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Data
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ZILOG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 3674 13-3092996
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
910 EAST HAMILTON AVENUE, CAMPBELL, CALIFORNIA 95008, (408) 558-8550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD R. PICKARD, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ZILOG, INC.
910 EAST HAMILTON AVENUE
CAMPBELL, CALIFORNIA 95008
(408) 558-8550
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF CORRESPONDENCE TO:
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KATHARINE A. MARTIN, ESQ. STEPHEN H. SHALEN, ESQ.
PILLSBURY MADISON & SUTRO LLP CLEARY, GOTTLIEB, STEEN & HAMILTON
2550 HANOVER STREET ONE LIBERTY PLAZA
PALO ALTO, CALIFORNIA 94304-1115 NEW YORK, NY 10006
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If 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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
=========================================================================================================================
TITLE OF EACH CLASS OF AGGREGATE PRINCIPAL PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
9 1/2% Senior Secured
Notes due 2005......... $280,000,000 100% $280,000,000 $82,600
=========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
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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.
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
PROSPECTUS
ZILOG, INC.
Offer to Exchange Series B 9 1/2% Senior Secured Notes due
2005, which have been registered under the Securities Act of
1933, as amended, for any and all outstanding Series A 9 1/2%
Senior Secured Notes due 2005
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended.
Zilog, Inc., a Delaware corporation (the "Issuer" or "Zilog"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and, together with this Prospectus, the "Exchange Offer"), to
exchange its Series B 9 1/2% Senior Secured Notes due 2005 (the "New Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus is a part, for the outstanding Series A 9 1/2% Senior
Secured Notes due 2005 of the Issuer (the "Old Notes"). The New Notes and the
Old Notes are collectively referred to herein as the "Notes."
Any and all Old Notes that are validly tendered and not withdrawn on or
prior to 5:00 p.m., New York City time, on the date the Exchange Offer expires,
which will be , 1998 (30 calendar days following the commencement of
the Exchange Offer) unless the Exchange Offer is extended (such date, including
as extended, the "Expiration Date"), will be accepted for exchange. Tenders of
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time on
the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions, which may be waived by the
Issuer, and to the terms of the Registration Rights Agreement, dated as of
February 27, 1998, by and among the Issuer and Goldman Sachs & Co., BancBoston
Securities Inc. and Citicorp Securities, Inc. (the "Initial Purchasers") (the
"Registration Rights Agreement"). Old Notes may only be tendered in integral
multiples of $1,000. See "The Exchange Offer."
The New Notes will be obligations of Zilog and will be entitled to the
benefits of the same Indenture (as defined herein) that governs the Old Notes.
The form and terms of the New Notes are the same in all material respects as the
form and terms of the Old Notes, except that the New Notes do not contain terms
with respect to [liquidated damages provisions] and the New Notes have been
registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof. See "The Exchange Offer" and "Description of
the New Notes."
The New Notes will be represented by permanent global notes in fully
registered form and will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of a nominee of DTC. Beneficial
interests in the permanent global notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants.
The New Notes are being offered hereunder to satisfy certain obligations of
Zilog contained in the Registration Rights Agreement. Based on interpretations
by the staff of the Securities and Exchange Commission (the "Commission"), as
set forth in no-action letters issued to third parties, including Exxon Capital
Holdings Corporation, SEC No-Action Letter (available April 13, 1988), Morgan
Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(collectively, the "Exchange Offer No-Action Letters"), the Issuer believes that
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold or otherwise transferred by each holder (other than a broker-dealer who
acquires such New Notes directly from the Issuer for resale pursuant to Rule
144A under the Securities Act or any other available exemption under the
Securities Act and other than any holder that is an "affiliate" (as defined in
Rule 405 under the Securities Act) of the Issuer) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement with any person to
participate in a distribution of such New Notes. By tendering Old Notes in
exchange for New Notes, each holder, other than a broker-dealer, will represent
to the Issuer that: (i) it is not an affiliate (as defined in Rule 405 under the
Securities Act) of the Issuer; (ii) it is not a broker-dealer tendering Old
Notes acquired for its own account directly from the Issuer; (iii) any New Notes
to be received by it will be acquired in the ordinary course of its business;
and (iv) it is not engaged in, and does not intend to engage in, a distribution
of such New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. If a holder of Old Notes is engaged in or intends to
engage in a distribution of New Notes or has any arrangement or understanding
with respect to the distribution of New Notes to be acquired pursuant to the
Exchange Offer, such holder may not rely on the applicable interpretations of
the staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF
THIS PROSPECTUS.
