuant to the terms of the Plan.
3.05 Allocation to Participant Account and Interest.
The Participant's Savings Restoration Amount shall be credited to the
Participant's Account as of the date such amount would have been paid to such
Participant as remuneration for services, and the Participant's Matching
Restoration Amount shall be credited to the Participant's Account as of the last
day of the Plan Year. The Participant's balance in his Accounts shall be
credited with Interest, in accordance with Section 1.08, at such times and in
such manner as determined in the sole discretion of the Committee.
ARTICLE IV -
DISTRIBUTION OF BENEFIT
4.01 Separation from Service.
In the event of a Participant's termination of employment with the Employer
for any reason (including retirement, disability or death), the final balance of
his Accounts shall be distributed in cash in a single sum not later than sixty
(60) days after the close of the Plan Year in which such termination occurs. If
the Participant elects to forfeit his contribution and Interest allocations for
that Plan Year, then his reduced benefit shall be accelerated and distributed
within sixty (60) days after such election is filed. Any Participant also may
elect an earlier distribution of his savings restoration account (the balance of
his Savings Restoration Amounts, adjusted for Interest and any prior
withdrawals) as of a date preselected by the Participant on a written
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election that becomes valid and effective on (but not before) the day after the
one-year anniversary of its making.
4.02 Hardship.
Payment of part or all of the benefits under this Plan may be accelerated
in the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not limited to,
illness or accident involving the Participant or any of the Participant's
dependents. All payments in case of hardship must be approved in advance by the
Committee. Hardship distributions may, upon request, include an amount
estimated to cover the income tax attributable to the hardship withdrawal.
ARTICLE V -
ADMINISTRATION; AMENDMENTS AND TERMINATION;
RIGHTS AGAINST THE COMPANY
5.01 Administration.
The Committee shall administer this Plan. With respect to the Plan, the
Committee shall have, and shall exercise and perform, in its sole discretion,
all the powers, rights, authorities and duties set forth in the Retirement Plan
with the same effect as if set forth in full herein with respect to this Plan
(but without modifying any of the substantive benefit rights of Participants set
forth in this Plan). Except as expressly set forth herein, any determination or
decision by the Committee shall be conclusive and binding on all persons who at
any time have or claim to have any interest whatever under this Plan.
5.02 Amendment and Termination.
The Employer, solely, and without the approval of the Committee or any
Participant or Beneficiary, shall have the right to amend this Plan at any time
and from time to time, by a written instrument adopted by the Employer's Board
of Directors or any delegatee of that Board for this purpose. Any such amendment
shall become effective upon the date stated therein. Notwithstanding the
foregoing, no amendment shall adversely affect the rights of any Participant or
Beneficiary who was previously receiving benefits under this Plan to continue to
receive such benefits or of all other Participants and Beneficiaries to receive
the benefits promised under the Plan immediately prior to the later of the
effective date or the date of adoption of the amendment.
The Employer has established this Plan with the bona fide intention and
expectation that it will deem it advisable to continue the Plan in effect
indefinitely. However, circumstances not now foreseen or circumstances beyond
the Employer's control may make it impossible or inadvisable to continue the
Plan. Therefore, the Employer, in its sole discretion, reserves the right to
terminate the Plan, in whole or in part, for any reason and at any time;
provided, however, that in such event any Participant or Beneficiary who was
receiving benefits under this Plan as of the termination date shall continue to
receive such benefits, and all other Participants and Beneficiaries shall
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remain entitled to receive the benefits promised under the Plan immediately
prior to the termination of the Plan.
5.03 Rights Against the Employer.
The establishment of this Plan shall not be construed as giving to any
Participant, Beneficiary, employee or any person whomsoever, any legal,
equitable or other rights against the Employer, or its officers, directors,
agents or shareholders, except as specifically provided for herein, or as giving
to any Participant or Beneficiary any equity or other interest in the assets,
business or shares of the Employer, or as giving any employee the right to be
retained in the employment of the Employer. All employees and Participants shall
be subject to discharge to the same extent that they would have been if this
Plan had never been adopted. Subject to the rights of the Employer to terminate
this Plan or any benefit hereunder, the rights of a Participant or Beneficiary
hereunder shall be solely those of an unsecured creditor of the Employer.
ARTICLE VI -
GENERAL AND MISCELLANEOUS
6.01 Spendthrift Clause.
No right, title or interest of any kind in the Plan shall be transferable
or assignable by any Participant or Beneficiary or any other person or be
subject to alienation, anticipation, encumbrance, garnishment, attachment,
execution or levy of any kind, whether voluntary or involuntary. Any attempt to
alienate, sell, transfer, assign, pledge, garnish, attach or otherwise encumber
or dispose of any interest in the Plan shall be void.
6.02 Severability.
In the event that any provision of this Plan shall be declared illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable, and this Plan
shall be construed and enforced as if said illegal or invalid provision had
never been inserted herein.
6.03 Construction of Plan.
The article and section headings and numbers are included only for
convenience of reference and are not to be taken as limiting or extending the
meaning of any of the terms and provisions of this Plan. Whenever appropriate,
words used in the singular shall include the plural or the plural may be read as
the singular.
6.04 Gender.
The personal pronoun of the masculine gender shall be understood to apply
to women as well as men, except where specific reference is made to one or the
other.
6.05 Governing Law.
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The validity and effect of this Plan and the rights and obligations of all
persons affected hereby shall be construed and determined in accordance with the
laws of the United States and the laws of the State of Delaware, without regard
to its otherwise applicable principles of conflicts of laws.
6.06 Unfunded Top Hat Plan.
It is the Employer's intention that this Plan be a Top Hat Plan, defined as
an unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
as provided in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended from time to time. The
Employer may establish and fund one or more trusts for the purpose of paying
some or all of the benefits promised to Participants and Beneficiaries under the
Plan; provided, however, that (i) any such trust(s) shall at all times be
subject to the claims of the Employer's general creditors in the event of the
insolvency or bankruptcy of the Employer, and (ii) notwithstanding the creation
or funding of any such trust(s), the Employer shall remain primarily liable for
any obligation hereunder. Notwithstanding the establishment of any such
trust(s), the Participants and Beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of any such trust or of the
Employer.
6.07 Divestment for Cause.
Notwithstanding any other provisions of this Plan to the contrary, the
right of any Participant, former Participant or Beneficiary of either to receive
or to have paid to any other person, or the right of any such other person to
receive any benefits attributable to the Matching Restoration Amount plus
Interest hereunder, shall be forfeited, if such Participant's employment with
the Employer is terminated because of or the Participant is discovered to have
engaged in fraud, embezzlement, dishonesty or criminality against (or adversely
affecting) the Employer, obtaining funds or property under false pretenses,
assisting a competitor without permission, interfering with the relationship of
the Employer or any subsidiary or affiliate thereof with a customer, breaching
any employment policies or employment-related agreement with the Employer, or
failing to carry out any significant task assigned to him as an Employee or to
otherwise perform his duties for the Employer. A Participant's or Beneficiary's
benefits shall be forfeited for any of the above reasons regardless of whether
such act is discovered prior to or subsequent to the Participant's termination
from the Employer or the payment of benefits under the Plan. If payment has been
made, such payment shall be restored to the Employer by the Participant or
Beneficiary.
IN WITNESS WHEREOF, this Benefit Restoration Plan, having been first duly
adopted, is hereby executed below by a duly authorized officer of the Employer
on this 10th day of March, 1997, to take effect as provided herein.
FSC SEMICONDUCTOR CORPORATION
By:
---------------------------------
Print Name:
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Its President
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Exhibit 10.24
FAIRCHILD INCENTIVE PROGRAM
Effective March 10, 1997
<PAGE>
FAIRCHILD INCENTIVE PROGRAM
TABLE OF CONTENTS
1. Objective and Structure......................................... 1
2. Definitions..................................................... 1
3. Effective Date.................................................. 3
4. Eligibility for Plan Participation.............................. 3
5. Target Awards and Incentive Levels.............................. 4
6. Plan Performance Goals.......................................... 4
7. Calculation and Payment of Awards............................... 5
8. Termination of Employment....................................... 6
9. Deferral of Awards.............................................. 7
10. Interpretations and Rule-Making................................. 8
11. Declaration of Incentives, Amendment, or Discontinuance......... 9
12. Miscellaneous................................................... 9
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FAIRCHILD INCENTIVE PROGRAM
1. Objective and Structure
The Fairchild Incentive Program (the "Plan") is designed to help retain
eligible employees and reward them for contributing to the success and
profitability of the Company. These objectives are accomplished by making
incentive awards under the Plan and providing Participants with a proprietary
interest in the growth and performance of the Company.
The Plan consists of two incentive plans combined in a single Plan
document. One plan is the Employee Incentive Plan (the "Incentive Plan"),
which is a non-ERISA cash bonus plan providing cash awards on an annual basis
to eligible employees based on measures of business performance for the year.
The other plan is a Select Employee Incentive Deferral Plan (the "Deferral
Plan"), primarily set forth in Article 9 below, which is an unfunded plan for
a select group of management or highly compensated employees, and hence is
substantially exempt from ERISA. The Deferral Plan provides an opportunity
for a limited number of management employees to defer receipt of their awards
under the Incentive Plan until termination of their employment or other
distributable event.
2. Definitions
Whenever used in the Plan, unless otherwise indicated, the following
terms shall have the respective meanings set forth below:
Award: The amount, if any, to be paid to a Plan Participant for a
particular Plan Period.
Award Date: The later of sixty (60) days after the end of the Company's
fiscal year, or fifteen (15) days after consolidated financial
statements for the fiscal year are completed and accepted by
the Company. As provided in Section 7, for certain
Participants an additional mid-year Award Date shall apply,
which shall be the later of sixty (60) days after the end
of the Company's second fiscal quarter or fifteen (15) days
after consolidated financial statements for the second fiscal
quarter are completed and accepted by the Company.
Base Salary: The annualized rate of base remuneration received by a
Participant from the Company as of the end of the Plan
Period, excluding all overtime, bonuses, fringe benefits
and extraordinary items.
Company: FSC Semiconductor Corporation ("FSC") or any corporate
successor assign which adopts or assumes the Plan. The term
"Company," as used herein, shall also refer to any subsidiary
or affiliate of FSC which adopts the Plan with the approval of
FSC.
Committee: The Compensation Committee appointed by the Board of Directors
of FSC.
<PAGE>
Disability: Inability to perform any services for the Company, combined
with eligibility to receive disability benefits under the
standards used by the Company's long-term disability benefit
plan.
Employee: An individual in the regular full-time or regular part-time
employ of the Company at any time during the Plan Period, not
including interim employees, college co-ops, summer interns, or
contract employees. Members of a collective bargaining unit
shall be considered Employees for purposes of the Plan only if
they satisfy the eligibility conditions of the preceding
sentence and their collective bargaining agreement provides
for their participation in the Plan. In addition, executive
employees who are eligible for the Company's 1997 Executive
Officer Incentive Plan Agreement, or any successor incentive
plan exclusively for Company executives or directors, shall not
be considered Employees under this Plan.
Extraordinary Events that, in the opinion of the Committee, are beyond the
Occurrence: significant influence of Plan Participants or the Company and
cause a significant unintended effect, positive or negative,
on Company operating and financial results.
Incentive The allocation of Participants into groups, by job grade or
Levels: management selection, as set forth in Article 5, for which
a single Target Award level applies within the group but
different Target Award levels may apply to different groups.
Employees of foreign Company locations shall be assigned
Incentive Levels by the Committee by tracking each of those
Employees to the respective job grade listed on Schedule A
which most closely matches the international job grade or
classification of that foreign Employee.
Participant: An Employee who at the time shall be a Participant in
accordance with the provisions of Article 4.
Performance Levels of performance shall be set in accordance with one
Goal: or more financial and strategic goals developed by the
Committee for the Company and, if desired by the
Committee, for any Division, department, or other business
unit or Employee group within the Company. For each goal,
four levels of performance shall be set, as follows:
(i) Threshold - The minimum acceptable level of performance
for which an Award may be earned on a particular Performance
Goal.
(ii) Target - Good performance, usually set at a level equal
to the Strategic Business Plan for financial measures,
reflecting a degree of difficulty which has a reasonable
probability of achievement.
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(iii) Stretch - Better than Target performance and reflecting
a degree of difficulty with only a moderate probability of
achievement.
(iv) Best Expected - Exceptional performance far exceeding
the Target level because of the great degree of difficult and
the limited (10%-20%) probability of achievement.
A Participant's Award shall be determined based on his or her
weighted average level of performance for all goals applicable
to that Participant for the Plan Period, in accordance with
Articles 6 and 7.
Plan Period: The fiscal year of the Company. Because the Plan takes effect
during the fourth quarter of the Company's 1997 fiscal year,
the initial Plan Period shall only take into account
prospective goals and performance for the balance of that
fiscal year.
Retirement: An Employee's permanent termination of employment with the
Company at a time when both (a) and (b) apply: (a) either
(i) age is at least sixty-five (65) or (ii) age is at least
fifty-five (55) and age plus years of service in the employ
of the Company totals sixty-five (65) or more, and (b) the
terminating employee has certified to the Committee that he
or she does not intend to engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base Salary, that is
earned by a Participant for achievement of the Target level
of performance.
3. Effective Date
The Plan will be conditioned upon, and effective commencing with, the
closing date of the reorganization of the three Fairchild divisions of
National Semiconductor Corporation (the Discrete, Logic and Memory
divisions) pursuant to the Agreement and Plan of Recapitalization between
Sterling Holding Company, LLC and National Semiconductor Corporation dated
January 31, 1997.
4. Eligibility for Plan Participation
A. All Employees shall participate in the Plan, subject to the further
provisions of this Article 4.
B. Participants will be notified of their participation and Incentive
Level during the first quarter of each Plan Period, or by the end of the first
quarter beginning after their Employee status commences, if later.
C. Newly hired Employees and newly promoted Employees shall be added as
Participants to the Plan during the Plan Period. Participants who are added to
the Plan during the Plan Period will receive a prorated Award based on relative
length of time of participation in the Plan for that Plan Period as an Employee.
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D. A Participant who is no longer an Employee on the last day of the Plan
Period will not be eligible for any Award for that Plan Period, except as
provided in Section 8 below.
5. Target Awards and Incentive Levels
A. Each Participant will be assigned an Incentive Level based upon his or
her job grade. A Target Award level, expressed as a percentage of Base Salary,
shall be assigned to each Incentive Level and that Target Award may vary for
each Incentive Level. The Incentive Levels, and corresponding Target Award
levels, shall be as listed from time to time on attached Schedule A, which is
hereby incorporated as part of the Plan.
B. In the event that a Participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether due to
promotion or demotion, his Award for the Plan Period will be based on the
Incentive Level attributable to his position as of the close of the Plan
Period, without regard to any other Incentive Levels under which he
participated during the Plan Period.
6. Plan Performance Goals
A. Performance Goals for each Plan Period, and associated weights, will
be established by the Committee from time to time and set forth in attached
Schedule B, which is hereby incorporated as part of the Plan. Participants in
defined business units may have the same Performance Goals, as determined by
the Committee. Each Performance Goal will have a defined Threshold, Target,
and Stretch level of performance. A Best Expected level of performance may
also be specified for one or more Performance Goals, subject to discretion of
the Committee. Performance Goals and their associated weights may change from
one Plan Period to another Plan Period to reflect the Company's operational
and strategic goals.
B. Awards may range between 0% and 200% of Target, except as provided in
Section 7.A(4) below. A scale showing the amount of the Participant's Award
relative to the Target Award at the various performance levels will be
developed for each Performance Goal. Performance Goals and associated Awards
(as a percent of the Target Award) will be set in a straight linear
relationship from Threshold to Target, and from Target to Stretch Performance
Goals, with Awards at the Stretch level being 150% of the Target Award,
Awards at the Target level being 100% of the Target Award, and Awards at the
Threshold level being 50% of the Target Award. The sum of the scoring on the
Performance Goals will determine the total performance level. Awards for
performance levels falling between or beyond the four Performance Goals will
be determined by interpolation or extrapolation on the same straight linear
basis. As a general rule, a Threshold performance level of 50% must be
achieved in order for any Award to be paid, but the Committee has the
discretion to make awards even if the Threshold level of performance is not
met. If performance in excess of the Stretch Performance Goal is achieved,
an award may be paid at the Best Expected Award level, which may be up to
200% of the Target Award, but payment of Awards beyond the Stretch level is
subject to Committee discretion.
C. Under exceptional circumstances, revisions to Performance Goals may be
made by the Committee during the Plan Period if the business environment or key
planning assumptions change significantly from conditions assumed at the start
of the Plan Period. In addition,
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Performance Goals, performance scales, and Awards may be adjusted in the
event the Committee determines there has been an Extraordinary Occurrence
during the Plan Period that (i) affects one or more Performance Goals;
(ii) unreasonably distorts Award calculations; or (iii) results in undue
benefit or detriment to the Plan Participants. Adjustments under the preceding
sentence will be made solely for the purpose of neutralizing the effect of the
Extraordinary Occurrence.
D. In the event that a Participant changes business units during the Plan
Period, the Participant's goals will be changed, if necessary, to reflect that
of the new business unit. The Participant's Award will then be prorated to
reflect both (i) the performance achieved by and Targets assigned to each
business unit the Participant belonged to during the Plan Period and (ii) the
length of time the Participant spent in each business unit during the Plan
Period.
7. Calculation and Payment of Awards
A. The maximum amount available to be paid for Awards for any group of
Participants or Incentive Level for the Plan Period shall be the applicable
Incentive Level times the Base Salary of every Participant in the group, unless
such maximum limit is adjusted by the Committee that Plan Year for that
particular group. Subject to this maximum amount, a Participant's Award will
be calculated as a percentage of Base Salary as follows:
1) The performance of the Participant's group is scored on an
overall basis at the end of the Plan Period, which score
determines what percentage of the Target Award for the group
becomes the Award level for each eligible Participant in the
group for that Plan Period.
2) For exceptional cases, Company management has discretion to
recommend adjustments to individual Awards based on significantly
greater or lesser individual contributions toward the group's
overall performance score, which adjustments shall require the
approval of the Committee. Without the approval of the
Committee, no individual Award may exceed 200% of the
Participant's Target Award amount.
3) Total Awards within the Participant's group may not exceed the
maximum limit set for Awards for that group for the Plan Period.
As a result, Award amounts may be adjusted to ensure conformance
with the maximum limit for the group.
B. Measurement of performance on Performance Goals for Participants will
be scored annually as approved by the President of FSC for each Plan Period
in a range between 0% and 200%, based on actual performance by the group,
Company, business unit or individual whose performance is measured for that
Performance Goal.
C. Awards will be paid in cash on or about the Award Date, except as
provided in Section F below.