------------------------
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 , 1998
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Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer (a "Participating Broker-Dealer") must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
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 Participating Broker-Dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. Pursuant to the
Registration Rights Agreement, the Issuer has agreed that it will make this
Prospectus available to any Participating Broker-Dealer for a period of time not
to exceed one year after the date on which the Exchange Offer is consummated for
use in connection with any such resale. See "Plan of Distribution."
The Issuer will not receive any proceeds from the Exchange Offer. The
Issuer has agreed to pay the expenses of the Exchange Offer. No underwriter is
being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes have been designated as eligible for trading in the Private
Offerings, Resale and Trading through Automated Linkages ("PORTAL") market.
Prior to this Exchange Offer, there has been no public market for the New Notes.
If such a market were to develop, the New Notes could trade at prices that may
be higher or lower than their principal amount. The Issuer does not intend to
apply for listing of the New Notes on any securities exchange or for quotation
of the New Notes on The Nasdaq Stock Market's National Market or otherwise. The
Initial Purchasers have previously made a market in the Old Notes, and the
Issuer has been advised that the Initial Purchasers currently intend to make a
market in the New Notes, as permitted by applicable laws and regulations, after
consummation of the Exchange Offer. The Initial Purchasers are not obligated,
however, to make a market in the Old Notes or the New Notes and any such market
making activity may be discontinued at any time without notice at the sole
discretion of the Initial Purchasers. There can be no assurance as to the
liquidity of the public market for the New Notes or that any active public
market for the New Notes will develop or continue. If an active public market
does not develop or continue, the market price and liquidity of the New Notes
may be adversely affected. See "Risk Factors -- Absence of a Public Market."
AVAILABLE INFORMATION
The Issuer is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Issuer will become subject to such requirements upon
the effectiveness of the Registration Statement (as defined below). Pursuant to
the indenture by and among the Issuer and State Street Bank and Trust Company
(as trustee), dated as of February 27, 1998 (the "Indenture"), the Issuer has
agreed to file with the Commission and provide to the holders of the Old Notes
annual reports and the information, documents and other reports which are
required to be delivered pursuant to Sections 13 and 15(d) of the Exchange Act.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by the Issuer with the Commission, through the Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR"), under the Securities Act, with respect
to the New Notes offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to the
Issuer and the securities offered hereby. Although statements concerning and
summaries of certain documents are included herein, reference is made to the
copies of such documents filed as exhibits to the Registration Statement or
otherwise filed with the Commission. These documents may be inspected without
charge at the office of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies may be obtained at fees and
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charges prescribed by the Commission. Copies of such materials may also be
obtained from the Web site that the Commission maintains at http://www.sec.gov.
Zilog(R) and Z-80(R) are trademarks of Zilog, Inc. Trademarks of other
corporations and organizations are also referenced in this Prospectus.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
various provisions of the Securities Act and the Exchange Act. All statements,
other than statements of historical facts, included in this Prospectus that
address activities, events or developments that Zilog expects or anticipates
will or may occur in the future, including such things as future capital
expenditures (including the amount and nature thereof), business strategy and
measures to implement strategy, competitive strengths, goals, expansion and
growth of Zilog's and its subsidiaries' business and operations, product
introduction schedules, plans, references to future success and other such
matters, are forward-looking statements. These statements are based on certain
assumptions and analyses made by Zilog in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform to
Zilog's expectations and predictions is subject to a number of risks and
uncertainties that may cause actual results to differ materially, including the
significant considerations and risks discussed in this Prospectus; general
economic, market or business conditions; the opportunities (or lack thereof)
that may be presented to and pursued by Zilog and its subsidiaries; competitive
actions by other companies; changes in laws or regulations; and other factors,
many of which are beyond the control of Zilog and its subsidiaries.
Consequently, all of the forward-looking statements made in this Prospectus are
qualified by these cautionary statements and there can be no assurance that the
results or developments anticipated by Zilog will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on Zilog and its subsidiaries or their business or operations. The
Issuer expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to these forward-looking statements to reflect events or
circumstances that occur or arise or are anticipated to occur or arise after the
date hereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and any definitive proxy or information statements filed by the
Issuer pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the New Notes offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated herein by reference, or contained in this Prospectus, shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. A COPY OF ANY AND ALL DOCUMENTS INCORPORATED
THEREIN BY REFERENCE (EXCLUDING EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED THEREIN BY REFERENCE) WILL BE PROVIDED WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROSPECTUS IS DELIVERED, UPON
ORAL OR WRITTEN REQUEST OF ANY SUCH PERSON BY FIRST CLASS MAIL OR OTHER EQUALLY
PROMPT MEANS WITHIN ONE BUSINESS DAY AFTER RECEIPT OF SUCH REQUEST. WITH RESPECT
TO DOCUMENTS OF ZILOG INCORPORATED HEREIN BY REFERENCE, REQUESTS SHOULD BE
DIRECTED TO ZILOG, INC., ATTN: INVESTOR RELATIONS MANAGER, 910 EAST HAMILTON
AVENUE, CAMPBELL, CALIFORNIA 95008, (408) 558-8550. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE EXPIRATION DATE, ANY SUCH REQUEST
SHOULD BE MADE BY , 1998.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and the Unaudited Pro Forma Consolidated
Financial Data of the Issuer, including the notes thereto, appearing elsewhere
in this Prospectus. Except as otherwise set forth herein, references herein to
"pro forma" financial data of the Issuer are to financial data of the Issuer
which gives effect to the Recapitalization, including the issuance of the Notes,
the issuance of the Non-voting Common Stock (as defined herein) and the issuance
of the Preferred Stock (as defined herein). All references herein to a fiscal
year refer to the 12 months ended on December 31, of the year referenced. All
references herein to a fiscal quarter refer to a period which is thirteen weeks
in duration (except for the fiscal quarter ended April 5, 1998, which was
fourteen weeks) ending on the last Sunday of each quarter.
THE ISSUER
Zilog is a worldwide designer, manufacturer and marketer of application
specific standard products ("ASSPs") for use in the high-growth consumer
electronics, data communications and computer peripherals end markets. Through
proprietary design technology, Zilog works with customers to customize its ASSPs
to control the basic function and performance of electronic devices. ASSPs
typically comprise some combination of a microprocessor, digital signal
processor, memory and input/output functions on a single semiconductor. Examples
of Zilog's product applications include chips in televisions that provide
picture-in-picture display and in remote control units that send instructions to
televisions and video cassette recorders, and chips that operate keyboards and
mouse-type pointing devices. Through its worldwide distribution network of more
than 120 representatives and distributors, the Issuer supplies over 800
customers with over 700 products. The average life cycles of these products are
over eight years.
The Issuer places significant emphasis on anticipating and meeting its
customers' needs as new electronic devices are designed. As customers "design
in" Zilog's products, the Issuer is able to gain a greater share of its
customers' purchases while maintaining its embedded position within its
customers' existing products. The Issuer believes that this design strategy is
at the core of its ability to achieve a high degree of customer acceptance
within specific applications. Reflecting the proprietary and often sole-source
nature of its products within its customers' applications, the Issuer's
relationships with its top 10 customers average seven years. In addition,
Zilog's customer base includes many leaders in their respective industries,
including Black & Decker, Cellnet, Cisco, DSC Communications, Fujitsu, General
Instrument, Hewlett-Packard, International Business Machines ("IBM"), Logitech,
Lucky Goldstar, Microsoft, Minebea ("NMB"), Samsung, Sharp and VeriFone.
Founded in 1974, Zilog is a pioneer in the semiconductor market. The
Issuer's Z-80(R) product, introduced in 1975, is the largest selling 8-bit
microprocessor in history and is still being sold today. In 1997, Zilog products
based on the Z-80 architecture accounted for approximately $75 million in
revenue, representing 29% of the Issuer's total revenue. Headquartered in
Campbell, California, the Issuer has two fabrication facilities in Nampa, Idaho
and two test and assembly centers in the Philippines. For the three months ended
April 5, 1998, Zilog had revenue of $49.5 million and pro forma EBITDA of $2.5
million.