D. Awards will reflect the Participant's Base Salary in effect at the end
of the Plan Period. Participants who take an unpaid leave of absence during the
Plan Period will have their
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Awards reduced on a prorata basis to reflect the unpaid leave of absence,
except as otherwise required by applicable law. A Participant on leave of
absence (whether paid or unpaid) on the Award Date will not receive the Award
until he or she returns from the leave of absence.
E. Awards shall be paid, if at all, as of an annual Award Date for
Participants in Grade 7 or above. For Participants in Grade 6 or below,
Awards shall be paid, if at all, on a semi-annual basis applying the
Performance Goals set forth in attached Schedule B for each respective
half of the Company's fiscal year, and such Awards are payable on or
about the corresponding mid-year and year-end Award Dates described
in Section 2.
F. All or any portion of the Award may be deferred under the Deferral
Plan if an eligible Participant makes a voluntary irrevocable election to
defer payment to a future date pursuant to the deferral terms contained in
Article 9.
8. Termination of Employment
A. Except as provided below, if a Participant's employment is terminated
before the end of a Plan Period, then for that Plan Period the Participant
will receive an Award (if any) reduced to reflect performance and Base Salary
for the Participant's actual period of employment as an Employee during that
Plan Period.
B. Unless local law or regulation provides otherwise, payments of Awards
made upon termination of employment by death, or on behalf of a Participant who
dies prior to receiving the Award, shall be made on the Award Date to:
(i) beneficiaries designated by the Participant; if none, then (ii) to a legal
representative of the Participant; if none, then (iii) to the person(s)
entitled thereto as determined by a court of competent jurisdiction. The
written consent of the Participant's spouse shall be required before the
designation of a beneficiary other than that spouse will be valid.
C. Notwithstanding any other provisions of the Plan to the contrary, the
right of a Participant to receive an Award under this Plan shall be forfeited
if the Participant's employment is terminated for cause. For purposes hereof,
the term "cause" shall mean that the Board of Directors of FSC (in the case of
the President or the Chief Financial Officer of FSC) or the President of FSC
(in all other cases) has determined, in its or his reasonable judgment, that
any one or more of the following has occurred:
(i) The Participant shall have committed an act or acts of
dishonesty or criminality that has had or could have an adverse effect on
the Company;
(ii) The Participant shall have committed any act of fraud,
embezzlement or misappropriation of funds;
(iii) The Participant shall have breached, in any material respect,
any of the provisions of any employment or other agreement between the
Participant and the Company;
(iv) A failure by the Participant to take or refrain from taking any
material action, which action Participant is then capable of taking or
refraining from taking, as
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specified in written directions of the Board of Directors or President of
FSC within a reasonable time following receipt by the Participant of such
written direction; or
(v) A failure by the Participant to perform his or her duties as an
employee of the Company as determined by the Board of Directors of FSC,
with the approval of the President of FSC.
A Participant's Award will be forfeited for any of the above reasons
regardless of whether such act is discovered prior to or subsequent to the
Participant's termination of employment or payment of an Award. If an Award
has been paid, such payment shall be repaid to the Company by the Participant.
9. Deferral of Awards
A. Except to the extent prohibited by applicable law and regulations,
an eligible Participant may elect to make an irrevocable election to defer
receipt of all or any portion of any Award in accordance with this Article 9.
Such Notice of Deferral Election must be completed at least thirty (30) days
before the end of the preceding Plan Period. Notices of Deferral Election
are not self-renewing and must be completed for each Plan Period if deferral
is desired for the applicable Plan Period. Only Participants in a grade 9
position or higher shall be eligible to defer an Award under this Article.
Thus, this Article 9 shall apply only to a select group of management or
highly compensated employees and shall constitute a separate, unfunded plan
for them. This separate plan shall be known as the Fairchild Select Employee
Incentive Deferral Plan. It shall consist of this Article 9 and such defined
terms and other provisions of the Fairchild Incentive Program document as are
necessary to understand and implement the operation and administration of
this Deferral Plan, which terms and provisions are incorporated by this
reference. Those provisions include, without limitation, Articles 1 through
4, Sections 7.E. and 8.C., and Articles 10 through 12.
B. For each Participant who elects deferral, the Company will establish
and maintain book entry accounts which will reflect the deferred Award and
any interest credited to the account. Each Participant with a deferred
account under this Article shall have an unsecured claim for benefits from
the Company, in accordance with Section 12.D. below.
C. For deferred Awards, Participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated corporate
bonds, as reported by the investment banking firm of Salomon Brothers Inc. of
New York City (or such other investment banking firm as the Committee may
specify) during the first week of each calendar year. The interest rate will
be reset at the beginning of each calendar year. Interest will begin to
accrue on the Award Date and will be credited each Award Date until the date
payment is actually made. If a Participant's Award is distributed at any
time other than on an Award Date, the Participant's account will be credited
with interest until the date of distribution.
D. A Participant will become entitled to receive any deferred Award,
plus credited interest thereon, as of the earlier of the Participant's
termination of employment for any reason (including, but not limited to,
Retirement, Disability, sale of the Participant's business unit, or death) or
a date pre-selected at least one year in advance by the Participant. The
account balance
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will be paid in a lump sum in the month following the earlier of the
Participant's termination of employment for any reason or the pre-selected
date, unless installment payments have been elected by the Participant. To
elect installment payments, a Participant who has previously elected to defer
an Award may irrevocably elect (such election to be valid only if made at
least twelve (12) months prior to the Participant's termination of employment
date) to have the balance of the deferred Award, plus credited interest
thereon, paid to the Participant in periodic annual installments over a
period of not more than ten (10) years. Payments shall commence in the month
following the Participant's termination of employment and shall be made
annually by the Company on a day each year that is within thirty (30) days of
the anniversary of the Participant's termination of employment. If a
Participant has requested installment payments and dies either before or
after distribution has begun, the unpaid balance will be paid in a lump sum
in the month following the Participant's death.
E. Payment of part or all of any deferred Awards may be accelerated in
the case of severe hardship, which shall mean an emergency or unexpected
situation in the Participant's financial affairs, including, but not limited
to, illness or accident involving the Participant or any of the Participant's
dependents. All payments in case of hardship must be specifically approved by
the Committee.
F. No Participant may borrow against his or her account.
G. Except to the extent prohibited by applicable law and regulations,
the Participant may designate a beneficiary to receive deferred Awards in the
event of the Participant's death. The Participant's beneficiary may be
changed without the consent of any prior beneficiary, except as follows:
In those jurisdictions where spouses are granted rights by law in a
Participant's earnings, if the Participant is married at the time of
designation, the Participant's spouse must consent to the beneficiary
designation and the Participant's spouse must consent to any change in
beneficiary. If no beneficiary is chosen or the beneficiary does not survive
the Participant, the Award will be paid in accordance with Section 8.C. of the
Plan or as otherwise required by applicable law or regulation.
10. Interpretations and Rule-Making
The Committee shall have the right and power to: (i) interpret the
provisions of the Plan, and resolve questions thereunder, which
interpretations and resolutions shall be final and conclusive; (ii) adopt
such rules and regulations with regard to the administration of the Plan as
it deems necessary in its discretion; and (iii) generally take all action to
equitably administer the operation of the Plan. The President of FSC may
delegate any of his rights and duties under this Plan to one or more other
officers of the Company.
11. Declaration of Incentives, Amendment, or Discontinuance
The Committee, acting within his sole discretion, may: (i) determine,
on or before an Award Date, not to make Awards to any or all Participants
for the related Plan Period; (ii) make any modification or amendment to the
Plan for any or all Participants; or (iii) discontinue the Plan for any or
all Participants. Any amendment or termination of the Plan shall be done by
written action of the Committee, approved by a majority of its members, but
the Plan also may be
8
<PAGE>
contractually assigned by the Company to, or assumed by, any successor
corporation without the need for action by the Committee.
12. Miscellaneous
A. Except as provided in Section 9.G., no right or interest in the Plan
is transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to continued
employment, and management reserves the right to dismiss Participants for any
reason whatsoever. Participation in one Plan Period does not guarantee the
Participant the right to participation in any subsequent Plan Period.
C. The Company reserves the right to deduct from all Awards under this
Plan any taxes or other amounts required by law to be withheld with respect to
Award payments. Unless prohibited by applicable law and regulations,
Participants and beneficiaries shall be given the opportunity to choose
whether to have income taxes withheld from their Award payments. Employment
taxes, such as FICA and FUTA, shall be deducted from Participants' deferred
accounts as of the close of each taxable year as and to the extent required
by applicable law and regulations.
D. This Plan constitutes an unfunded Plan of deferred compensation. As
such, any amounts payable hereunder will be paid out of the general corporate
assets of the Company and shall not be transferred into a trust or otherwise
set aside. All accounts under the Plan will be for bookkeeping purposes only
and shall not represent a claim against specific assets of the Company.
The Participant will be considered a general creditor of the Company and the
obligation of the Company is purely contractual and shall not be funded or
secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the Plan Period will be the responsibility of the Chief
Financial Officer of FSC.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Company's Board of Directors to adopt such other plans or
programs, or to make salary, bonus, incentive, or other payments, with respect
to compensation of officers or Employees, as in its sole judgment it may deem
proper.
G. No member of the Committee or the Company's Board of Directors, nor
any officer, employee, or agent of the Company, shall have any liability to
any person, firm, or corporation based on or arising out of this Plan.
9
<PAGE>
IN WITNESS WHEREOF, this Plan, having been first duly adopted, is hereby
executed below on this 10th day of March, 1997, to take effect as provided
herein.
FSC SEMICONDUCTOR
CORPORATION
By: _______________________________
Print Name:
President:
10
<PAGE>
FAIRCHILD INCENTIVE PROGRAM
Schedule A
Incentive and Target Award Levels (Non-Executive)
------------------------------------------------
Exempt Employee Non-Exempt Employee
Job Grade Target Award Level Target Award Level
--------- ------------------ ------------------
Grade 9 15% 8%
Grade 8 10% 8%
Grade 7 10% 8%
Grade 6 and below 8% 8%
Incentive and Target Award Levels (Executive)
---------------------------------------------
Job Grade Target Level
--------- ------------
3 35%
4A 30%
4 30%
5 20%
6 20%
<PAGE>
FAIRCHILD INCENTIVE PROGRAM
Schedule B
Performance Goals
I. For the Plan Period from the closing date to and including the Sunday
nearest preceding or on May 31, 1997 (the "First Plan Period"), the
Participant's incentive Award shall be calculated as follows:
(A) the Participant's Base Salary paid during the First Plan Period,
multiplied by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if FSC's EBITDA (as defined in the Securities Purchase and
Holders Agreement to be entered into by National, Sterling
Holding Company, LLC and the Management Investors) for the First
Plan Period equals $33.9 million multiplied by a fraction (the
"First Plan Period Fraction"), the numerator of which equals the
number of days in the First Plan Period and the denominator of
which equals the number of days in the fiscal quarter of the
Company and its predecessor which includes the First Plan Period
(the "Threshold Amount"),
(ii) 1.0, if FSC's EBITDA for the First Plan Period equals $35.4
million multiplied by the First Plan Period Fraction (the "Target
Amount"),
(iii) 1.5, if FSC's EBITDA for the First Plan Period equals $37.9
million multiplied by the First Plan Period Fraction (the
"Stretch Amount"), or
(iv) if FSC's EBITDA for the First Plan Period exceeds the Threshold
Amount but is less than the Target Amount, or exceeds the Target
Amount but is less than the Stretch Amount, such number between
.5 and 1.0 or between 1.0 and 1.5, respectively, as reflects, on
a proportionate basis, the relationship between actual EBITDA for
such period and such benchmarks.
If FSC's EBITDA for the First Period is less than the Threshold Amount or
greater than the Stretch Amount, the Committee may, as contemplated by the
Plan, make Awards, on a case by case basis, based on multipliers of less
than 0.5 or greater than 1.5 (but in no event greater than 2.0),
respectively. For purposes of this provision, the Best Expected Amount for
the First Plan Period shall equal $40.3 million of EBITDA multiplied by the
First Plan Period Fraction.
II. For the Plan Period from the Sunday nearest preceding or on May 31, 1997 to
the Sunday nearest preceding or on May 31, 1998 (the "1998 Fiscal Year"),
the Participant's incentive Award for a Participant in Grade 7 or above
shall be calculated as follows:
(A) the Participant's Base Salary paid during the 1998 Fiscal Year,
multiplied by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if FSC's EBITDA (as defined in the Securities Purchase and
Holders Agreement (the "Stockholders Agreement") to be entered
into by National, Sterling Holding Company, LLC and the
Management Investors) for the
2
<PAGE>
1998 Fiscal Year equals $144.5 million or, in the case of
persons who are Management Investors, as defined in the
Stockholders Agreement, $164.0 million (the "Threshold Amount"),
(ii) 1.0, if FSC's EBITDA for the 1998 Fiscal Year equals $174.2
million (the "Target Amount"),
(iii) 1.5, if FSC's EBITDA for the 1998 Fiscal Year equals $183.7
million (the "Stretch Amount"), or
(iv) if FSC's EBITDA for the 1998 Fiscal Year exceeds the Threshold
Amount but is less than the Target Amount, or exceeds the Target
Amount but is less than the Stretch Amount, such number between
.5 and 1.0 or between 1.0 and 1.5, respectively, as reflects, on
a proportionate basis, the relationship between actual EBITDA for
such period and such benchmarks.
If FSC's EBITDA for the 1998 Fiscal Year is less than the Threshold Amount
or greater than the Stretch Amount, the Committee may, as contemplated by
the Plan, make Awards on a case by case basis, based on multipliers of less
than 0.5 or greater than 1.5 (but in no event greater than 2.0),
respectively. For purposes of this provision, the Best Expected Amount for
the 1998 Fiscal Year shall equal $193.1 million of EBITDA.
III. For the semi-annual Plan Period from the Sunday nearest preceding or on May
31, 1997 to the Sunday nearest preceding or on November 30, 1997 (the
"First 1998 Period"), the incentive Award for a Participant in Grade 6 or
below shall be calculated as follows:
(A) the Participant's Base Salary paid during the First 1998 Period,
multiplied by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if FSC's EBITDA for the First 1998 Period equals $72.25
million (the "Threshold Amount"),
(ii) 1.0, if FSC's EBITDA for the First 1998 Period equals $80.1
million (the "Target Amount"),
(iii) 1.5, if FSC's EBITDA for the First 1998 Period equals $84.5
million (the "Stretch Amount"), or
(iv) if FSC's EBITDA for the First 1998 Period exceeds the Threshold
Amount but is less than the Target Amount, or exceeds the Target
Amount but is less than the Stretch Amount, such number between
0.5 and 1.0 or between 1.0 and 1.5, respectively, as reflects, on
a proportionate basis, the relationship between actual EBITDA for
such period and such benchmarks.
If FSC's EBITDA for the First 1998 Period is less than the Threshold Amount
or greater than the Stretch Amount, the Committee may, as contemplated by
the Plan, make Awards on a case by case basis, based on multipliers of less
than 0.5 or greater than 1.5 (but in no event greater than 2.0),
respectively. For purposes of this provision, the Best Expected Amount for
the First 1998 Period shall equal $88.8 million of EBITDA.
IV. For the semi-annual Plan Period from the Sunday nearest preceding or on
November 30, 1997 to the Sunday nearest preceding or on May 31, 1998 (the
"Second 1998 Period"), the incentive Award for a Participant in Grade 6 or
below shall be calculated as follows:
3
<PAGE>
(A) the Participant's Base Salary paid during the Second 1998 Period,
multiplied by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if FSC's EBITDA for the Second 1998 Period equals $72.25
million (the "Threshold Amount"),
(ii) 1.0, if FSC's EBITDA for the Second 1998 Period equals $94.1
million (the "Target Amount"),
(iii) 1.5 if FSC's EBITDA for the Second 1998 Period equals $99.2
million (the "Stretch Amount"), or
(iv) if FSC's EBITDA for the Second 1998 Period exceeds the Threshold
Amount but is less than the Target Amount, or exceeds the Target
Amount but is less than the Stretch Amount, such number between
0.5 and 1.0 or between 1.0 and 1.5, respectively, as reflects, on
a proportionate basis, the relationship between actual EBITDA for
such period and such benchmarks.
If FSC's EBITDA for the Second 1998 Period is less than the Threshold
Amount or greater than the Stretch Amount, the Committee may, as
contemplated by the Plan, make Awards on a case by case basis, based on
multipliers of less than 0.5 or greater than 1.5 (but in no event greater
than 2.0), respectively. For purposes of this provision, the Best Expected
Amount for the Second 1998 Period shall equal $104.3 million of EBITDA.
4
<PAGE>
Exhibit 10.25
FSC SEMICONDUCTOR CORPORATION
1997 EXECUTIVE OFFICER INCENTIVE PLAN AGREEMENT
ARTICLE I
Definitions
Whenever used in the Agreement, unless otherwise indicated, the following
terms shall have the respective meanings set forth below:
Agreement: This Executive Officer Incentive Plan Agreement.
Award: The amount to be paid to a Participant.
Award Date: The date set by the Committee for payment of Awards,
usually approximately forty days after the Company
makes public its consolidated financial statements for
the fiscal year.
Base Salary: Except where the context otherwise suggests, the
annualized base remuneration received by a Participant
from the Company at the end of the fiscal year.
Extraordinary items, including but not limited to prior
awards, relocation expenses, international assignment
allowances and tax adjustments, sales incentives,
amounts recognized as income from stock or stock
options, disability benefits (whether paid by the
Company or a third party) and all other remuneration
are excluded from the computation of Base Salary.
Company: FSC Semiconductor Corporation ("FSC"), a Delaware
corporation, and any other corporation in which FSC
controls directly or indirectly fifty percent (50%) or
more of the combined voting power of voting securities,
and which has adopted this Agreement.
Committee: A committee comprised of two or more directors of the
Company who are outside directors of the Company within
the meaning of Internal Revenue Code Section 162(m).
Disability: Inability to perform any services for the Company and
eligible to receive disability benefits under the
standards used by the Company's disability benefit plan
or any successor plan thereto.
Executive Officer: An officer of the Company who is (or would be, if FSC
had a publicly traded class of equity securities)
subject to the reporting and liability provisions of
Section 16 of the Securities and Exchange Act of 1934.
<PAGE>
Incentive Levels: The grouping of those Executive Officers designated as
Participants as set forth in Article 4.
Participant: An Executive Officer designated as a Participant in
accordance with the provisions of Article 3.
Performance Goal: Objective factors considered and scored to determine
the amount of a Participant's Award, which shall be
based on criteria established by the Committee.
Performance Goals will have four levels of performance
as follows:
(i) Threshold -- The minimum acceptable level of
performance.
(ii) Target -- Good performance, as established by the
Committee, reflecting a degree of difficulty which has
a reasonable probability of achievement.
(iii) Stretch -- Better than Target performance and
reflecting a degree of difficulty with only a moderate
probability of achievement.
(iv) Best Expected -- Exceptional performance far
exceeding the Target level because of the great degree
of difficulty and the limited probability of
achievement.