THE INDUSTRY
According to trade statistics published by the Semiconductor Industry
Association (the "SIA"), revenue for the worldwide semiconductor market was $137
billion in 1997. The overall semiconductor market has expanded at a compound
annual growth rate of 17% from 1991 to 1997. The semiconductor industry is
comprised of three broad product segments: logic devices, including
microprocessors, microcontrollers and digital signal processors, which process
data (approximately 50% of total industry sales); memory devices, which store
data (approximately 22% of total industry sales); and analog and discrete
devices, which process electronic signals (approximately 28% of total industry
sales). Zilog develops, manufactures and markets products in the logic device
segment. The logic device segment further consists of three distinct categories:
(i) general purpose logic products, such as the Intel Pentium(R) microprocessor,
which are neither application
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nor customer specific, are used for a wide array of logic-related functions and
are typically capable of more functions than are actually required for any given
application; (ii) application or customer specific integrated circuits
("ASICs"), which are designed to meet particular application requirements, are
usually proprietary to one customer and are generally produced in relatively
small volumes; and (iii) ASSPs, which are designed for a particular application,
but are not proprietary to a single customer. The Issuer's ASSPs typically
comprise some combination of a microprocessor, digital signal processor, memory
and input/output functions on a single semiconductor to control the basic
function and performance of its customers' products.
Revenue for the ASSP segment of the semiconductor industry has grown from
$14.6 billion in 1994 to $27.8 billion in 1997, a compound annual growth rate of
approximately 24%, and is forecasted to grow to $44.6 billion by the year 2000.
The Issuer believes that the market for ASSPs is distinct from other logic and
memory markets in that it is less cyclical and that ASSPs typically have longer
product life cycles. Applications in the ASSP market generally do not demand the
processing power of general purpose microprocessors such as the Intel Pentium(R)
microprocessor, which operates personal computers; rather, Zilog's products
operate or perform specialized functions in everyday products such as
telephones, garage door openers and televisions, all of which exhibit growing
degrees of silicon content.
THE ISSUER'S STRENGTHS
As a pioneer in the industry, Zilog has established a well-recognized and
respected brand name in its markets and has developed strong, long-term
relationships with numerous customers who are leaders in their respective
markets. The Issuer's franchise is built upon several specific strengths,
including the following:
LEADING MARKET POSITION WITH HIGH QUALITY CUSTOMER BASE. The Issuer
believes it maintains a leading market position in several niches, including
television remote controls, keyboards and mouse-type pointing devices.
Approximately 70% of its revenue is derived from relationships with customers
for a particular proprietary product design. The Issuer believes that these
relationships provide a significant recurring revenue stream and represent a
strong competitive advantage for Zilog as a redesign of the customer's hardware
and software to use a competitor's ASSP would often involve substantial costs to
the customer. In addition, Zilog believes that it has established strong,
long-term relationships by partnering with customers throughout the interactive
product design and manufacturing process. Currently, the Issuer sells to more
than 800 customers worldwide, and its relationships with its top 10 customers
average seven years. In consumer electronics, Zilog sells to customers that
include Black & Decker, Samsung, SGS-Thomson, Sony and Zenith. In data
communications, Zilog's customers include Lucent Technologies ("Lucent"), Cisco,
IBM, Motorola and VeriFone. Zilog's computer peripheral customers include
Hewlett-Packard, Microsoft and NMB, the largest keyboard manufacturer in the
world.
DIVERSIFIED PRODUCTS AND MARKETS. Within the consumer electronics, data
communications and computer peripherals end markets, Zilog sells and markets
over 700 products to more than 800 customers worldwide. The Issuer sells either
directly through its 29 sales offices or indirectly through its more than 120
sales representatives and distributors located throughout the world. In 1997, no
single product or single customer accounted for more than 8% of total revenue.
The Issuer believes that its product and market diversity, its independence from
reliance on any one customer and its numerous sales personnel and locations
around the world help to insulate the Issuer from some of the volatility that
affects other companies in the semiconductor industry. The Issuer also believes
no competitor addresses exactly the same diverse set of markets.