Retirement: Permanent termination of employment with the Company,
and (a) the Participant's age is either sixty-five (65)
or age is at least fifty-five (55) and age plus years
of service in the employ of the Company is sixty-five
(65) or more, and (b) the retiring Participant certifies
to the Chief Financial Officer of the Company that he or
she does not intend to engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base Salary,
that may be earned by a Participant for achievement of
the Target level of performance.
ARTICLE 2
Effective Date
The Agreement will become effective as of March 11, 1997, to be effective
for the Company's fiscal year 1998 ("Fiscal Year 1998"), as well as the
portion of the Company's fiscal year 1997 between the effective date and the
start of Fiscal Year 1998 (the "Initial Period"), and shall be automatically
renewed for each fiscal year thereafter unless modified by the Committee,
subject, however, to the provisions of any employment or other written
agreements between the
2
<PAGE>
Company and any Participant. For purposes of this Agreement, the Initial
Period will be treated as one fiscal year of the Company.
ARTICLE 3
Eligibility for Plan Participation
A. Set forth in Schedule 1 hereto are the names of those Executive
Officers who shall be Participants and their respective Incentive Levels.
B. Continued participation will be determined by the Committee annually
at the beginning of each fiscal year subsequent to the Company's 1998 fiscal
year.
C. Newly hired Executive Officers and persons who are promoted to
Executive Officers may be added as Participants to the Agreement by the
Committee during the fiscal year. Such Participants will receive a prorated
Award based on time of participation in the Agreement.
ARTICLE 4
Incentive Levels
In the event that a Participant changes positions during the Initial Period
or a subsequent fiscal year and the change results in a change in Incentive
Level, whether due to promotion or demotion, the Participant's Incentive Level
will be prorated to reflect the time spent in each position.
ARTICLE 5
Plan Performance Goals
A. Performance Goals and levels of performance for Fiscal Year 1998
(and the Initial Period) are set forth in Schedule 2. Performance Goals and
associated weights will be established by the Committee for all subsequent
periods. Each Performance Goal will have a defined Threshold, Target,
Stretch and Best Expected level of performance. Performance Goals and their
associated weights may change for subsequent fiscal years to reflect the
Company's operational and strategic goals.
B. Actual Award amounts may range between 0% and 200% of the Target
Award. A scale showing the amount of the Participant's Award relative to the
Target Award at the various performance levels have been and will, for future
fiscal years, be developed by the Committee, subject to the provisions of any
written employment agreements between the Company and Participants.
Performance levels and associated Awards (as a percentage of the Target
Award) have been and will be, for future fiscal years, set from Threshold to
Best Expected for the Performance Goals, with Awards ranging from 50% at the
Threshold level to 200% of the Target Award at the Best Expected level. A
Threshold performance level must be achieved in order for any Award to be
paid. Each Performance Goal will be scored at end of the fiscal year at a
rating
3
<PAGE>
from 0% to 200%. The sum of the scoring on the Performance Goals will
determine the total performance level for the year.
ARTICLE 6
Calculation and Payment of Awards
A. A Participant's Award will be calculated as a percentage of Base
Salary as follows:
1) The Participant's Incentive Level for the Initial Period and Fiscal
Year 1998 is set forth in Schedule 1 hereof and, for future periods,
shall be determined by the Committee prior to the beginning of the
fiscal year.
2) The performance of each Participant is scored at the end of the fiscal
year.
3) No one individual Award may exceed 200% of the Participant's Target
Award amount.
B. The Committee will score the performance of the Participants. Awards
will be paid only after the Committee certifies in writing that the ratings on
the Performance Goals have been attained.
C. Awards will be paid in cash on or about the Award Date.
D. Awards will reflect the Participant's Base Salary in effect at the end
of the fiscal year. Participants who take an unpaid leave of absence during the
fiscal year for good cause shown to the satisfaction of the Committee will have
their Awards prorated to reflect actual pay earned during the fiscal year.
E. All or any portion of the Award may be deferred if the Participant
makes a voluntary irrevocable election to defer payment to a future date
pursuant to the deferral terms contained in Article 8.
ARTICLE 7
Termination of Employment
A. Except as otherwise provided in this Article 7, if a Participant's
employment is terminated during the fiscal year, the Participant will receive an
Award reflecting the Participant's performance and actual period of full-time
employment during the fiscal year.
B. Unless local law or regulation provides otherwise, payments of Awards
made upon termination of employment by death shall be made on the Award Date
to: (a) beneficiaries designated by the Participant; if none, then (b) to a
legal representative of the Participant; if none, then (c) to the persons
entitled thereto as determined by a court of competent jurisdiction.
4
<PAGE>
C. The Committee reserves the right to reduce an Award to reflect a
Participant's absence from work during a fiscal year. A Participant absent on
the Award Date will not receive an Award until he or she returns from the
absence and satisfies the Committee the absence was for good cause shown.
D. The right of a Participant to receive an Award shall be forfeited if
the Participant's employment is terminated for cause. For purposes hereof, the
term "cause" shall mean that the Board of Directors of FSC (in the case of the
President or the Chief Financial Officer) or the President (in all other cases)
has determined, in its or his reasonable judgment, that any one or more of the
following has occurred:
(i) The Participant shall have committed an act or acts of dishonesty
or criminality that has had or could have an adverse effect on the Company;
(ii) The Participant shall have committed any act of fraud,
embezzlement or misappropriation of funds;
(iii) The Participant shall have breached, in any material
respect, any of the provisions of any employment or other agreement between
the Participant and the Company;
(iv) A failure by the Participant to take or refrain from taking any
material action, which action Participant is then capable of taking or
refraining from taking, as specified in written directions of the Board of
Directors of FSC or the President within a reasonable time following
receipt by the Participant of such written direction; or
(v) A failure by the Participant to perform his or her duties as an
employee of the Company as determined by the Board of Directors of FSC,
with the approval of the President.
A Participant's Award will be forfeited for any of the above reasons regardless
of whether such act is discovered prior to or subsequent to the Participant's
termination of employment or payment of an Award. If an Award has been paid,
such payment shall be repaid to the Company by the Participant.
ARTICLE 8
Deferral of Awards
A. If permitted by local law and regulations, a Participant is
entitled to make an irrevocable election (in the form of the Notice of
Election attached) to defer receipt of all or any portion of any Award. For
any fiscal year, the Notice of Election must be completed prior to thirty
(30) days before the end of the preceding fiscal year. Notices of Election
are not self-renewing and must be completed for each fiscal year if deferral
is desired for the applicable fiscal year.
5
<PAGE>
B. For each Participant who elects deferral, the Company will establish
and maintain book entry accounts which will reflect the deferred Award and any
interest credited to the account.
C. For deferred Awards, Participant deferred accounts will be credited
each Award Date with interest set at the rate for long-term A-rated corporate
bonds, as reported by the investment banking firm of Salomon Brothers Inc. of
New York City (or such other investment banking firm as the Committee may
specify) during the first week of each calendar year. The interest rate will be
reset at the beginning of each calendar year. Interest will begin to accrue on
the Award Date and will be credited each Award Date until the date payment is
actually made. If a Participant's Award is distributed at any time other than
on an Award Date, the Participant's account will be credited with interest until
the date of distribution.
D. Participants will not receive deferred Awards until the earlier of
termination of employment for any reason (including Retirement, Disability, or
death) or a date pre-selected by the Participant. The account balance will be
paid in a lump sum in the month following the earlier of termination of
employment for any reason or the pre-selected date unless installment payments
are permitted and have been elected as follows: Upon termination of employment
by reason of Retirement or Disability, a Participant who has previously elected
to defer an Award may irrevocably elect to have the balance of the deferred
Award plus accrued interest paid to the Participant in periodic, annual
installments over a period of ten (10) years. Payments shall commence or be
made annually on a day that is within thirty (30) days of the anniversary date
following the Participant's Retirement or Disability.
E. Subject to Section 7.D., if the Participant's employment is terminated
for any reason other than death, Disability or Retirement, the Participant will
be paid the entire account balance in a lump sum in the month after termination,
less any sums due the Company. If a Participant has requested installment
payments and dies either before or after distribution has begun, the unpaid
balance will be paid in a lump sum in the month following the Participant's
death, less any sums due the Company.
F. Payment of part or all of the deferred Award may be accelerated in the
case of severe hardship for good cause shown to the satisfaction of the
Committee, which shall mean an emergency or unexpected situation including, but
not limited to, illness or accident involving the Participant or any of the
Participant's dependents. All payments in case of hardship must be specifically
approved by the Committee.
G. No Participant may assign, pledge or borrow against his or her account
except as provided in this Agreement.
H. If permitted by local law and regulations, the Participant may
designate a beneficiary to receive deferred Awards in the event of the
Participant's death. The Participant's beneficiary may be changed without the
consent of any prior beneficiary except as follows: In those jurisdictions
where spouses are granted rights by law in a Participant's earnings, if the
Participant is married at the time of designation, the Participant's spouse must
consent to the beneficiary designation and any change in beneficiary. If no
beneficiary is chosen or the
6
<PAGE>
beneficiary does not survive the Participant, the Award account balance will
be paid in accordance with the terms of this Agreement or as otherwise
required by local law or regulation.
ARTICLE 9
Interpretations and Rule-Making
The Committee shall have the sole right and power to: (i) interpret the
provisions of the Agreement, and resolve questions thereunder, which
interpretations and resolutions shall be final and conclusive; (ii) adopt
such rules and regulations with regard to the administration of the Plan as
are consistent with the terms of the Plan and the Agreement; and (iii)
generally take all action to equitably administer the operation of the Plan
and this Agreement.
ARTICLE 10
Miscellaneous
A. Except as provided in Section 8.H, no right or interest in the Plan is
transferable or assignable except by will or the laws of descent and
distribution.
B. Participation in this Plan does not guarantee any right to continued
employment and the Committee and management reserve the right to dismiss
Participants for any reason whatsoever, subject to the terms of any written
employment agreement between the Company and a Participant. Participation in
one fiscal year does not guarantee a Participant the right to participation in
any subsequent fiscal year.
C. The Company reserves the right to deduct from all Awards under this
Plan any sums due the Company as well as any taxes or other amounts required by
law to be withheld with respect to Award payments.
D. This Plan constitutes an unfunded plan of deferred compensation. As
such, any amounts payable hereunder will be paid out of the general corporate
assets of the Company and shall not be transferred into a trust or otherwise
set aside. All accounts under the Plan will be for bookkeeping purposes only
and shall not represent a claim against specific assets of the Company. The
Participant will be considered a general creditor of the Company and the
obligation of the Company is purely contractual and shall not be funded or
secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the fiscal year will be the responsibility of the Chief
Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the right
or power of the Committee or the President, as applicable, to continue to
adopt such other plans or programs, or to make salary, bonus, incentive, or
other payments, with respect to compensation of Executive Officers, as in its
sole judgment it may deem proper.
7
<PAGE>
G. Except to the extent superseded by federal law, this Agreement shall
be construed in accordance with the laws of the State of Maine.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any person, firm
or corporation based on or arising out of this Agreement or the Plan.
I. Any dispute relating to or arising from this Agreement shall be
determined by binding arbitration by a three member panel chosen under the
auspices of the American Arbitration Association and acting pursuant to its
Commercial Rules, sitting in Portland, Maine. The panel may assess all fees,
costs and other expenses, including reasonable counsel fees, as the panel sees
fit. Notwithstanding the parties' election to use arbitration to resolve
disputes under this Agreement, nothing contained in that election shall preclude
either party, if the circumstances warrant, from seeking extraordinary relief,
such as injunction and attachment, from any court of competent jurisdiction in
Maine.
8
<PAGE>
SCHEDULE 1
to FSC Semiconductor Corporation
1997 Executive Officer Incentive Plan Agreement
<TABLE>
<CAPTION>
Name of Incentive Level/
Executive Officer Title Target Award*
- ------------------- --------------------------- ------------------
<S> <C> <C>
Kirk P. Pond President and CEO 70%
Joseph R. Martin Executive Vice President 40%
and Chief Financial Officer
W. Wayne Carlson Executive Vice President 40%
Jerry Baker Executive Vice President 40%
Darrell Mayeux Senior Vice President 40%
Daniel E. Boxer Senior Vice President, 40%
Chief Administrative Officer,
General Counsel and Secretary
</TABLE>
________________
* As a percentage of Base Salary.
9
<PAGE>
Schedule 2
I. For the period from the Closing to and including the Sunday nearest
preceding or on May 31, 1997 (the "First Period"), the Participant's annual
incentive award shall be calculated as follows:
(A) the Participant's base salary paid during the First Period, multiplied
by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if Fairchild's EBITDA (as defined in the Securities Purchase
and Holders Agreement to be entered into by National, Sterling
Holding Company, LLC and the Management Investors) for the First
Period equals $33.9 million multiplied by a fraction (the "First
Period Fraction"), the numerator of which equals the number of
days in the First Period and the denominator of which equals the
number of days in the fiscal quarter of the Company and its
predecessor which includes the First Period (the "Threshold
Amount"),
(ii) 1.0, if Fairchild's EBITDA for the First Period equals $35.4
million multiplied by the First Period Fraction (the "Target
Amount"),
(iii) 1.5, if Fairchild's EBITDA for the First Period equals $37.9
million multiplied by the First Period Fraction (the "Stretch
Amount"),
(iv) 2.0, if Fairchild's EBITDA for the First Period equals or exceeds
$40.3 million multiplied by the First Period Fraction (the "Best
Expected Amount"), or
(v) if the Company's EBITDA for the First Period exceeds the
Threshold Amount but is less than the Target Amount, or exceeds
the Target Amount but is less than the Stretch Amount, or exceeds
the Stretch Amount but is less than the Best Expected Amount,
such number between .5 and 1.0 or between 1.0 and 1.5 or between
1.5 and 2.0, respectively, as reflects, on a proportionate basis,
the relationship between actual EBITDA for such period and such
benchmarks,
If Fairchild's EBITDA for the First Period is less than the Threshold
Amount, no awards shall be paid with respect to the First Period.
II. For the period from the Sunday nearest preceding or on May 31, 1997 to the
Sunday nearest preceding or on May 31, 1998 (the "1998 Fiscal Year"), the
Participant's annual incentive award shall be calculated as follows:
(A) the Participant's base salary paid during the 1998 Fiscal Year,
multiplied by
(B) the Participant's Incentive Level, multiplied by
(C) (i) 0.5, if Fairchild's EBITDA (as defined in the Securities Purchase
and Holders Agreement to be entered into by National, Sterling
Holding Company, LLC and the Management Investors) for the 1998
Fiscal Year equals $164.0 million (the "Threshold Amount"),
(ii) 1.0, if Fairchild's EBITDA for the 1998 Fiscal Year equals $174.2
million (the "Target Amount"),
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(iii) 1.5, if Fairchild's EBITDA for the 1998 Fiscal Year equals
$183.7 million (the "Stretch Amount"),
(iv) 2.0, if Fairchild's EBITDA equals or exceeds $193.1 million (the
"Best Expected Amount"), or
(v) if the Company's EBITDA for the 1998 Fiscal Year exceeds the
Threshold Amount but is less than the Target Amount, or exceeds
the Target Amount but is less than the Stretch Amount, or exceeds
the Stretch Amount but is less than the Best Expected Amount,
such number between .5 and 1.0 or between 1.0 and 1.5 or between
1.5 and 2.0, respectively, as reflects, on a proportionate basis,
the relationship between actual EBITDA for such period and such
benchmarks.
If Fairchild's EBITDA for the 1998 Fiscal Year is less than the
Threshold Amount, no awards shall be paid hereunder with respect to the
1998 Fiscal Year.
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Exhibit 10.26
FSC SEMICONDUCTOR CORPORATION
STOCK OPTION PLAN
1. TITLE OF PLAN
The title of this Plan is the FSC Semiconductor Corporation Stock Option
Plan, hereinafter referred to as the "Plan".
2. PURPOSE
The Plan is intended to align the interests of eligible key employees of
FSC Semiconductor Corporation (hereinafter called the "Corporation") and its
subsidiaries (as hereinafter defined) with the interests of the stockholders
of the Corporation and to provide incentives for such employees to exert
maximum efforts for the success of the Corporation. By extending to key
employees the opportunity to acquire proprietary interests in the Corporation
and to participate in its success, the Plan may be expected to benefit the
Corporation and its stockholders by making it possible for the Corporation to
attract and retain the best available talent and by rewarding key management
and technical personnel for their part in increasing the value of the
Corporation's shares. It is further intended that options granted pursuant to
this Plan may be incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or may be options which are
not incentive stock options (hereafter called "non-qualified stock options").
3. STOCK SUBJECT TO THE PLAN
There will be reserved for issue upon the exercise of options granted
under the Plan 821,000 shares of the Corporation's Class A Common Stock, par
value $.01 per share, subject to adjustment as provided in Paragraph 8, which
may be unissued shares, reacquired shares, or shares bought on the market.
If any option which shall have been granted shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares shall
again become available for the purposes of the Plan (unless the Plan shall
have been terminated).
4. ADMINISTRATION
(a) The Plan shall be administered by a committee of the Board of
Directors of the Corporation (the "Committee"), consisting of two or more
members of the Board of Directors. The Committee shall be constituted to
permit the Plan to comply with (i) Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 ("Exchange Act") and any successor rule and
(ii) IRS regulations issued under Section 162(m) of the Code.
(b) The Committee shall have the plenary power, subject to and within
the limits of the express provisions of the Plan:
(i) To determine from time to time which of the eligible persons
shall be granted options under the Plan; the time or times (during the term
of the option) within which all
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or portions of each option may be exercised and the number of shares for
which an option or options shall be granted to each of them.
(ii) To construe and interpret the Plan and options granted under
it, and to establish, amend, and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, shall
generally determine all questions of policy and expediency that may arise,
may correct any defect, or supply any omission or reconcile any inconsistency
in the Plan or in any option agreement in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(iii) To prescribe the terms and provisions of each option
granted (which need not be identical).
(iv) To determine whether options granted shall be incentive stock
options or non-qualified stock options.
(v) To determine whether options granted shall be transferable
without consideration to immediate family members or family trusts for the
benefit of optionee's immediate family members. As used herein, "immediate
family" means parents, spouses and children.
(c) The Committee shall not have the authority to grant new options in
exchange for the cancellation of stock options previously granted under the
Plan or under any other stock option plan of the Corporation.
5. ELIGIBILITY
Options may be granted only to regular salaried officers and key
employees of the Corporation and its subsidiaries. The term "subsidiary"
corporation shall mean any corporation in which the Corporation controls,
directly or indirectly, fifty percent (50%) or more of the combined voting
power of all classes of stock. A director of the Corporation shall not be
eligible for the benefits of the Plan unless such person also is a regular
salaried employee of the Corporation and/or of any subsidiary.