COMPREHENSIVE PROPRIETARY DESIGN LIBRARY. Based upon over 20 years of
design expertise, Zilog's proprietary design library allows customers to select
or modify proven components that can be combined and assembled to create new
products or new applications. Zilog's customers that have designed their
products using one or more of the Issuer's devices can redesign and upgrade to
new Zilog ASSPs, often without the loss of hardware or software compatibility.
This methodology allows customers to leverage Zilog's vast component library to
advance their own product development processes. Because of extensive
customization, Zilog's customers depend upon Zilog's expertise for much of their
end-product functionality. A Zilog customer switching to a non-Zilog design
could incur significant learning, design, software and manufacturing costs.
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OWNERSHIP OF STATE-OF-THE-ART MANUFACTURING FACILITIES. Over the last three
years, Zilog has spent $235 million to increase capacity and improve efficiency
by building a new wafer fabrication facility, renovating an existing facility
and equipping both facilities with state-of-the-art equipment. These facilities
contain fabrication modules equipped to manufacture products with competitive
submicron dimensions. Overall, the Issuer estimates that it is operating its
fabrication facilities at 60% capacity, enabling Zilog to capitalize on future
upswings in industry demand. The present building also has sufficient space and
infrastructure to accommodate the additional machinery for a 50% increase in
total capacity. The Issuer believes that its manufacturing facilities will
remain competitive in the current market environment without additional
significant capital expenditures, and that the Issuer's manufacturing, assembly
and test facilities are among the most efficient in the industry.
BUSINESS STRATEGY
Under the leadership of Curtis J. Crawford, formerly Group President of the
Microelectronics Group and President of the Intellectual Property Division of
Lucent, and now Zilog's President and Chief Executive Officer ("CEO"), the
Issuer intends to capitalize on its core strengths with the following business
strategies:
INCREASE CUSTOMER FOCUS. The Issuer intends to increase the number of field
application engineers, sales personnel, design engineers and distribution
partners to respond more effectively to its customers' changing product needs.
As competition occurs primarily at the design stage, Zilog believes that once a
customer commits to a design (a "design win"), it typically results in a
proprietary supplier relationship. Zilog believes a strong focus on design wins
through an increase in field application engineers and improvements in design
tools should lead to an increased base of recurring revenue from its customers.
The Issuer increased its design wins from 180 in 1995 to over 220 in each of
1996 and 1997.
BROADEN APPLICATIONS. Utilizing its library of proprietary designs, the
Issuer has introduced an average of 39 new products annually since 1993,
including 36 new products in 1997. The Issuer's strategy is to upgrade its
existing product lines to meet the changing requirements of evolving
applications and to design new products in new markets. In addition to releasing
new or upgraded products in its historic market applications (e.g., keyboards,
mouse-type pointing devices and television remote controls), Zilog expects to
introduce products in several new areas in 1998, including transaction
processing (credit card) modems, internet-access devices for televisions and
telephones and enhanced universal serial bus ("USB") keyboard and pointing
device microcontrollers for personal computers.
EXPAND PRODUCT CAPABILITIES. The Issuer's position within its markets
depends in part upon the strength and capabilities of its library of proprietary
designs. Zilog intends to expand its existing library by recruiting additional
engineers, investing in computer-aided development tools to assist the Issuer's
design engineers and acquiring additional design technology from third parties.
By investing in its design library, Zilog will be able to offer more products
with broader functionalities and enhance its competitive position with new and
existing customers.
STRENGTHEN INTERNAL SYSTEMS AND CUSTOMER SUPPORT TOOLS. The Issuer intends
to increase the efficiency of its experienced employee workforce by investing in
appropriate productivity tools and upgrading office workspace. For example, the
Issuer intends to invest over $8 million in 1998 in improved internal systems
such as E-mail, computer networks and voicemail. In addition, the Issuer intends
to move its headquarters to a nearby facility providing approximately 30,000
additional square feet of office space. Zilog also intends to improve its
offering of customer support tools such as compilers, emulators and debuggers,
which facilitate customer adoption of Zilog products. With these tools, Zilog
believes the value of its existing product portfolio to its customers, as well
as its ability to create new products, should be significantly enhanced.
LEVERAGE MANUFACTURING CAPABILITIES. The Issuer's ownership of a
substantial portion of its manufacturing resources provides an important
strategic advantage. Direct control over fabrication, assembly and test
operations allows Zilog to offer its customers continuous supply, shortens the
Issuer's design and production cycles and allows Zilog to capture the
manufacturing margin. Having spent $235 million over the last three
6
<PAGE> 9
years in order to increase capacity and improve efficiency in its manufacturing
facilities, Zilog believes it is well positioned to increase revenue and margins
in the future.
THE RECAPITALIZATION
The Issuer was established in 1974 and became a wholly owned subsidiary of
Exxon Corporation in 1981. In 1989, Zilog was acquired in a leveraged buyout
transaction sponsored by Warburg Pincus Capital Company, L.P. In 1991, Zilog
became a publicly traded company, and its Common Stock was initially listed on
Nasdaq and traded under the symbol "ZLOG". Zilog's Common Stock was subsequently
listed on the New York Stock Exchange and traded under the symbol "ZLG" until
February 27, 1998.
Pursuant to an Agreement and Plan of Merger, dated as of July 20, 1997, as
amended (the "Merger Agreement"), entered into by and among TPG Partners II,
L.P., a Delaware limited partnership ("TPG II"), TPG Zeus Acquisition
Corporation, a Delaware corporation ("Merger Sub"), and Zilog, Merger Sub merged
with and into Zilog (the "Merger"), and Zilog continues as the surviving
corporation. By virtue of the Merger, shares of Zilog common stock having an
implied value of approximately $7.5 million held by certain of Zilog's
stockholders were converted into common stock of Zilog. All other shares of
outstanding common stock were converted into the right to receive cash
consideration as set forth in the Merger Agreement. In the Merger, the common
stock of Merger Sub was converted into new shares of Common Stock, Non-Voting
Common Stock and Preferred Stock of Zilog. Also, in connection with the Merger,
options to purchase shares of Common Stock issued under Zilog's stock plans
outstanding immediately prior to the consummation of the Merger were canceled
and, in certain instances, were converted into the right to receive an amount in
cash, as set forth in the Merger Agreement. Zilog paid approximately $4.1
million to redeem outstanding options as a result of the Merger. The Merger was
approved by Zilog's stockholders on January 27, 1998.
Effective immediately after the consummation of the Merger on February 27,
1998, the Board of Directors of Zilog, the surviving corporation, declared a
4-for-1 stock split in the form of a dividend for each share of Common Stock and
Class A Non-Voting Common Stock and designated 1,500,000 shares of Series A
Cumulative Preferred Stock. Unless otherwise specified, all share amounts in
this Prospectus do not give effect to this stock split.
Cash funding requirements for the Merger were satisfied through the
following: (i) a cash equity investment by TPG II and certain other investors of
$117.5 million in Merger Sub (the "Equity Investment"); (ii) use of
approximately $36.1 million of Zilog's cash and cash equivalents; and (iii)
$280.0 million of gross proceeds from the offering of the Old Notes (the
"Offering"). See "Management's Discussion and Analysis of Financial Condition
and Results of Operation -- Liquidity and Capital Resources." Upon consummation
of the Merger, Zilog became able to borrow up to $25.0 million under a new
senior secured revolving credit facility with Goldman Sachs Credit Partners L.P.
as arranger and syndication agent and BankBoston, N.A. as administrative agent
(the "Revolving Credit Facility").
The Merger was accounted for as a recapitalization transaction for
accounting purposes. The Merger, the Equity Investment, and the Offering are
herein referred to collectively as the "Recapitalization." See "The
Recapitalization."
NEW CHIEF EXECUTIVE OFFICER
Curtis J. Crawford became President, CEO and a Director of Zilog upon
completion of the Recapitalization. Mr. Crawford, 50, has more than 24 years of
experience in software, systems and semiconductors. He recently served as Group
President of the Microelectronics Group and President of the Intellectual
Property Division of Lucent, a leading designer and manufacturer of a wide range
of communications technologies.