6. TERMS OF OPTION AND OPTION AGREEMENTS
Each option shall be evidenced by a written Stock Option Agreement which
shall expressly identify the options as incentive stock options or as
non-qualified stock options, and be in such form and contain such provisions
as the Committee shall from time to time deem appropriate; provided, however,
that the grant of a non-qualified option pursuant to this Plan shall in no
way be construed to be an alternative to the right of an employee to purchase
stock pursuant to any incentive stock option heretofore or hereafter granted
to an employee pursuant to any stock option plans now in existence or
hereafter adopted by the Corporation. The terms of the option agreements
need not be identical, but each option agreement shall include, by
appropriate language, or be subject to, the substance of all of the
applicable following provisions:
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(a) The purchase price under each option granted shall be as determined
by the Committee but shall in no instance be less than 100% of fair market
value on the date of grant. The fair market value on the date of grant shall
be determined by the Committee; provided, however, that (i) if the Common
Stock is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System on the date the option is granted, fair
market value shall not be less than the average of the highest bid and lowest
asked prices of the Common Stock on such System on such date or the last date
preceding such date on which a sale was reported, or (ii) if the Common Stock
is admitted to trading on a national securities exchange on the date the
option is granted, fair market value shall not be less than the last sale
price reported for the Common Stock on such exchange on such date or, if
there was no sale on such date, the last date preceding such date on which a
sale was reported.
(b) The maximum term of any incentive stock option shall be ten years
from the date it was granted.
(c) The maximum term of any non-qualified stock option shall be ten
years and one day from the date it was granted.
(d) An option may not be exercised to any extent, either by the person
to whom it was granted or by the grantee's transferee, or by any person after
the grantee's death, unless the person to whom the option was granted has
remained in the continuous employ of the Corporation, or of a subsidiary, for
not less than six months from the date when the option was granted.
Otherwise, each option shall be exercisable as determined by the Committee.
(e) The Corporation, during the terms of options granted under the Plan,
at all times will keep available the number of shares of stock required to
satisfy such options.
(f) The Corporation will seek to obtain from each regulatory commission
or agency having jurisdiction such authority as may be required to issue and
sell shares of stock to satisfy such options. Inability of the Corporation
to obtain from any such regulatory commission or agency authority which
counsel for the Corporation deems necessary for the lawful issuance and sale
of its stock to satisfy such options shall relieve the Corporation from any
liability for failure to issue and sell stock to satisfy such options pending
the time when such authority is obtained or is obtainable.
(g) Neither a person to whom an option is granted nor his or her
transferee, legal representative, heir, legatee, or distributee, shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such option unless and until he or she has
exercised his or her option pursuant to the terms thereof.
(h) In order to be exempt under Section 16 of the Exchange Act and
qualify as an incentive stock option, the option may not be transferable
except by will or by the laws of descent or distribution, and during the
lifetime of the person to whom the option is granted he or she alone may
exercise it.
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(i) An option shall terminate and may not be exercised if the person to
whom it is granted ceases to be continuously employed by the Corporation, or
by a subsidiary of the Corporation, except (subject nevertheless to the last
sentence of this subparagraph (i)): (1) if the grantee's continuous
employment is terminated for any reason other than (i) retirement, (ii)
permanent disability, or (iii) death, the grantee or the grantee's transferee
may exercise the option to the extent that the grantee was entitled to
exercise such option at the date of such termination at any time within a
period of three (3) months following the date of such termination, or if the
grantee shall die within the period of three (3) months following the date of
such termination without having exercised such option, the option may be
exercised within a period of one year following the grantee's death by the
grantee's transferee or the person or persons to whom the grantee's rights
under the option pass by will or by the laws of descent or distribution but
only to the extent exercisable at the date of such termination; (2) if the
grantee's continuous employment is terminated by (i) retirement, (ii)
permanent disability, or (iii) death, the option may be exercised in
accordance with its terms and conditions at any time within a period of five
(5) years following the date of such termination by the grantee or the
grantee's transferee, or in the event of the grantee's death, by the persons
to whom the grantee's rights under the option shall pass by will or by the
laws of descent or distribution; (3) if the grantee's continuous employment
is terminated and within a period of ninety (90) days thereafter the grantee
is recalled to the active payroll, the Committee may reinstate any portion of
the option previously granted but not exercised. Nothing contained in this
subparagraph (i) is intended to extend the stated term of the option and in
no event may an option be exercised by anyone after the expiration of its
stated term.
(j) Option agreements evidencing incentive stock options shall contain
such terms and provisions as may be necessary to render them incentive stock
options pursuant to Section 422 of the Code and the income tax regulations
thereunder, as the same or any successor statute or regulations may at the
time be in effect.
(k) No employee shall receive during any one (1) year period options to
purchase more than 50,000 shares of Common Stock.
(l) Nothing in this Plan or in any option granted hereunder shall confer
on any optionee any right to continue in the employ of the Corporation or any
of its subsidiaries, or to interfere in any way with the right of the
Corporation or any of its subsidiaries to terminate his or her employment at
any time.
7. TIME OF GRANTING OPTION
The Committee shall determine the date on which options are granted under
the Plan. All options granted must be approved at a meeting of the Committee
by a majority of the members of the Committee. If an option agreement is not
executed by an employee and returned to the Corporation on or prior to ninety
(90) days after the date the option is granted (or such earlier date as the
Committee may specify), such option shall terminate.
8. ADJUSTMENT IN NUMBER OF SHARES AND IN OPTION PRICE
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In the event there is any change in the shares of the Corporation through
the declaration of stock dividends or a stock split-up, or through
recapitalization resulting in share split-ups, or combinations or exchanges
of shares, or otherwise, the number of shares available for option, as well
as the shares subject to any option and the option price thereof, shall be
appropriately adjusted by the Committee.
9. PAYMENT OF PURCHASE PRICE AND WITHHOLDING TAXES
(a) The purchase price for all shares purchased pursuant to options
exercised must be either paid in full in cash, or paid in full, with the
consent of the Committee, in Common Stock of the Corporation valued at fair
market value on the date of exercise or a combination of cash and Common
Stock. Fair market value on the date of exercise shall be determined in the
same manner as provided in Section 6(a) hereof.
(b) The Committee may permit the payment of all or part of the
applicable withholding taxes due upon exercise of an option, up to the
highest marginal rates then in effect, by the withholding of shares otherwise
issuable upon exercise of the option. Option shares withheld in payment of
such taxes shall be valued at the fair market value of the Corporation's
Common Stock on the date of exercise as provided in Section 6(a) hereof.
10. CHANGE IN CONTROL
In the event the Corporation is merged into or acquired by another entity
in a transaction involving a change in control, the Committee shall have the
complete authority and discretion, but not the obligation, to accelerate the
vesting of any outstanding options granted hereunder. The Committee may also
ask the Board of Directors to negotiate, as part of any agreement involving a
sale or merger of the Corporation, a sale of substantially all the
Corporation's assets or similar transaction, terms providing protection for
employees holding options under the Plan.
11. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN
(a) The Board may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. The Board will seek stockholder approval of
an amendment if determined to be required by or advisable under regulations
of the Securities and Exchange Commission or the Internal Revenue Service,
the rules of any stock exchange on which the Corporation's stock is listed,
or other applicable law or regulation.
(b) The Plan shall continue in effect until all shares available for
issuance under the Plan have been issued. An option may not be granted while
the Plan is suspended or after it is terminated.
(c) The rights and obligations under any options granted while the Plan
is in effect shall not be altered or impaired by amendment, suspension or
termination of the Plan, except with the consent of the person to whom the
option was granted or the grantee's transferee or the
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person to whom rights under an option shall have passed by will or by the
laws of descent and distribution.
12. EFFECTIVE DATE
The Plan shall become effective on March 10, 1997, subject to approval by
the stockholders of the Corporation within twelve (12) months after said date.
6
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Exhibit 10.27
EMPLOYMENT AGREEMENT
AGREEMENT, entered into as of the 11th day of March, 1997,
by and among FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware
corporation (the "Company"), FSC SEMICONDUCTOR CORPORATION, a
Delaware corporation ("Holdings"), Sterling Holding Company, LLC,
a Delaware limited liability company ("Sterling"), and KIRK P.
POND (the "Executive").
WHEREAS, the Company and Holdings have been established to
acquire the Logic, Memory and Discrete Products divisions of
National Semiconductor Corporation ("NSC") and certain of its
affiliates (the "NSC Parties") through a series of
recapitalization transactions (the "Recapitalization"), pursuant
to that certain Recapitalization Agreement dated as of January
24, 1997 (the "Recapitalization Agreement") between NSC and
Sterling and that certain Asset Purchase Agreement, dated as of
March 11, 1997, between NSC and the Company;
WHEREAS, the Company, Holdings and Sterling desire to
engage the full-time services of the Executive and the Executive
desires to be so employed by the Company, Holdings and Sterling;
and
WHEREAS, the operations of the Company and its affiliates
are a complex matter requiring direction and leadership in a
variety of areas; and the Company, Holdings and Sterling desire
to be assured that the unique and expert services of the
Executive will be available solely to the Company, Holdings and
Sterling, and that the Executive is willing and able to render
such services on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company, Holdings and Sterling desire to be
assured that the confidential information and goodwill of the
Company will be preserved for the exclusive benefit of the
Company.
NOW, THEREFORE, in consideration of such employment and the
mutual covenants and promises herein contained, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company, Holdings, Sterling
and the Executive agree as follows:
Section 1. EMPLOYMENT. Effective as of the Closing Date (as
defined in the Recapitalization Agreement), the Company, Holdings
and Sterling hereby employ the Executive and the Executive hereby
accepts such employment under and subject to the terms and
conditions hereinafter set forth. If the Recapitalization
Agreement shall be terminated pursuant to Section 9.1 thereof
prior to the Closing (as defined therein), this Agreement shall
terminate automatically and have no further force or effect.
Section 2. TERM. Unless sooner terminated as provided
herein, the term of employment under this Agreement shall begin
on the Closing Date and shall conclude on the third anniversary
thereof (the "Initial Term"). This Agreement shall be renewed
automatically for up to two (2) additional consecutive one year
terms (each a "Renewal Term") unless either the Company or the
Executive shall give to the other written notice not less than
ninety (90) days prior to the end of the Term or the first
Renewal Term that it or he does not wish to renew this Agreement.
The Initial Term and any Renewal Term are sometimes collectively
referred to herein as the "Term."
<PAGE>
Section 3. DUTIES. During the Term, the Executive shall
serve as Chairman of the Boards of Directors and as Chief
Executive Officer of the Company and Holdings. The Executive
also agrees to serve, without further compensation, as a director
and/or officer of one or more of the Company's affiliates if so
elected or appointed from time to time. The Executive shall be
subject to the direction of the Boards of Directors of the
Company and Holdings (collectively, the "Board"), and shall be
the Chief Executive Officer of the Company and Holdings, with
authority and responsibility for the management of the business
and affairs of the Company and its affiliates, subject to the
customary role of the Board of Directors of the Company. Subject
to the foregoing, Executive's duties shall include, without
limitation, the authority to retain or terminate the employment
of all Company personnel and, subject to budgets or general
compensation policies approved by the Board, to establish from
time to time the compensation and other incentives and terms of
employment of all Company personnel to be at least generally
consistent and competitive with those offered by NSC and
semiconductor industry standards in general. The Executive
hereby agrees to devote his full business time and best efforts
to the faithful performance of such duties and to the advancement
of the business and affairs of the Company and its affiliates
during the Term. The Executive shall not engage in any other
business activity during the Term, except as may be expressly
approved by the Board in writing. The Executive may not be
required to relocate his residence or his principal office during
the Term.
Section 4. SALARY COMPENSATION. In consideration of the
services rendered by the Executive under this Agreement, the
Company shall pay the Executive during the Term a base salary at
the rate of not less than Four Hundred and Fifty Thousand Dollars
($450,000) per year. The base salary shall be paid in such
installments and at such times as the Company pays its regularly
salaried executive employees. The base salary will be subject to
additional increases from time to time by the Board, in its sole
discretion. Such base salary, as from time to time increased, is
hereinafter referred to as the "Base Salary." The Base Salary
shall be prorated for any period of service during the Term which
covers less than one full calendar year.
Section 5. EXECUTIVE OFFICER INCENTIVE COMPENSATION. During
the Term, the Company from time to time shall award the Executive
annual incentive compensation ("Incentive Compensation") based
upon a target (the "Target") which shall be seventy percent (70%)
of the Base Salary, with the actual annual incentive award
ranging from zero to two hundred percent (200%) at the best
expected level, in accordance with the achievement of financial
or other performance measures contained in the Company's 1997
Executive Officer Incentive Plan (the "Plan"), in which Executive
shall participate during the Initial Term and any Renewal Term.
Any compensation paid to the Executive as Incentive Compensation
shall be in addition to the Base Salary and in lieu of
participation in any other incentive, profit sharing or bonus
compensation program (other than pursuant to any stock option
plan described in Section 6.02) which the Company or Holdings
maintains; provided that, to the extent determined by the Board
from time to time, the Executive will be eligible to participate
in profit sharing, incentive compensation or bonus compensation
programs adopted in the future.
Section 6. STOCK SUBSCRIPTION; STOCK OPTIONS.
6.01. STOCK SUBSCRIPTION. Pursuant to a Securities Purchase
and Holders Agreement (the "Stockholders Agreement") to be
executed at the Closing, the Executive (or, at Executive's
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option, one or more trusts for the benefit of Executive's
children or a "rabbi" or other trust for the benefit of Executive
(an "Executive Trust"), or a combination thereof) shall purchase
from Holdings and Holdings shall sell to the Executive (or, at
Executive's option, one or more Executive Trusts, or a
combination thereof) shares of Holdings stock for an aggregate
purchase price as provided therein; such purchase and sale to be
for securities of the same class or classes sold in connection
with the Recapitalization to (and at per share prices equal to
those paid by) NSC for such shares in connection with the
Recapitalization.
6.02. STOCK OPTIONS. Holdings shall establish and adopt a
stock option plan in substantially the form attached hereto as
Exhibit A, which allows the Board (based upon Executive's
recommendations) to grant, in the aggregate, options to purchase
up to five percent (5%) of all outstanding Holdings Common Stock
to employees designated by the Board who are not parties to the
Stockholders Agreement (or beneficiaries of a trust that is a
party to such agreement) and at a price equal to that paid per
share of Common Stock pursuant to said Agreement. Executive
shall also have the right to participate in a stock option plan
to be developed immediately prior to or after any public offering
of Holdings stock, which shall provide for options with exercise
prices equal to the fair market value of such stock on the date
such options are granted.
Section 7. BENEFITS. In addition to the compensation
detailed in Sections 4, 5 and 6 of this Agreement, the Executive
shall be entitled to the following additional benefits:
7.01. FRINGE BENEFITS. During the Term and subject to any
contribution therefor generally required of executives of the
Company, the Executive shall be eligible to participate in all
employee fringe benefit programs as are made available from time
to time to the Company's executive employees. The Executive
shall be eligible to participate in the Company's 401(k) and
deferred compensation plans to be adopted by the Company
consistent with such plans offered by NSC and pursuant to which
employees covered thereby may defer receipt of all or any portion
of any bonus amounts payable to them until future periods. The
Company will provide to the Executive health benefits comparable
to the health benefits provided to the Executive by NSC prior to
the Closing Date. Such participation in fringe benefit and
option programs shall be subject to (i) the terms of the
applicable plan documents, and (ii) generally applicable Company
policies. In addition, during the Term, the Company will pay or
reimburse the Executive for reasonable medical examination costs
incurred as part of the Executive's routine annual physical
examination, and will pay the cost of maintaining the existing
life insurance policy provided by NSC to the Executive, and will
obtain and maintain in effect for Executive's benefit a
supplemental long-term disability insurance policy with coverage
of not less than eighty percent (80%) of Executive's base salary
for the duration of such disability.
7.02. PAID VACATION. The Executive shall be entitled to five
(5) weeks paid vacation per calendar year, such vacation to
extend for such periods and to be taken at such intervals as
shall be appropriate and consistent with the proper performance
of the Executive's duties hereunder. Any unused, accrued vacation
time may be accumulated from one calendar year to another,
provided that the Executive shall not be entitled to compensation
for vacation time not taken.
7.03. REIMBURSEMENT OF EXPENSES. The Company shall reimburse
the Executive for all reasonable expenses actually incurred by
the Executive in connection with the business affairs of the
Company and the performance of his duties hereunder. The
Executive shall comply with such
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reasonable limitations and reporting requirements with respect to such
expenses as the Board may establish from time to time.
7.04. FINANCIAL PLANNING. During the Term, the Company will
reimburse the Executive for up to Six Thousand ($6,000) Dollars
per year in connection with tax planning, tax return preparation
and financial planning for the Executive.
7.05. SEVERANCE. In the event Executive's employment
hereunder is terminated by the Company pursuant to Section 8.04
or by the Executive pursuant to Section 8.05, the Company will
pay the Executive, his designated beneficiary or, if none, his
estate, monthly severance payments during the greater of
twenty-four (24) months and the remaining number of months in the
Initial Term, each to be payable on the last day of the month
commencing with the end of the month following the date of
termination, and shall continue throughout such period, at the
Company's expense, all of Executive's benefits then being made
available or to which Executive is entitled pursuant to Section 7
hereof. Each monthly severance payment shall be in an amount
equal to the sum of (a) one-twelfth (1/12) of the Base Salary in
effect at the time of such termination plus (b) one-twelfth
(1/12) of 100% of what the Executive's Target Award would have
been for the Company's fiscal year preceding the year in which
the termination occurs, irrespective of what the Executive's
actual award was under the Plan for such preceding fiscal year
(annualized in the event such prior fiscal year was a partial
year for purposes of the Plan). In addition, in the event of any
such termination, all options theretofore granted to Executive as
contemplated by Section 6.02 shall become fully and immediately
exercisable notwithstanding any limitations contained in the Plan
or any Stock Option Agreement.
Section 8. TERMINATION. Notwithstanding the provisions of
Section 2, this Agreement shall terminate prior to the expiration
of the Term under the following circumstances:
8.01. DEATH. In the event of the Executive's death during
the Term, the Executive's employment hereunder shall immediately
and automatically terminate and the Company shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate (i) any Base Salary
earned but unpaid through the date of his death plus (ii) at the
times the Company pays its Incentive Compensation in accordance
with its general payroll policies, an amount equal to that
portion of the Incentive Compensation which but for his death
would have been earned by the Executive during the year of his
death (pro-rated based on the number of days during the year of
his death during which the Executive was employed by the Company
on an active status).
8.02. DISABILITY.
8.02.1 The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature
and, as a result, is unable to perform substantially all of
his duties and responsibilities hereunder for an aggregate
of one hundred eighty (180) days during any period of three
hundred and sixty (360) consecutive calendar days.
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8.02.2 The Board may designate another employee to act
in the Executive's place during any period of the
Executive's disability. Notwithstanding any such
designation, the Executive shall continue to receive the
Base Salary in accordance with Section 4 and to receive
benefits in accordance with Section 7.01, to the extent
permitted by the then-current terms of the applicable
benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan
maintained by the Company or until the termination of his
employment, whichever shall first occur.
8.02.3 While receiving disability income payments
under any disability income plan maintained by the Company,
the Executive shall not be entitled to receive any Base
Salary under Section 4 or Incentive Compensation (except as
otherwise provided under the Plan), but shall continue to
participate in the Company's benefit plans in accordance
with Section 7.01 and the terms of such plans, until the
termination of his employment. In the event the Executive's
employment hereunder is terminated pursuant to Section
8.02.1, the Company shall pay or provide to the Executive,
at the times the Company pays its executives bonuses in
accordance with its general payroll policies, an amount
equal to that portion of the Incentive Compensation which
but for his disability would have been earned by the
Executive during the year in which his employment was
terminated under Section 8.02.1 (pro-rated based on the
number of days during which the Executive was employed by
the Company on an active status during the year of such
termination).
Section 8.03. BY THE COMPANY FOR CAUSE. The employment of
the Executive may be terminated at any time by the Company for
Cause (as defined below), effective immediately, in accordance
with the provisions of Section 8.03.2. For purposes hereof, the
term "Cause" shall mean the Board has determined, in its
reasonable judgment, that any one or more of the following has
occurred:
(i) The Executive shall have committed an act or acts
of dishonesty or criminality that, in the good faith
judgment of the Board of Directors of the Company, has had
or could have an adverse effect on the Company;
(ii) The Executive shall have committed any act of
fraud, embezzlement or misappropriation of funds; or
(iii) The Executive shall have breached, in any
material respect, any of the provisions of this Agreement.
Upon the effectiveness of the termination of the Executive's
termination for Cause, the Company, Holdings and Sterling shall
have no further obligation or liability to the Executive relating
to the Executive's employment hereunder, or the termination
thereof, other than for Base Salary earned but unpaid through the
date of termination.
Section 8.04. BY THE COMPANY WITHOUT CAUSE. The Company may
terminate the Executive's employment at any time during the
Initial Term or any Renewal Term without Cause. In the event of
such termination, then the Company shall pay or provide the
Executive (i) Base Salary to the extent earned but unpaid through
the date of termination plus (ii) the amounts specified in
Section 7.05 plus (iii) at the times the Company pays its
executives incentive
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compensation in accordance with its general payroll policies, an amount
which, but for such termination, the Executive would have earned during the
year of such termination (pro-rated based on the number of days during the
year of such termination of employment for which the Executive was employed
by the Company on an active status). In addition, any options granted to the
Executive as contemplated by Section 6.02 shall become fully exercisable upon
any such termination, notwithstanding any limitations in the Plan or any
Stock Option Agreement. Any nonrenewal of this Agreement by the Company shall
in no event be deemed a termination for purposes of this Section 8.04.
Section 8.05. BY THE EXECUTIVE FOR GOOD REASON. The
Executive may terminate his employment at any time during the
Initial Term or any Renewal Term for Good Reason. In the event
of such termination, the Company shall pay or provide the
Executive (i) base salary to the extent earned but unpaid through
the date of termination plus (ii) the amount and benefits
specified in Section 7.05 plus (iii) at the times the Company
pays its executives incentive compensation in accordance with its
general payroll policies, an amount which, but for such
termination, the Executive would have earned during the year of
such termination (pro-rated based on the number of days during
the year of such termination of employment for which the
Executive was employed by the Company on an active status). In
addition, any options granted to the Executive as contemplated by
Section 6.02 shall become fully and immediately exercisable upon
any such termination, notwithstanding any limitations in the plan
or any stock option agreement. Any non-renewal of this Agreement
by the Company shall in no event be deemed a termination for
purposes of this Section 8.05. As used herein, "Good Reason"
means a resignation by the Executive within thirty (30) days
after (i) any demotion or similar change in his duties such that
the duties assigned to the Executive after such change represent
a substantial decrease in the Executive's duties,
responsibilities or status with the Company relative to such
duties, responsibilities or status as of the date hereof, (ii)
being required to relocate his principal place of employment
beyond a ten (10) mile radius of Portland, Maine or (iii) the
Company's failure to make any payment or to provide any benefit
due to the Executive hereunder when due; provided, however, that
the Executive shall have first given the Company written notice
of such failure to pay or provide and such failure to pay or
provide shall not have been cured within ten (10) days after the
receipt by the Company of such notice.
Section 8.06. BY THE EXECUTIVE WITHOUT GOOD REASON. The
Executive may terminate his employment hereunder at any time upon
ninety (90) days' notice to the Company. In the event of
termination of the Executive pursuant to this Section 8.06, the
Board may elect to waive the period of notice, or any portion
thereof, and, unless the Board so elects, the Company will pay
the Executive his Base Salary for the notice period. Upon
termination of the Executive's employment hereunder pursuant to
this Section 8.06, the Company shall have no further obligation
or liability to the Executive relating to the Executive's
employment hereunder, or the termination thereof, other than
payment to the Executive of his Base Salary for the period (or
portion of such period) indicated above.
Section 8.07. POST-AGREEMENT EMPLOYMENT. In the event the
Executive remains in the employ of the Company, Holdings,
Sterling or any of their affiliates following termination of this
Agreement, by the expiration of the Term or otherwise, then such
employment shall be at will, unless otherwise agreed in writing.
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Section 8.08. MITIGATION. Any amounts payable to the
Executive hereunder pursuant to Section 7.05, 8.04 or 8.05 shall
not be reduced by any amounts earned by the Executive from any
other employer or source following termination of the Executive's
employment with the Company, Holdings and Sterling, except in the
event of a violation of Section 11 hereof; provided, however,
that the amounts payable to Executive pursuant to clause (b) of
Section 7.05 hereof shall be subject to prospective (and not
retrospective) offset to the extent of any cash compensation
actually received by Executive from any other employer during the
period in which such amounts would otherwise be payable to
Executive. Notwithstanding the foregoing, the Executive shall be
under no obligation to take or refrain from taking any action to
mitigate the Company's potential liability to make such severance
payments.
Section 9. EFFECT OF TERMINATION. The provisions of this
Section 9 shall apply in the event of termination of employment
whether due to the expiration of the Term, pursuant to Section 8
or otherwise.
Section 9.01. PAYMENT IN FULL. Payment by the Company of any
Base Salary and other amounts and contributions to the cost of
the Executive's continued receipt of benefits that may be due the
Executive under the applicable termination provision of Section 8
shall constitute the entire obligation of the Company to the
Executive. Acceptance by the Executive of performance by the
Company shall constitute full settlement of any claim that the
Executive might otherwise assert against the Company, its
affiliates or any of their respective shareholders, partners,
directors, officers, employees or agents relating to such
termination.
Section 9.02. SURVIVAL OF CERTAIN PROVISIONS. Provisions of
this Agreement shall survive any termination of employment if so
provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including, without limitation,
the obligations of the Executive under Sections 10 and 11 hereof.
The obligation of the Company to make payments to or on behalf of
the Executive under Sections 7.05, 8.04 or 8.05 hereof is
expressly conditioned upon the Executive's continued full
performance of obligations under Section 10 and 11 hereof. The
Executive recognizes that, except as expressly provided in
Section 7.05, 8.04 or 8.05, no compensation is earned after
termination of employment.
Section 9.03. PUBLIC STATEMENT OF TERMINATION. In the event
the Executive's employment terminates for any reason, the Company
and the Executive shall agree upon a public statement pertaining
to the Executive's termination of employment, and the terms of
said statement shall not be subject to subsequent modification by
either party unless required by law; provided, however, that in
the event the Company and the Executive are unable in good faith
to agree on such a statement, the Company may make public
statements as are necessary to comply with the law.
Section 10. PROPRIETARY INFORMATION; INVENTIONS IN THE FIELD.
Section 10.01. PROPRIETARY INFORMATION. In the course of his
service to the Company (and to its predecessor, NSC), the
Executive has had and will continue to have access to
confidential specifications, know-how, strategic or technical
data, marketing research data, product research and development
data, manufacturing techniques, financial performance,
confidential customer lists, costs, sources of supply and trade
secrets, names and addresses of the people and organizations with
whom the Company and its affiliates have business relationships
and such
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relationships, and special needs of customers of the Company and its
affiliates, all of which are confidential and may be proprietary and are
owned or used by the Company or its affiliates. Such information shall
hereinafter be called "Proprietary Information" and shall include any and all
items enumerated in the preceding sentence and coming within the scope of the
business of the Company or its affiliates as to which the Executive may have
had or may in the future have access, whether conceived or developed by
others or by the Executive alone or with others during the period of his
service to the Company or its affiliates (or to NSC and its affiliates),
whether or not conceived or developed during regular working hours. The term
"Proprietary Information" also shall be deemed to include comparable
information that the Company or any of its affiliates (or NSC or any of its
affiliates) have received belonging to others or which was received by the
Company or any of its affiliates (or NSC or any of its affiliates) with any
understanding that it would not be disclosed. Proprietary Information shall
not include any records, data or information which are in the public domain
during the period of service by the Executive provided the same are not in
the public domain as a consequence of disclosure, directly or indirectly by
the Executive in violation of this Agreement.
Section 10.02. FIDUCIARY OBLIGATIONS. The Executive agrees
that Proprietary Information is of critical importance to the
Company and its affiliates, and that a violation of this Section
10.02 or Section 10.03 would seriously and irreparably impair and
damage the Company's business. The Executive agrees that he shall
keep all Proprietary Information in a fiduciary capacity for the
sole benefit of the Company.
Section 10.03. NON-USE AND NON-DISCLOSURE. The Executive
shall not during the Term or at any time thereafter, regardless
of the reason for termination of the Executive's employment (a)
disclose, directly or indirectly, any Proprietary Information to
any person other than the Company or authorized employees thereof
at the time of such disclosure, or such other persons to whom the
Executive has been specifically instructed to make disclosure by
the Board and in all such cases only to the extent required in
the course of the Executive's service to the Company or (b) use
any Proprietary Information, directly or indirectly, for his own
benefit or for the benefit of any other person or entity. The
parties agree and acknowledge that nothing contained in this
Section 10.03 is intended to preclude the Executive from
utilizing general or industry-specific business skills developed
by him over his career, or to effectively extend the restrictions
contained in Section 11 hereof beyond the Non-Competition Period
(as defined therein), and that this Section 10.03 shall be
applicable only to specific, demonstrable instances of improper
disclosure or use by the Executive of Proprietary Information.
The Company shall have the burden of establishing that Executive
has violated Section 10.03 and shall not be entitled to withhold
or recover any amounts or benefits payable or to be provided to
Executive hereunder until and unless there has been a final
adjudication that Executive has breached this Section 10.03.
Section 10.04. RETURN OF DOCUMENTS. All notes, letters,
documents, records, tapes and other media of every kind and
description relating to the business, present or otherwise, of
the Company or its affiliates and any copies, in whole or in
part, thereof (collectively, the "Documents"), whether or not
prepared by the Executive, shall be the sole and exclusive
property of the Company. The Executive shall safeguard all
Documents and shall surrender to the Company at the time his
employment terminates, or at such earlier time or times as the
Board or its designee may specify, all Documents then in the
Executive's possession or control.
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Section 10.05. ASSIGNMENT OF RIGHTS TO INTELLECTUAL
PROPERTY. The Executive shall promptly and fully disclose all
Intellectual Property to the Company. The Executive hereby
assigns and agrees to assign to the Company (or as otherwise
directed by the Board) the Executive's full right, title and
interest in and to all Intellectual Property. The Executive
agrees to execute any and all applications for domestic and
foreign patents, copyrights or other proprietary rights and to do
such other acts (including without limitation the execution and
delivery of instruments of further assurance or confirmation)
requested by the Company to assign the Intellectual Property to
the Company and to permit the Company and its affiliates to
enforce any patents, copyrights or other proprietary rights to
the Intellectual Property. For purposes of this Section 10.05,
"Intellectual Property" means inventions, discoveries,
developments, methods, processes, compositions, works, concepts
and ideas (whether or not patentable or copyrightable or
constituting trade secrets) conceived, made, created, developed
or reduced to practice by the Executive (whether alone or with
others, whether or not during normal business hours or on or off
Company premises) during the Executive's employment that relate
to either any business, venture or activity being conducted or
proposed to be conducted by the Company or its affiliates at any
time during the term of this Agreement.
Section 11. RESTRICTIONS ON ACTIVITIES OF THE EXECUTIVE.
Section 11.01. ACKNOWLEDGMENTS. The Executive agrees that he
is being employed hereunder in a key management capacity with the
Company, that the Company is engaged in a highly competitive
business and that the success of the Company's business in the
marketplace depends upon its goodwill and reputation for quality
and dependability. The Executive further agrees that reasonable
limits may be placed on his ability to compete against the
Company and its affiliates as provided herein so as to protect
and preserve their legitimate business interests and goodwill.
Section 11.02. AGREEMENT NOT TO COMPETE OR SOLICIT.
11.02.1 During the Non-Competition Period (as defined
below), the Executive will not engage or participate in,
directly or indirectly, as principal, agent, employee,
employer, consultant, investor or partner, or assist in the
management of, any business which is Competitive with the
Company (as defined below).
11.02.2 During the Non-Competition Period, the
Executive will not, directly or indirectly through any other
entity, hire or attempt to hire, any officer, director,
consultant, executive or employee of the Company or any of
its affiliates during his or her engagement with the Company
or such affiliate. During the Non-Competition Period, the
Executive will not call upon, solicit, divert or attempt to
solicit or divert from the Company or any of its affiliates
any of their customers or suppliers or potential customers
or suppliers of whose names he was aware during the Term
(other than customers or suppliers or potential customers or
suppliers contacted by the Executive solely in connection
with a business that is not Competitive with the Company).
11.02.3 The "Non-Competition Period" shall mean the
Term and a period consisting of the greater of (a)
twenty-four (24) consecutive months or (b) the remaining
number of months in the Initial Term after (x) the
Executive's employment terminates
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under any circumstances whatsoever, or (y) any expiration or nonrenewal
of this Agreement.
11.02.4. A business shall be considered "Competitive
with the Company" if it is engaged in any business, venture
or activity in the Restricted Area (as defined below) which
competes or plans to compete with any business, venture or
activity being conducted or actively and specifically
planned to be conducted within the Non-Competition Period
(as evidenced by the Company's internal written business
plans or memoranda) by the Company, or any group, division
or affiliate of the Company, at the date the Executive's
employment hereunder is terminated.
11.02.5. The "Restricted Area" shall mean the United
States of America and any other country where the Company,
or any group, division or affiliate of the Company, is
conducting, or has proposed to conduct within the
Non-Competition Period (as evidenced by the Company's
internal written business plans or memoranda), any business,
venture or activity, at the date the Executive's employment
hereunder is terminated.
11.02.6. Notwithstanding the provisions of this
Section 11.02, the parties agree that (i) ownership of not
more than three percent (3%) of the voting stock of any
publicly held corporation shall not, of itself, constitute a
violation of this Section 11.02 and (ii) working as an
employee of an entity that has a stand-alone division or
business unit which is Competitive with the Company shall
not, of itself, constitute a violation of this Section 11.02
if the Executive is not, in any way (directly or indirectly,
as principal, agent, employee, employer, consultant,
advisor, investor or partner), responsible for, compensated
with respect to, or involved in the activities of such
stand-alone division or business unit and does not (directly
or indirectly) provide information or assistance to such
stand-alone division or business unit.
Section 12. REMEDIES. It is specifically understood and
agreed that any breach of the provisions of Section 10 or 11 of
this Agreement is likely to result in irreparable injury to the
Company and that the remedy at law alone will be an inadequate
remedy for such breach, and that in addition to any other remedy
it may have, the Company shall be entitled to enforce the
specific performance of this Agreement by the Executive and to
obtain both temporary and permanent injunctive relief without the
necessity of proving actual damages.
Section 13. SEVERABLE PROVISIONS. The provisions of this
Agreement are severable and the invalidity of any one or more
provisions shall not affect the validity of any other provision.
In the event that a court of competent jurisdiction shall
determine that any provision of this Agreement or the application
thereof is unenforceable in whole or in part because of the
duration or scope thereof, the parties hereto agree that said
court in making such determination shall have the power to reduce
the duration and scope of such provision to the extent necessary
to make it enforceable, and that the Agreement in its reduced
form shall be valid and enforceable to the full extent permitted
by law.
Section 14. NOTICES. All notices hereunder, to be effective,
shall be in writing and shall be delivered by hand or mailed by
certified mail, postage and fees prepaid, as follows:
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To the Executive: Kirk P. Pond
1 Center Lane
Cape Elizabeth, Maine 04107
To Holdings, Sterling Fairchild Semiconductor Corporation
or the Company: 333 Western Avenue
South Portland, Maine 04106
Attention: General Counsel
or to such other address as a party may notify the other pursuant
to a notice given in accordance with this Section 14.
Section 15. MISCELLANEOUS.
Section 15.01. NO OTHER BENEFITS. Except as specifically
provided in this Agreement, the Executive shall not be entitled
to any compensation, severance or other benefits from the
Company, Holdings or any of their affiliates, whether during the
Term or upon the termination of this Agreement for any reason
whatsoever.
Section 15.02. MODIFICATION: WAIVER. This Agreement
constitutes the entire Agreement between the parties hereto with
regard to the subject matter hereof, superseding all prior
understandings and agreements, whether written or oral. This
Agreement may not be amended or revised except by a writing
signed by the parties. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of any party to require the performance of any term
or obligation of this Agreement, or the waiver by any party of
any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of
any subsequent breach.
Section 15.03. WITHHOLDING OF TAXES. The Company may
withhold from any amounts payable under this Agreement any local,
state or federal taxes as shall be required pursuant to any
applicable law.
Section 15.04. ASSIGNMENT AND TRANSFER. This Agreement shall
not be terminated by the merger or consolidation of the Company
with any corporate or other entity or by the transfer of all or
substantially all of the assets of the Company to any other
person, corporation, firm or entity, and the consent of the
Executive shall not be required in connection with the assignment
of the rights and obligations of the Company, Holdings and
Sterling pursuant to any such transaction. The Company shall use
its commercially reasonable efforts to cause the successor to its
business (as a result of a merger, consolidation or transfer of
all or substantially all of its assets), to assume the
obligations of the Company hereunder. Neither this Agreement nor
any of the rights, duties or obligations of the Executive shall
be assignable by the Executive, nor shall any of the payments
required or permitted to be made to the Executive by this
Agreement be encumbered, transferred or in any way anticipated.
This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors,
executors, administrators, heirs-and permitted assigns.
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Section 15.05. AFFILIATES. For purposes of this Agreement,
an "affiliate" of the Company or Holdings shall mean all persons
and entities directly or indirectly controlling, controlled by or
under common control with the Company, Holdings or Sterling, as
the case may be.
Section 15.06. GOVERNING LAW. This Agreement shall be
construed under and enforced in accordance with the laws of the
State of Maine, other than conflict of laws principles.
Section 15.07. CONSENT TO JURISDICTION. Each of the Company,
Holdings, Sterling and the Executive, by its or his execution
hereof, (i) subject to the provisions of Section 15.08 hereof,
hereby irrevocably submits to the exclusive jurisdiction of the
state courts of the State of Maine for the purpose of any claim
or action arising out of or based upon this Agreement or relating
to the subject matter hereof, and (ii) hereby waives any right to
trial by jury. Each of the Company, Holdings, Sterling and the
Executive hereby consents to service of process in any such
proceeding in any manner permitted by Maine law, and agrees that
service of process by registered or certified mail, return
receipt requested, at its address specified pursuant to Section
14 hereof is reasonably calculated to give actual notice.
Section 15.08. ARBITRATION. The parties agree and
acknowledge that (other than actions for injunctive relief
pursuant to Section 12 hereof) any and all disputes arising out
of or in connection with this Agreement shall be resolved by
binding arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association ("AAA") before a single
arbitrator selected by AAA. Such arbitration shall be held in
Portland, Maine.
Section 15.09. DISCLAIMER OF DAMAGES. The maximum
liability of the Company on account of this Agreement (or any
breach of this Agreement) shall under no circumstances exceed the
amount of salary, benefits and other compensation (including
severance) required to be paid hereunder. Without limiting the
generality of the foregoing, Executive hereby acknowledges that
the Company and Holdings, acting through the Board, shall have
the right and power to remove Executive from office and terminate
his employment at any time and for any reason whatsoever without
incurring liability to Executive other than the payment of such
salary, benefits and other compensation (including severance) as
may be required under this Agreement, including without
limitation liability in connection with claims by the Executive
that such termination, in and of itself, has damaged the
Executive's career or prospects for securing other employment, or
that such termination has impaired the value of the Executive's
investment in Holdings. The parties agree that no party to this
Agreement (or any of its affiliates) shall be liable to any other
party hereto for any incidental, consequential, special,
exemplary or punitive damages based on any claim arising out of
this Agreement; provided, however, that the foregoing limitation
shall not apply to claims arising out of any breach by the
Executive of Sections 10 or 11 of the Agreement, and that such
limitation, and (in the case of claims by the Executive) the
limitation contained in the first sentence of this Section 15.09,
shall not apply to any defamation, slander, libel or similar
claim by the Company or the Executive. In the event that
Executive's employment hereunder terminates, whether pursuant to
Section 8.06 hereof or otherwise, neither the Company nor
Holdings shall be entitled to recover from the Executive any
costs of identifying, engaging or retaining any successor to the
Executive.
Section 15.10. COSTS OF ENFORCEMENT. The parties agree and
acknowledge that the prevailing party in any proceeding arising
under this Agreement shall be entitled to receive, in
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addition to any amounts or benefits to which he or it is entitled hereunder,
all costs (including reasonable attorneys' fees) incurred by him or it in
enforcing or collecting upon any obligation of any other party under this
Agreement.
Section 15.11. DRAFTING. The parties agree and acknowledge
that this Agreement is the product of arms' length negotiation
among the parties, who have been represented by counsel
throughout, and that, accordingly, no party shall be deemed to be
the drafter of this Agreement and no presumptions as to the
construction of any provisions hereof shall be applicable as a
consequence of any party's role in the drafting hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as a sealed instrument as of the day and year
first above written.
FAIRCHILD SEMICONDUCTOR CORPORATION
By:__________________________________
Name ________________________________
Title:_______________________________
FSC SEMICONDUCTOR CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
STERLING HOLDING COMPANY, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Kirk P. Pond
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Exhibit 10.28
EMPLOYMENT AGREEMENT
AGREEMENT, entered into as of the 11th day of March, 1997, by and among
Fairchild Semiconductor Corporation, a Delaware corporation (the "Company"),
FSC Semiconductor Corporation, a Delaware corporation ("Holdings"), Sterling
Holding Company, LLC, a Delaware limited liability company ("Sterling"), and
Joseph R. Martin (the "Executive").
WHEREAS, the Company and Holdings have been established to acquire the
Logic, Memory and Discrete Products divisions of National Semiconductor
Corporation ("NSC") and certain of its affiliates (the "NSC Parties") through
a series of recapitalization transactions (the "Recapitalization"), pursuant
to that certain Recapitalization Agreement dated as of January 24 1997 (the
"Recapitalization Agreement") between NSC and Sterling and that certain Asset
Purchase Agreement, dated as of March 11, 1997, between NSC and the Company;
WHEREAS, the Company, Holdings and Sterling desire to engage the
full-time services of the Executive and the Executive desires to be so
employed by the Company, Holdings and Sterling; and
WHEREAS, the operations of the Company and its affiliates are a complex
matter requiring direction and leadership in a variety of areas; and the
Company, Holdings and Sterling desire to be assured that the unique and
expert services of the Executive will be available solely to the Company,
Holdings and Sterling, and that the Executive is willing and able to render
such services on the terms and conditions hereinafter set forth; and
WHEREAS, the Company, Holdings and Sterling desire to be assured that
the confidential information and goodwill of the Company will be preserved
for the exclusive benefit of the Company.
NOW, THEREFORE, in consideration of such employment and the mutual
covenants and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company, Holdings, Sterling and the Executive agree as follows:
Section 1. Employment. Effective as of the Closing Date (as defined in
the Recapitalization Agreement), the Company, Holdings and Sterling hereby
employ the Executive and the Executive hereby accepts such employment under
and subject to the terms and conditions hereinafter set forth. If the
Recapitalization Agreement shall be terminated pursuant to Section 9.1
thereof prior to the Closing (as defined therein), this Agreement shall
terminate automatically and have no further force or effect.
Section 2. Term. Unless sooner terminated as provided herein, the term
of employment under this Agreement shall begin on the Closing Date and shall
conclude on the third anniversary thereof (the "Initial Term"). This
Agreement shall be renewed automatically for up to two (2) additional
consecutive one year terms (each a "Renewal Term") unless either the Company
or the Executive shall give to the other written notice not less than ninety
(90) days prior to the end of
<PAGE>
the Term or the first Renewal Term that it or he does not wish to renew this
Agreement. The Initial Term and any Renewal Term are sometimes collectively
referred to herein as the "Term."
Section 3. Duties. During the Term, the Executive shall serve as
Executive Vice President and Chief Financial Officer of the Company and
Holdings and shall be a member of the Boards of Directors of the Company and
Holdings. The Executive also agrees to serve, without further compensation,
as a director and/or officer of one or more of the Company's affiliates if so
elected or appointed from time to time. The Executive shall be subject to the
direction of the Boards of Directors of the Company and Holdings
(collectively, the "Board") and the Chief Executive Officer of the Company
and Holdings. The Executive shall be the Company's and Holdings' chief
financial officer, with authority and responsibility for all of the financial
aspects of the business and affairs of the Company and its affiliates,
subject to the customary roles of the Board of Directors and the President
and Chief Executive Officer of the Company. The Executive hereby agrees to
devote his full business time and best efforts to the faithful performance of
such duties and to the advancement of the business and affairs of the Company
and its affiliates during the Term. The Executive shall not engage in any
other business activity during the Term, except as may be expressly approved
by the Board in writing. The Executive may not be required to relocate his
residence or his principal office during the Term.
Section 4. Salary Compensation. In consideration of the services
rendered by the Executive under this Agreement, the Company shall pay the
Executive during the Term a base salary at the rate of not less than Two
Hundred and Fifty Thousand Dollars ($250,000) per year. The base salary shall
be paid in such installments and at such times as the Company pays its
regularly salaried executive employees. The base salary will be subject to
additional increases from time to time by the Board, in its sole discretion.
Such base salary, as from time to time increased, is hereinafter referred to
as the "Base Salary." The Base Salary shall be prorated for any period of
service during the Term which covers less than one full calendar year.
Section 5. Executive Officer Incentive Compensation. During the Term,
the Company from time to time shall award the Executive annual incentive
compensation ("Incentive Compensation") based upon a target (the "Target")
which shall be forty percent (40%) of the Base Salary, with the actual annual
incentive award ranging from zero to two hundred percent (200%) at the best
expected level, in accordance with the achievement of financial or other
performance measures contained in the Company's 1997 Executive Officer
Incentive Plan (the "Plan"), in which Executive shall participate during the
Initial Term and any Renewal Term. Any compensation paid to the Executive as
Incentive Compensation shall be in addition to the Base Salary and in lieu of
participation in any other incentive, profit sharing or bonus compensation
program (other than pursuant to any stock option plan described in Section
6.02) which the Company or Holdings maintains; provided that, to the extent
determined by the Board from time to time, the Executive will be eligible to
participate in profit sharing, incentive compensation or bonus compensation
programs adopted in the future.
Section 6. Stock Subscription; Stock Options.
6.01. Stock Subscription. Pursuant to a Securities Purchase and Holders
Agreement (the "Stockholders Agreement") to be executed at the Closing, the
Executive (or, at Executive's
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option, one or more trusts for the benefit of Executive's children or a
"rabbi" or other trust for the benefit of Executive (an "Executive Trust"),
or a combination thereof) shall purchase from Holdings and Holdings shall
sell to the Executive (or, at Executive's option, one or more Executive
Trusts, or a combination thereof) shares of Holdings stock for an aggregate
purchase price as provided therein; such purchase and sale to be for
securities of the same class or classes sold in connection with the
Recapitalization to (and at per share prices equal to those paid by) NSC for
such shares in connection with the Recapitalization.
6.02. Stock Options. Holdings shall establish and adopt a stock option
plan in substantially the form attached hereto as Exhibit A, which allows the
Board (based upon Executive's recommendations) to grant, in the aggregate,
options to purchase up to five percent (5%) of all outstanding Holdings
Common Stock to employees designated by the Board who are not parties to the
Stockholders Agreement (or beneficiaries of a trust that is a party to such
agreement) and at a price equal to that paid per share of Common Stock
pursuant to said Agreement. Executive shall also have the right to
participate in a stock option plan to be developed immediately prior to or
after any public offering of Holdings stock, which shall provide for options
with exercise prices equal to the fair market value of such stock on the date
such options are granted.
Section 7. Benefits. In addition to the compensation detailed in
Sections 4, 5 and 6 of this Agreement, the Executive shall be entitled to the
following additional benefits:
7.01. Fringe Benefits. During the Term and subject to any contribution
therefor generally required of executives of the Company, the Executive shall
be eligible to participate in all employee fringe benefit programs as are
made available from time to time to the Company's executive employees. The
Executive shall be eligible to participate in the Company's 401(k) and
deferred compensation plans to be adopted by the Company consistent with such
plans offered by NSC and pursuant to which employees covered thereby may
defer receipt of all or any portion of any bonus amounts payable to them
until future periods. The Company will provide to the Executive health
benefits comparable to the health benefits provided to the Executive by NSC
prior to the Closing Date. Such participation in fringe benefit and option
programs shall be subject to (i) the terms of the applicable plan documents,
and (ii) generally applicable Company policies. In addition, during the
Term, the Company will pay or reimburse the Executive for reasonable medical
examination costs incurred as part of the Executive's routine annual physical
examination, and will pay the cost of maintaining a life insurance policy
substantially similar to the existing life insurance policy provided by the
Company to the President and Chief Executive Officer, and will obtain and
maintain in effect for Executive's benefit a supplemental long-term
disability insurance policy with coverage of not less than eighty percent
(80%) of Executive's base salary for the duration of such disability.
7.02. Paid Vacation. The Executive shall be entitled to five (5) weeks
paid vacation per calendar year, such vacation to extend for such periods and
to be taken at such intervals as shall be appropriate and consistent with the
proper performance of the Executive's duties hereunder. Any unused, accrued
vacation time may be accumulated from one calendar year to another, provided
that the Executive shall not be entitled to compensation for vacation time
not taken.
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7.03. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable expenses actually incurred by the Executive in
connection with the business affairs of the Company and the performance of
his duties hereunder. The Executive shall comply with such reasonable
limitations and reporting requirements with respect to such expenses as the
Board may establish from time to time.
7.04. Financial Planning. During the Term, the Company will reimburse
the Executive for up to Four Thousand ($4,000) Dollars per year in connection
with tax planning, tax return preparation and financial planning for the
Executive.
7.05. Severance. In the event Executive's employment hereunder is
terminated by the Company pursuant to Section 8.04 or by the Executive
pursuant to Section 8.05, the Company will pay the Executive, his designated
beneficiary or, if none, his estate, monthly severance payments during the
greater of twenty-four (24) months and the remaining number of months in the
Initial Term, each to be payable on the last day of the month commencing with
the end of the month following the date of termination, and shall continue
throughout such period, at the Company's expense, all of Executive's benefits
then being made available or to which Executive is entitled pursuant to
Section 7 hereof. Each monthly severance payment shall be in an amount equal
to the sum of (a) one-twelfth (1/12) of the Base Salary in effect at the time
of such termination plus (b) one-twelfth (1/12) of 100% of what the
Executive's Target Award would have been for the Company's fiscal year
preceding the year in which the termination occurs, irrespective of what the
Executive's actual award was under the Plan for such preceding fiscal year
(annualized in the event such prior fiscal year was a partial year for
purposes of the Plan). In addition, in the event of any such termination,
all options theretofore granted to Executive as contemplated by Section 6.02
shall become fully and immediately exercisable notwithstanding any
limitations contained in the Plan or any Stock Option Agreement.
Section 8. Termination. Notwithstanding the provisions of Section 2,
this Agreement shall terminate prior to the expiration of the Term under the
following circumstances:
8.01. Death. In the event of the Executive's death during the Term, the
Executive's employment hereunder shall immediately and automatically
terminate and the Company shall pay to the Executive's designated beneficiary
or, if no beneficiary has been designated by the Executive, to his estate (i)
any Base Salary earned but unpaid through the date of his death plus (ii) at
the times the Company pays its Incentive Compensation in accordance with its
general payroll policies, an amount equal to that portion of the Incentive
Compensation which but for his death would have been earned by the Executive
during the year of his death (pro-rated based on the number of days during
the year of his death during which the Executive was employed by the Company
on an active status).
8.02. Disability.
8.02.1 The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the
event that the Executive becomes disabled during his
employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature
and, as a result, is unable to perform substantially all of
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his duties and responsibilities hereunder for an aggregate
of one hundred eighty (180) days during any period of three
hundred and sixty (360) consecutive calendar days.
8.02.2 The Board may designate another employee to act
in the Executive's place during any period of the
Executive's disability. Notwithstanding any such
designation, the Executive shall continue to receive the
Base Salary in accordance with Section 4 and to receive
benefits in accordance with Section 7.01, to the extent
permitted by the then-current terms of the applicable
benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan
maintained by the Company or until the termination of his
employment, whichever shall first occur.
8.02.3 While receiving disability income payments
under any disability income plan maintained by the Company,
the Executive shall not be entitled to receive any Base
Salary under Section 4 or Incentive Compensation (except as
otherwise provided under the Plan), but shall continue to
participate in the Company's benefit plans in accordance
with Section 7.01 and the terms of such plans, until the
termination of his employment. In the event the Executive's
employment hereunder is terminated pursuant to Section
8.02.1, the Company shall pay or provide to the Executive,
at the times the Company pays its executives bonuses in
accordance with its general payroll policies, an amount
equal to that portion of the Incentive Compensation which
but for his disability would have been earned by the
Executive during the year in which his employment was
terminated under Section 8.02.1 (pro-rated based on the
number of days during which the Executive was employed by
the Company on an active status during the year of such
termination).
Section 8.03. By The Company For Cause. The employment of the Executive
may be terminated at any time by the Company for Cause (as defined below),
effective immediately, in accordance with the provisions of Section 8.03.2.
For purposes hereof, the term "Cause" shall mean the Board has determined, in
its reasonable judgment, that any one or more of the following has occurred:
(i) The Executive shall have committed an act or acts
of dishonesty or criminality that, in the good faith
judgment of the Board of Directors of the Company, has had
or could have an adverse effect on the Company;
(ii) The Executive shall have committed any act of
fraud, embezzlement or misappropriation of funds; or
(iii) The Executive shall have breached, in any
material respect, any of the provisions of this Agreement.
Upon the effectiveness of the termination of the Executive's termination
for Cause, the Company, Holdings and Sterling shall have no further
obligation or liability to the Executive relating to the Executive's
employment hereunder, or the termination thereof, other than for Base Salary
earned but unpaid through the date of termination.
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Section 8.04. By the Company Without Cause. The Company may terminate
the Executive's employment at any time during the Initial Term or any Renewal
Term without Cause. In the event of such termination, then the Company shall
pay or provide the Executive (i) Base Salary to the extent earned but unpaid
through the date of termination plus (ii) the amounts specified in Section
7.05 plus (iii) at the times the Company pays its executives incentive
compensation in accordance with its general payroll policies, an amount
which, but for such termination, the Executive would have earned during the
year of such termination (pro-rated based on the number of days during the
year of such termination of employment for which the Executive was employed
by the Company on an active status). In addition, any options granted to the
Executive as contemplated by Section 6.02 shall become fully exercisable upon
any such termination, notwithstanding any limitations in the Plan or any
Stock Option Agreement. Any nonrenewal of this Agreement by the Company shall
in no event be deemed a termination for purposes of this Section 8.04.
Section 8.05. By the Executive for Good Reason. The Executive may
terminate his employment at any time during the Initial Term or any Renewal
Term for Good Reason. In the event of such termination, the Company shall
pay or provide the Executive (i) base salary to the extent earned but unpaid
through the date of termination plus (ii) the amount and benefits specified
in Section 7.05 plus (iii) at the times the Company pays its executives
incentive compensation in accordance with its general payroll policies, an
amount which, but for such termination, the Executive would have earned
during the year of such termination (pro-rated based on the number of days
during the year of such termination of employment for which the Executive was
employed by the Company on an active status). In addition, any options
granted to the Executive as contemplated by Section 6.02 shall become fully
and immediately exercisable upon any such termination, notwithstanding any
limitations in the plan or any stock option agreement. Any non-renewal of
this Agreement by the Company shall in no event be deemed a termination for
purposes of this Section 8.05. As used herein, "Good Reason" means a
resignation by the Executive within thirty (30) days after (i) any demotion
or similar change in his duties such that the duties assigned to the
Executive after such change represent a substantial decrease in the
Executive's duties, responsibilities or status with the Company relative to
such duties, responsibilities or status as of the date hereof, (ii) being
required to relocate his principal place of employment beyond a ten (10) mile
radius of Portland, Maine or (iii) the Company's failure to make any payment
or to provide any benefit due to the Executive hereunder when due; provided,
however, that the Executive shall have first given the Company written notice
of such failure to pay or provide and such failure to pay or provide shall
not have been cured within ten (10) days after the receipt by the Company of
such notice.
Section 8.06. By the Executive Without Good Reason. The Executive may
terminate his employment hereunder at any time upon ninety (90) days' notice
to the Company. In the event of termination of the Executive pursuant to this
Section 8.06, the Board may elect to waive the period of notice, or any
portion thereof, and, unless the Board so elects, the Company will pay the
Executive his Base Salary for the notice period. Upon termination of the
Executive's employment hereunder pursuant to this Section 8.06, the Company
shall have no further obligation or liability to the Executive relating to
the Executive's employment hereunder, or the termination thereof, other than
payment to the Executive of his Base Salary for the period (or portion of
such period) indicated above.
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Section 8.07. Post-Agreement Employment. In the event the Executive
remains in the employ of the Company, Holdings, Sterling or any of their
affiliates following termination of this Agreement, by the expiration of the
Term or otherwise, then such employment shall be at will, unless otherwise
agreed in writing.
Section 8.08. Mitigation. Any amounts payable to the Executive
hereunder pursuant to Section 7.05, 8.04 or 8.05 shall not be reduced by any
amounts earned by the Executive from any other employer or source following
termination of the Executive's employment with the Company, Holdings and
Sterling, except in the event of a violation of Section 11 hereof; provided,
however, that the amounts payable to Executive pursuant to clause (b) of
Section 7.05 hereof shall be subject to prospective (and not retrospective)
offset to the extent of any cash compensation actually received by Executive
from any other employer during the period in which such amounts would
otherwise be payable to Executive. Notwithstanding the foregoing, the
Executive shall be under no obligation to take or refrain from taking any
action to mitigate the Company's potential liability to make such severance
payments.
Section 9. Effect of Termination. The provisions of this Section 9 shall
apply in the event of termination of employment whether due to the expiration
of the Term, pursuant to Section 8 or otherwise.
Section 9.01. Payment in Full. Payment by the Company of any Base Salary
and other amounts and contributions to the cost of the Executive's continued
receipt of benefits that may be due the Executive under the applicable
termination provision of Section 8 shall constitute the entire obligation of
the Company to the Executive. Acceptance by the Executive of performance by
the Company shall constitute full settlement of any claim that the Executive
might otherwise assert against the Company, its affiliates or any of their
respective shareholders, partners, directors, officers, employees or agents
relating to such termination.
Section 9.02. Survival of Certain Provisions. Provisions of this
Agreement shall survive any termination of employment if so provided herein
or if necessary or desirable fully to accomplish the purposes of such
provision, including, without limitation, the obligations of the Executive
under Sections 10 and 11 hereof. The obligation of the Company to make
payments to or on behalf of the Executive under Sections 7.05, 8.04 or 8.05
hereof is expressly conditioned upon the Executive's continued full
performance of obligations under Section 10 and 11 hereof. The Executive
recognizes that, except as expressly provided in Section 7.05, 8.04 or 8.05,
no compensation is earned after termination of employment.
Section 9.03. Public Statement of Termination. In the event the
Executive's employment terminates for any reason, the Company and the
Executive shall agree upon a public statement pertaining to the Executive's
termination of employment, and the terms of said statement shall not be
subject to subsequent modification by either party unless required by law;
provided, however, that in the event the Company and the Executive are unable
in good faith to agree on such a statement, the Company may make public
statements as are necessary to comply with the law.
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Section 10. Proprietary Information; Inventions in the Field.
Section 10.01. Proprietary Information. In the course of his service to
the Company (and to its predecessor, NSC), the Executive has had and will
continue to have access to confidential specifications, know-how, strategic
or technical data, marketing research data, product research and development
data, manufacturing techniques, financial performance, confidential customer
lists, costs, sources of supply and trade secrets, names and addresses of the
people and organizations with whom the Company and its affiliates have
business relationships and such relationships, and special needs of customers
of the Company and its affiliates, all of which are confidential and may be
proprietary and are owned or used by the Company or its affiliates. Such
information shall hereinafter be called "Proprietary Information" and shall
include any and all items enumerated in the preceding sentence and coming
within the scope of the business of the Company or its affiliates as to which
the Executive may have had or may in the future have access, whether
conceived or developed by others or by the Executive alone or with others
during the period of his service to the Company or its affiliates (or to NSC
and its affiliates), whether or not conceived or developed during regular
working hours. The term "Proprietary Information" also shall be deemed to
include comparable information that the Company or any of its affiliates (or
NSC or any of its affiliates) have received belonging to others or which was
received by the Company or any of its affiliates (or NSC or any of its
affiliates) with any understanding that it would not be disclosed.
Proprietary Information shall not include any records, data or information
which are in the public domain during the period of service by the Executive
provided the same are not in the public domain as a consequence of
disclosure, directly or indirectly by the Executive in violation of this
Agreement.
Section 10.02. Fiduciary Obligations. The Executive agrees that
Proprietary Information is of critical importance to the Company and its
affiliates, and that a violation of this Section 10.02 or Section 10.03 would
seriously and irreparably impair and damage the Company's business. The
Executive agrees that he shall keep all Proprietary Information in a
fiduciary capacity for the sole benefit of the Company.
Section 10.03. Non-Use and Non-Disclosure. The Executive shall not
during the Term or at any time thereafter, regardless of the reason for
termination of the Executive's employment (a) disclose, directly or
indirectly, any Proprietary Information to any person other than the Company
or authorized employees thereof at the time of such disclosure, or such other
persons to whom the Executive has been specifically instructed to make
disclosure by the Board and in all such cases only to the extent required in
the course of the Executive's service to the Company or (b) use any
Proprietary Information, directly or indirectly, for his own benefit or for
the benefit of any other person or entity. The parties agree and acknowledge
that nothing contained in this Section 10.03 is intended to preclude the
Executive from utilizing general or industry-specific business skills
developed by him over his career, or to effectively extend the restrictions
contained in Section 11 hereof beyond the Non-Competition Period (as defined
therein), and that this Section 10.03 shall be applicable only to specific,
demonstrable instances of improper disclosure or use by the Executive of
Proprietary Information. The Company shall have the burden of establishing
that Executive has violated Section 10.03 and shall not be entitled to
withhold or recover any amounts or benefits payable or to be provided to
Executive hereunder until and unless there has been a final adjudication that
Executive has breached this Section 10.03.
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Section 10.04. Return of Documents. All notes, letters, documents,
records, tapes and other media of every kind and description relating to the
business, present or otherwise, of the Company or its affiliates and any
copies, in whole or in part, thereof (collectively, the "Documents"), whether
or not prepared by the Executive, shall be the sole and exclusive property of
the Company. The Executive shall safeguard all Documents and shall surrender
to the Company at the time his employment terminates, or at such earlier time
or times as the Board or its designee may specify, all Documents then in the
Executive's possession or control.
Section 10.05. Assignment of Rights to Intellectual Property. The
Executive shall promptly and fully disclose all Intellectual Property to the
Company. The Executive hereby assigns and agrees to assign to the Company (or
as otherwise directed by the Board) the Executive's full right, title and
interest in and to all Intellectual Property. The Executive agrees to execute
any and all applications for domestic and foreign patents, copyrights or
other proprietary rights and to do such other acts (including without
limitation the execution and delivery of instruments of further assurance or
confirmation) requested by the Company to assign the Intellectual Property to
the Company and to permit the Company and its affiliates to enforce any
patents, copyrights or other proprietary rights to the Intellectual Property.
For purposes of this Section 10.05, "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions,
works, concepts and ideas (whether or not patentable or copyrightable or
constituting trade secrets) conceived, made, created, developed or reduced to
practice by the Executive (whether alone or with others, whether or not
during normal business hours or on or off Company premises) during the
Executive's employment that relate to either any business, venture or
activity being conducted or proposed to be conducted by the Company or its
affiliates at any time during the term of this Agreement.
Section 11. Restrictions on Activities of the Executive.
Section 11.01. Acknowledgments. The Executive agrees that he is being
employed hereunder in a key management capacity with the Company, that the
Company is engaged in a highly competitive business and that the success of
the Company's business in the marketplace depends upon its goodwill and
reputation for quality and dependability. The Executive further agrees that
reasonable limits may be placed on his ability to compete against the Company
and its affiliates as provided herein so as to protect and preserve their
legitimate business interests and goodwill.
Section 11.02. Agreement Not to Compete or Solicit.
11.02.1 During the Non-Competition Period (as defined
below), the Executive will not engage or participate in,
directly or indirectly, as principal, agent, employee,
employer, consultant, investor or partner, or assist in the
management of, any business which is Competitive with the
Company (as defined below).
11.02.2 During the Non-Competition Period, the
Executive will not, directly or indirectly through any other
entity, hire or attempt to hire, any officer, director,
consultant, executive or employee of the Company or any of
its affiliates during his or her
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engagement with the Company or such affiliate. During the
Non-Competition Period, the Executive will not call upon,
solicit, divert or attempt to solicit or divert from the
Company or any of its affiliates any of their customers or
suppliers or potential customers or suppliers of whose names
he was aware during the Term (other than customers or suppliers
or potential customers or suppliers contacted by the Executive
solely in connection with a business that is not Competitive
with the Company).
11.02.3 The "Non-Competition Period" shall mean the
Term and a period consisting of the greater of (a)
twenty-four (24) consecutive months or (b) the remaining
number of months in the Initial Term after (x) the
Executive's employment terminates under any circumstances
whatsoever, or (y) any expiration or nonrenewal of this
Agreement.
11.02.4. A business shall be considered "Competitive
with the Company" if it is engaged in any business, venture
or activity in the Restricted Area (as defined below) which
competes or plans to compete with any business, venture or
activity being conducted or actively and specifically
planned to be conducted within the Non-Competition Period
(as evidenced by the Company's internal written business
plans or memoranda) by the Company, or any group, division
or affiliate of the Company, at the date the Executive's
employment hereunder is terminated.
11.02.5. The "Restricted Area" shall mean the United
States of America and any other country where the Company,
or any group, division or affiliate of the Company, is
conducting, or has proposed to conduct within the
Non-Competition Period (as evidenced by the Company's
internal written business plans or memoranda), any business,
venture or activity, at the date the Executive's employment
hereunder is terminated.
11.02.6. Notwithstanding the provisions of this
Section 11.02, the parties agree that (i) ownership of not
more than three percent (3%) of the voting stock of any
publicly held corporation shall not, of itself, constitute a
violation of this Section 11.02 and (ii) working as an
employee of an entity that has a stand-alone division or
business unit which is Competitive with the Company shall
not, of itself, constitute a violation of this Section 11.02
if the Executive is not, in any way (directly or indirectly,
as principal, agent, employee, employer, consultant,
advisor, investor or partner), responsible for, compensated
with respect to, or involved in the activities of such
stand-alone division or business unit and does not (directly
or indirectly) provide information or assistance to such
stand-alone division or business unit.
Section 12. Remedies. It is specifically understood and agreed that any
breach of the provisions of Section 10 or 11 of this Agreement is likely to
result in irreparable injury to the Company and that the remedy at law alone
will be an inadequate remedy for such breach, and that in addition to any
other remedy it may have, the Company shall be entitled to enforce the
specific performance of this Agreement by the Executive and to obtain both
temporary and permanent injunctive relief without the necessity of proving
actual damages.
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Section 13. Severable Provisions. The provisions of this Agreement are
severable and the invalidity of any one or more provisions shall not affect
the validity of any other provision. In the event that a court of competent
jurisdiction shall determine that any provision of this Agreement or the
application thereof is unenforceable in whole or in part because of the
duration or scope thereof, the parties hereto agree that said court in making
such determination shall have the power to reduce the duration and scope of
such provision to the extent necessary to make it enforceable, and that the
Agreement in its reduced form shall be valid and enforceable to the full
extent permitted by law.
Section 14. Notices. All notices hereunder, to be effective, shall be in
writing and shall be delivered by hand or mailed by certified mail, postage
and fees prepaid, as follows:
To the Executive: Joseph R. Martin
1 Beechtree Lane
Yarmouth, Maine 04096
To Holdings, Sterling Fairchild Semiconductor Corporation
or the Company: 333 Western Avenue
South Portland, Maine 04106
Attention: General Counsel
or to such other address as a party may notify the other pursuant to a notice
given in accordance with this Section 14.
Section 15. Miscellaneous.
Section 15.01. No Other Benefits. Except as specifically provided in
this Agreement, the Executive shall not be entitled to any compensation,
severance or other benefits from the Company, Holdings or any of their
affiliates, whether during the Term or upon the termination of this Agreement
for any reason whatsoever.
Section 15.02. Modification: Waiver. This Agreement constitutes the
entire Agreement between the parties hereto with regard to the subject matter
hereof, superseding all prior understandings and agreements, whether written
or oral. This Agreement may not be amended or revised except by a writing
signed by the parties. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any
party to require the performance of any term or obligation of this Agreement,
or the waiver by any party of any breach of this Agreement, shall not prevent
any subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach.
Section 15.03. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement any local, state or federal taxes as
shall be required pursuant to any applicable law.
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Section 15.04. Assignment and Transfer. This Agreement shall not be
terminated by the merger or consolidation of the Company with any corporate
or other entity or by the transfer of all or substantially all of the assets
of the Company to any other person, corporation, firm or entity, and the
consent of the Executive shall not be required in connection with the
assignment of the rights and obligations of the Company, Holdings and
Sterling pursuant to any such transaction. The Company shall use its
commercially reasonable efforts to cause the successor to its business (as a
result of a merger, consolidation or transfer of all or substantially all of
its assets), to assume the obligations of the Company hereunder. Neither this
Agreement nor any of the rights, duties or obligations of the Executive shall
be assignable by the Executive, nor shall any of the payments required or
permitted to be made to the Executive by this Agreement be encumbered,
transferred or in any way anticipated. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
successors, executors, administrators, heirs-and permitted assigns.
Section 15.05. Affiliates. For purposes of this Agreement, an
"affiliate" of the Company or Holdings shall mean all persons and entities
directly or indirectly controlling, controlled by or under common control
with the Company, Holdings or Sterling, as the case may be.
Section 15.06. Governing Law. This Agreement shall be construed under
and enforced in accordance with the laws of the State of Maine, other than
conflict of laws principles.
Section 15.07. Consent to Jurisdiction. Each of the Company, Holdings,
Sterling, and the Executive, by its or his execution hereof, (i) subject to
the provisions of Section 15.08 hereof, hereby irrevocably submits to the
exclusive jurisdiction of the state courts of the State of Maine for the
purpose of any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof, and (ii) hereby waives any right to
trial by jury. Each of the Company, Holdings, Sterling and the Executive
hereby consents to service of process in any such proceeding in any manner
permitted by Maine law, and agrees that service of process by registered or
certified mail, return receipt requested, at its address specified pursuant
to Section 14 hereof is reasonably calculated to give actual notice.
Section 15.08. Arbitration. The parties agree and acknowledge that
(other than actions for injunctive relief pursuant to Section 12 hereof) any
and all disputes arising out of or in connection with this Agreement shall be
resolved by binding arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association ("AAA") before a single arbitrator
selected by AAA. Such arbitration shall be held in Portland, Maine.
Section 15.09. Disclaimer of Damages. The maximum liability of the
Company on account of this Agreement (or any breach of this Agreement) shall
under no circumstances exceed the amount of salary, benefits and other
compensation (including severance) required to be paid hereunder. Without
limiting the generality of the foregoing, Executive hereby acknowledges that
the Company and Holdings, acting through the Board, shall have the right and
power to remove Executive from office and terminate his employment at any
time and for any reason whatsoever without incurring liability to Executive
other than the payment of such salary, benefits and other compensation
(including severance) as may be required under this Agreement, including
without limitation liability in connection with claims by the Executive that
such termination, in and of
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itself, has damaged the Executive's career or prospects for securing other
employment, or that such termination has impaired the value of the
Executive's investment in Holdings. The parties agree that no party to this
Agreement (or any of its affiliates) shall be liable to any other party
hereto for any incidental, consequential, special, exemplary or punitive
damages based on any claim arising out of this Agreement; provided, however,
that the foregoing limitation shall not apply to claims arising out of any
breach by the Executive of Sections 10 or 11 of this Agreement, and that such
limitation, and (in the case of claims by the Executive) the limitation
contained in the first sentence of this Section 15.09, shall not apply to any
defamation, slander, libel or similar claim by the Company or the Executive.
In the event that Executive's employment hereunder terminates, whether
pursuant to Section 8.06 hereof or otherwise, neither the Company nor
Holdings shall be entitled to recover from the Executive any costs of
identifying, engaging or retaining any successor to the Executive.
Section 15.10. Costs of Enforcement. The parties agree and acknowledge
that the prevailing party in any proceeding arising under this Agreement
shall be entitled to receive, in addition to any amounts or benefits to which
he or it is entitled hereunder, all costs (including reasonable attorneys'
fees) incurred by him or it in enforcing or collecting upon any obligation of
any other party under this Agreement.
Section 15.11. Drafting. The parties agree and acknowledge that this
Agreement is the product of arms' length negotiation among the parties, who
have been represented by counsel throughout, and that, accordingly, no party
shall be deemed to be the drafter of this Agreement and no presumptions as to
the construction of any provisions hereof shall be applicable as a
consequence of any party's role in the drafting hereof.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as a sealed instrument as of the day and year first above written.
FAIRCHILD SEMICONDUCTOR CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
FSC SEMICONDUCTOR CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
STERLING HOLDING COMPANY, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Joseph R. Martin
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.01
Historical Pro Forma Pro Forma
---------------------------------------------------- -------------------- --------------------
Fairchild Fairchild Fairchild Holdings
Nine months
ended Year Nine months Year Nine months
Years ended May February ended ended ended ended
---------------------------------------------------- May 26, February 23, May 26, February 23
1992 1993 1994 1995 1996 1996 1997 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) before income
taxes for the period
Before Preferred Stock dividends (34.8) 24.7 125.5 74.3 72.3 67.6 9.6 46.5 (0.4) 37.5 (8.0)
After Preferred Stock dividends 29.1 (15.1)
Fixed Charges:
Interest portion of rent 2.7 2.3 1.5 1.0 1.6 1.2 1.3 1.6 1.3 1.6 1.3
Interest Expense 40.3 29.7 49.3 37.3
Amortization of deferred
financing costs 2.6 1.7 2.6 1.7
---------------------------------------------------------------------------------------------
Total Fixed Charges 2.7 2.3 1.5 1.0 1.6 1.2 1.3 44.5 32.7 53.5 40.3
Preferred Stock Dividend 8.4 7.1
---------------------------------------------------------------------------------------------
Combined noted charges and
preferred stock dividends 2.7 2.3 1.5 1.0 1.6 1.2 1.3 44.5 32.7 61.9 47.4
Earnings:
Net income before tax plus
fixed charges (32.1) 27.0 127.0 75.3 73.9 68.8 10.9 91.0 32.3 91.0 32.3
Net income before tax plus
combined fixed charges (32.1) 27.0 127.0 75.3 73.9 68.8 10.9 91.0 32.3 91.0 32.3
Ratio:
Earnings to fixed charges n/a 11.7 84.7 75.3 46.2 57.3 8.4 2.0 n/a 1.7 N/A
Earnings to combined fixed
charges n/a 11.7 84.7 75.3 46.2 57.3 8.4 2.0 n/a 1.5 n/a
Deficiency of earnings available
to cover:
Fixed charges 34.8 -- -- -- -- -- -- -- (0.4) -- (8.0)
Combined fixed charges and
dividends on Preferred Stock 34.8 (0.4) (15.1)
</TABLE>
<PAGE>
Exhibit 21.01--Subsidiaries of the Company
<TABLE>
<CAPTION>
Name of subsidiary Jurisdiction of incorporation or organization
- ------------------ ---------------------------------------------
<S> <C>
Fairchild Semiconductor Limited United Kingdom
Fairchild Semiconductor GmbH Germany
Fairchild Semiconductor Asia Singapore
Pacific Pte. Ltd.
Fairchild Semiconductor Malaysia
(Malaysia) Sdn. Bhd.
Fairchild Semiconductor Hong Kong Limited Hong Kong
Fairchild Semiconductor Hong Kong Hong Kong
(Holdings) Limited
Fairchild Semiconductor Japan K.K. Japan
Fairchild Semiconductor Srl Italy
</TABLE>
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Fairchild Semiconductor Corporation:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
San Jose, California
May 12, 1997
<PAGE>
Exhibit 25.01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
Section 305(b)(2) _______
-------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
-------------------------
Fairchild Semiconductor Corporation
(Exact name of obligor as specified in its charter)
Delaware 77-0449095
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
333 Western Avenue
South Portland, Maine 04106
(Address of principal executive offices)
-------------------------
10 1/8% Senior Subordinated Note due 2007
(Title of the indenture securities)
<PAGE>
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting Securities of the Trustee
2,999,020 shares of Common Stock - par value $5 per share
4. Trusteeships under Other Indentures
Not applicable.
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters
Not applicable.
2
<PAGE>
6. Voting Securities of the Trustee Owned by the Obligor or its Officials
Not applicable.
7. Voting Securities of the Trustee Owned by Underwriters or their Officials
Not applicable.
8. Securities of the Obligor Owned or Held by the Trustee
Not applicable.
9. Securities of Underwriters Owned or Held by the Trustee
Not applicable.
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Securities Holders of the Obligor
Not applicable.
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor
Not applicable.
12. Indebtedness of the Obligor to the Trustee
Not applicable.
13. Defaults by the Obligor
Not applicable.
14. Affiliations with the Underwriters
Not applicable.
3
<PAGE>
15. Foreign Trustee
Not applicable.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on October
6, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 in an amended filing to an
original Registration Statement filed on August 28,
1995 (Registration No. 33-96262).
T-1.2 - Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit
T-1.4 to Form T-1 filed on October 6, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990 in
an amended filing to an original Registration Statement
filed on August 28, 1995 (Registration No. 33-96262).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising
or examining authority.
NOTE
As of April 21,1997 the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U. S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
4
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of New
York, and State of New York, on the 21st day of April, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
/s/
By: John Guiliano
Vice President
5
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/
-----------------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 75,754
Short-Term Investments 276,399
Securities, Available for Sale 925,886
Loans 1,638,516
Less: Allowance for Credit Losses 13,168
-----------
Net Loans 1,625,348
Premises and Equipment 61,278
Other Assets 120,903
-----------
Total Assets $3,085,568
-----------
-----------
LIABILITIES
Deposits:
Non-Interest Bearing $ 645,424
Interest Bearing 1,694,581
-----------
Total Deposits 2,340,005
Short-Term Credit Facilities 449,183
Accounts Payable and Accrued Liabilities 139,261
-----------
Total Liabilities $2,928,449
-----------
-----------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,926
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 804
-----------
Total Stockholder's Equity 157,119
-----------
Total Liabilities and
Stockholder's Equity $3,085,568
-----------
-----------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
April 9, 1997
<PAGE>
EXHIBIT 99.01
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
FAIRCHILD SEMICONDUCTOR CORPORATION
LETTER OF TRANSMITTAL
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust
BY HAND: BY FACSIMILE:
United States Trust Company of New York United States Trust Company of New York
111 Broadway (212) 420-6152
Lower Level Attn: Corporate Trust
Corporate Trust Window CONFIRM BY TELEPHONE:
New York, New York 10006 (800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR EXISTING NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR
EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE
EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated , 1997
(the "Prospectus") of FAIRCHILD SEMICONDUCTOR CORPORATION (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000
principal amount of its 10 1/8% Senior Subordinated Notes Due 2007 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for each $1,000 principal amount of its outstanding
10 1/8% Senior Subordinated Notes Due 2007 (the "Existing Notes"), of which
$300,000,000 principal amount is outstanding, upon the terms and conditions set
forth in the Prospectus. Other capitalized terms used but not defined herein
have the meaning given to them in the Prospectus.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Existing Note. Interest on the Exchange Notes will accrue from
the last interest payment date on which interest was paid on the Existing Notes
surrendered in exchange therefor or, if no interest has been paid on the
Existing Notes, from the date of original issue of the Existing Notes. Holders
of Existing Notes accepted for exchange will be deemed to have waived the right
to receive any other payments or accrued interest on the Existing Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify holders of the Existing Notes of any extension by means of
a press release or other public announcement prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Existing Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Existing Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures for Tendering Existing Notes" by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Existing Notes; or (iii) tender of Existing
Notes is to be made according to the guaranteed delivery procedures set forth in
the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Existing Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Existing Notes are held of record by DTC who
desires to deliver such Existing Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.
<PAGE>
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER
AND TENDER THEIR EXISTING NOTES MUST COMPLETE THIS
LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
DESCRIPTION OF 10- 1/8% SENIOR SUBORDINATED NOTES DUE 2007 (EXISTING NOTES)
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REGISTERED BY (IF LESS THAN
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) ALL)**
<S> <C> <C> <C>
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered,"
any tendering Holder of Existing Notes will be deemed to have tendered
the entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)." If the
space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to
this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Existing
Notes. All other tenders must be integral multiples of $1,000.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing To be accepted ONLY if certificates for Existing
Notes in a principal amount not tendered or not Notes in a principal amount not tendered or not
accepted for exchange, or Exchange Notes issued accepted for exchange, are to be sent to someone
in exchange for Existing Notes accepted for other than the undersigned, or to the undersigned
exchange, are to be issued in the name of someone at an address other than that shown above.
other than the undersigned, or if the Existing
Notes tendered by book-entry transfer that are
not accepted for exchange are to be credited to
an account maintained by DTC.
Issue certificate(s) to: Mail to:
Name: Name:
Address: Address:
(Include Zip Code) (Include Zip Code)
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
</TABLE>
/ / CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
DTC Book-Entry Account No.: ________________________________________________
Transaction Code No.: ______________________________________________________
/ / CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: _________ Transaction Code Number: _________
2
<PAGE>
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:______________________________________________________________________
Address:___________________________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND ARE RECEIVING EXCHANGE NOTES FOR
YOUR OWN ACCOUNT IN EXCHANGE FOR EXISTING NOTES THAT WERE ACQUIRED AS A
RESULT OF MARKET MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES.
Name:______________________________________________________________________
Address:___________________________________________________________________
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Existing Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Existing Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
Indenture for the Existing Notes and Exchange Notes) with respect to the
tendered Existing Notes with full power of substitution to (i) deliver
certificates for such Existing Notes to the Company, or transfer ownership of
such Existing Notes on the account books maintained by DTC and deliver all
accompanying evidence of transfer and authenticity to, or upon the order of, the
Company and (ii) present such Existing Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Existing Notes, all in accordance with the terms and subject
to the conditions of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Existing Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any Exchange Notes acquired in
exchange for Existing Notes tendered hereby will have been acquired in the
ordinary course of business of the Holder receiving such Exchange Notes, whether
or not such person is the Holder, that neither the Holder nor any such other
person has any arrangement or understanding with any person to participate in
the distribution of such Exchange Notes and that neither the Holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities Act,
of the Company or any of its subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the Exchange Notes issued in exchange for the
Existing Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangements with
3
<PAGE>
any person to participate in the distribution of such Exchange Notes. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes:
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Existing
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offer--Withdrawal
Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Existing Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Existing Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Existing
Notes will be returned (except as noted below with respect to tenders through
DTC), without expense, to the undersigned at the address shown below or at a
different address as may be indicated under "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Existing Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Existing Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the Exchange Notes issued in exchange for
the Existing Notes accepted for exchange and return any Existing Notes not
tendered or not exchanged in the name(s) of the undersigned (or in either such
event in the case of the Existing Notes tendered through DTC, by credit to the
undersigned's account, at DTC). Similarly, unless otherwise indicated under
"Special Delivery Instructions," please send the certificates representing the
Exchange Notes issued in exchange for the Existing Notes accepted for exchange
and any certificates for Existing Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s), unless, in either event, tender is being
made through DTC. In the event that both "Special Payment Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Existing Notes
accepted for exchange and return any Existing Notes not tendered or not
exchanged in the name(s) of, and send said certificates to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation
pursuant to the "Special Payment Instructions" and "Special Delivery
Instructions" to transfer any Existing Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the
Existing Notes so tendered.
Holders of Existing Notes who wish to tender their Existing Notes and (i)
whose Existing Notes are not immediately available or (ii) who cannot deliver
their Existing Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent, or cannot complete the procedure for book-entry
transfer, prior to the Expiration Date, may tender their Existing Notes
according to the guaranteed delivering procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed
4
<PAGE>
Delivery Procedures." See Instruction 1 regarding the completion of the Letter
of Transmittal printed below.
PLEASE SIGN HERE WHETHER OR NOT
EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X
Date
X
Signature(s) of Registered Holder(s) Date
Or Authorized Signatory
</TABLE>
Area Code and Telephone Number ____________________________
The above lines must be signed by the registered Holder(s) of Existing Notes
as their name(s) appear(s) on the Existing Notes or, if the Existing Notes are
tendered by a participant in DTC, as such participant's name appears on a
security position listing as the owner of Existing Notes, or by person(s)
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Existing Notes to which this Letter of Transmittal
relates are held of record by two or more joint Holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must (i)
set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name:___________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
------------------------------------------------------------------
(Authorized Signature)
--------------------------------------------------------------
(Title)
--------------------------------------------------------------
(Name of Firm)
Dated:_______________________________
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter is to be completed by noteholders, either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Existing Notes, or Book-Entry Confirmation, as the case may
be, as well as a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile hereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Existing Notes
tendered hereby must be in denominations of principal amount of maturity of
$1,000 and any integral multiple thereof.
Noteholders whose certificates for Existing Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Existing Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer-- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined in Instruction 4 below), (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Existing Notes and the amount of Existing
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Existing Notes, or a Book-Entry Confirmation, and any other
documents required by this Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter of Transmittal, are received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Existing Notes and
all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Existing Notes are sent by mail, it is
suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit the delivery to the Exchange Agent prior to 5:00 p.m. New York
City time, on the Expiration Date.
See "The Exchange Offer" section in this Prospectus.
2. TENDER BY HOLDER. Only a holder of Existing Notes may tender such
Existing Notes in the Exchange Offer. Any beneficial holder of Existing Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this Letter of Transmittal on his
or her behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his or her Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such holder's name
or obtain a properly completed bond power from the registered holder.
3. PARTIAL TENDERS. Tenders of Existing Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Existing Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of 10 1/8%
Senior
6
<PAGE>
Subordinated Notes Due 2007 (Existing Notes)" above. The entire principal amount
of Existing Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all
Existing Notes is not tendered, then Existing Notes for the principal amount of
Existing Notes not tendered and a certificate or certificates representing
Exchange Notes issued in exchange for any Existing Notes accepted will be sent
to the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal promptly after the
Existing Notes are accepted for exchange.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder of the Existing Notes tendered hereby, the signature
must correspond exactly with the name as written on the face of the certificates
without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Existing Notes specified herein and tendered hereby, no
endorsements of certificates or separate powers of attorney are required. If,
however, the Exchange Notes are to be issued, or any untendered Existing Notes
are to be reissued, to a person other than the registered holder, then
endorsements of any certificates transmitted hereby or separate powers of
attorney are required. Signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the names on the registered holder or
holders appear(s) on the certificate(s) and signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
Endorsements on certificates for Existing Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Existing Notes are tendered (i) by a registered holder of
Existing Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Existing Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter of Transmittal, or (ii) for the account of an
Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Notes or substitute Existing Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Existing Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering
Existing Notes by book-entry transfer may request that Existing Notes not
exchanged be credited to such account
7
<PAGE>
maintained at the Book-Entry Transfer Facility as such noteholder may designate
hereon. If no such instructions are given, such Existing Notes not exchanged
will be returned to the name and address of the person signing this Letter of
Transmittal.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose offered Existing Notes are accepted for exchange must provide the Company
(as payer) with his, her or its correct Taxpayer Identification Number ("TIN"),
which, in the case of an exchanging holder who is an individual, is his or her
social security number. If the Company is not provided with the correct TIN or
an adequate basis for exemption, such holder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS"), and payments made with
respect to Existing Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
To prevent backup withholding, each exchanging holder must provide his, her
or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has been notified by the IRS that he, she or it is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the IRS
has notified the holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Existing Notes are in more than one
name or are not in the name of the actual owner, consult the Substitute Form W-9
for information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Existing Notes for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the Existing Notes tendered hereby, or if tendered Existing
Notes are registered in the name of any person other than the person signing
this Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Existing Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
on any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this letter.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Existing Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Existing Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Existing Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Existing
Notes nor shall any of them incur any liability for failure to give any such
notice.
8
<PAGE>
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. Any tendering
holder whose Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance for additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the address specified in the Prospectus.
9
<PAGE>
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE ENTERING NOTES EXISTING NOTES
SURRENDERED TENDERED ACCEPTED
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
- ------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------ ------------------------------------
</TABLE>
Delivery Prepared by
------------------------------------Checked By
------------------------------------Date
----------------------------------------------
PAYER'S NAME: FAIRCHILD SEMICONDUCTOR CORPORATION
<TABLE>
<S> <C> <C>
Name (if joint names, list first and circle the name of the
person or entity whose number you enter in Part I below. See
instructions if your name has changed.)
Address
------------------------------------------------------------
City, state and ZIP code
-----------------------------------------------------
List account number(s) here (optional)
----------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY PART 1--PLEASE PROVIDE YOUR Social security number
INTERNAL REVENUE SERVICE TAXPAYER IDENTIFICATION NUM- or TIN
BER ("TIN") IN THE BOX AT -----------------------------
RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
PART 2--Check the box if you are NOT subject to backup
PAYER'S REQUEST FOR TIN withholding under the provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified you that you are
no longer subject to backup withholding.
CERTIFICATION--UNDER THE PEN- PART 3--AWAITING TIN / /
ALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PRO-
VIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
Signature
---------------------------
Date
-----------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
<PAGE>
EXHIBIT 99.02
NOTICE OF GUARANTEED DELIVERY
FOR
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
FAIRCHILD SEMICONDUCTOR CORPORATION
As set forth in the Prospectus dated , 1997 (the "Prospectus") of
FAIRCHILD SEMICONDUCTOR CORPORATION (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter of Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's offer to exchange (the "Exchange Offer") all of its outstanding
10 1/8% Senior Subordinated Notes Due 2007 (the "Existing Notes") for its
10 1/8% Senior Subordinated Notes Due 2007, which have been registered under the
Securities Act of 1933, as amended (the "Exchange Notes"), if certificates for
the Existing Notes are not immediately available or if the Existing Notes, the
Letter of Transmittal or any other documents required thereby cannot be
delivered to the Exchange Agent, or the procedure for book-entry transfer cannot
be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as
defined in the Prospectus). This form may be delivered by an Eligible
Institution by hand or transmitted by facsimile transmission, overnight courier
or mail to the Exchange Agent as set forth below. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER:
<S> <C>
United States Trust Company of New United States Trust Company of New
York York
P.O. Box 844 770 Broadway
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attention: Corporate Trust
BY HAND: BY FACSIMILE:
United States Trust Company of New United States Trust Company of New
York York
111 Broadway (212) 420-6152
Lower Level Attention: Corporate Trust
Corporate Trust Window CONFIRM BY TELEPHONE:
New York, New York 10006 (800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Existing Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to FAIRCHILD SEMICONDUCTOR CORPORATION, a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, $ principal amount of Existing Notes pursuant to the
guaranteed delivery procedures set forth in Instruction 1 of the Letter of
Transmittal.
The undersigned understands that tenders of Existing Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Existing Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Existing Notes (if Name(s) of Record Holder(s)
available)
PLEASE PRINT OR TYPE
Principal Amount of Existing Notes Address
Area Code and Tel. No.
Signature(s)
Dated:
If Existing Notes will be delivered by
book-entry transfer at the Depository Trust
Company, Depository Account No.
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Existing Notes exactly as its (their) name(s) appear on
certificates for Existing Notes or on a security position listing as the owner
of Existing Notes, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _______________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Existing Notes tendered
hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents
that such tender of Existing Notes complies with Rule 14e-4 under the Exchange
Act and (c) guarantees that delivery to the Exchange Agent of certificates for
the Existing Notes tendered hereby, in proper form for transfer (or confirmation
of the book-entry transfer of such Existing Notes into the Exchange Agent's
Account at the Depository Trust Company, pursuant to the procedures for
book-entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above within
five New York Stock Exchange ("NYSE") trading days after the execution of this
Notice of Guaranteed Delivery.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD
SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
<TABLE>
<CAPTION>
Name of Firm
<S> <C>
Authorized Signature
Address Name
Please Print or Type
Title
Zip Code
Area Code and Tel. No. Date
Dated:, 1997
</TABLE>
NOTE: DO NOT SEND EXISTING NOTES WITH THIS FORM; EXISTING NOTES SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE NYSE TRADING DAYS AFTER THE EXECUTION OF THIS NOTICE OF GUARANTEED
DELIVERY.
3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> MAY-26-1996 MAY-25-1997
<PERIOD-START> MAY-29-1995 MAY-27-1996
<PERIOD-END> MAY-26-1996 FEB-23-1997
<EXCHANGE-RATE> 1 1
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 93,100 67,300
<CURRENT-ASSETS> 112,300 85,500
<PP&E> 665,400 679,700
<DEPRECIATION> (347,100) (375,900)
<TOTAL-ASSETS> 432,700 390,200
<CURRENT-LIABILITIES> 83,500 76,200
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 349,200 314,000
<TOTAL-LIABILITY-AND-EQUITY> 432,700 390,200
<SALES> 775,400 509,700
<TOTAL-REVENUES> 775,400 509,700
<CGS> 560,300 408,200
<TOTAL-COSTS> 560,300 408,200
<OTHER-EXPENSES> 142,800 91,900
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 72,300 9,600
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 72,300 9,600
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 72,300 9,600
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