As President of Lucent's Microelectronics Group, Mr. Crawford managed the
worldwide development, design, manufacture and sale of semiconductors and
optoelectronic components for applications in telecommunications, networked
computing, multimedia, wireless and consumer electronics. During Mr. Crawford's
tenure, the Microelectronics Group grew external sales from $0.8 billion in 1991
to $2.8 billion in 1997,
7
<PAGE> 10
representing a 23% compound annual growth rate. As President of Lucent's
Intellectual Property Division, Mr. Crawford managed a broad portfolio of
technology patents and licenses.
TEXAS PACIFIC GROUP
Texas Pacific Group ("TPG") was founded by David Bonderman, James G.
Coulter and William S. Price, III in 1992 to pursue public and private
investment opportunities through a variety of methods, including leveraged
buyouts, recapitalizations, joint ventures, restructurings and strategic public
securities investments. The principals of TPG manage TPG Partners, L.P. and TPG
II, both Delaware limited partnerships, which, with affiliated partnerships,
have aggregate committed capital of over $3.2 billion. Among TPG's investments
are technology and telecommunications companies Paradyne Corporation, GlobeSpan
Semiconductor and GT Com. Other TPG portfolio companies include America West
Airlines, Belden & Blake, Beringer Wine Estates, Del Monte Foods, Denbury
Resources, Ducati Motor, Favorite Brands International, Genesis ElderCare, J.
Crew, Virgin Entertainment, and Vivra Specialty Partners. In addition, the
principals of TPG led the $9 billion reorganization of Continental Airlines in
1993.
OTHER
Zilog's principal executive offices are located at 910 East Hamilton
Avenue, Campbell, California 95008-6600, and its telephone number is (408)
558-8550.
SUMMARY OF THE EXCHANGE OFFER
REGISTRATION RIGHTS
AGREEMENT..................... The Old Notes were issued on February 27, 1998
to the Initial Purchasers. The Initial
Purchasers placed the Old Notes with
institutional investors. In connection
therewith, the Issuer and the Initial
Purchasers entered into the Registration Rights
Agreement, providing, among other things, for
the Exchange Offer. See "The Exchange Offer."
THE EXCHANGE OFFER............ New Notes are being offered in exchange for an
equal principal amount of Old Notes. As of the
date hereof, $280,000,000 aggregate principal
amount of Old Notes is outstanding. Old Notes
may be tendered only in integral multiples of
$1,000.
RESALE OF NEW NOTES........... Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to third parties, including the Exchange
Offer No-Action Letters, the Issuer believes
that the New Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold or otherwise transferred by each holder
thereof (other than a broker-dealer who
acquires such New Notes directly from the
Issuer for resale pursuant to Rule 144A under
the Securities Act or any other available
exemption under the Securities Act and other
than any holder that is an "affiliate" (as
defined under Rule 405 of the Securities Act)
of the Issuer) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such New
Notes are acquired in the ordinary course of
such holder's business and such holder is not
engaged in, and does not intend to engage in, a
distribution of such New Notes and has no
arrangement with any person to participate in a
distribution of such New Notes. By tendering
the Old Notes in exchange for New Notes, each
holder, other than a broker-dealer, will
represent to the Issuer that: (i) it is not an
affiliate (as defined in Rule 405 under the
Securities Act) of the
8
<PAGE> 11
Issuer; (ii) it is not a broker-dealer
tendering Old Notes acquired for its own
account directly from the Issuer; (iii) any New
Notes to be received by it were acquired in the
ordinary course of its business; and (iv) it is
not engaged in, and does not intend to engage
in, a distribution of such New Notes and has no
arrangement or understanding to participate in
a distribution of the New Notes. If a holder of
Old Notes is engaged in or intends to engage in
a distribution of the New Notes or has any
arrangement or understanding with respect to
the distribution of the New Notes to be
acquired pursuant to the Exchange Offer, such
holder may not rely on the applicable
interpretations of the staff of the Commission
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any secondary
resale transaction. Each Participating
Broker-Dealer that receives New Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of such New
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a
prospectus, a Participating 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 Participating Broker-Dealer in
connection with resales of New Notes received
in exchange for Old Notes where such Old Notes
were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Issuer has agreed that it will make this
Prospectus available to any Participating
Broker-Dealer for a period of time not to
exceed one year after the date on which the
Exchange Offer is consummated for use in
connection with any such resale. See "Plan of
Distribution." To comply with the securities
laws of certain jurisdictions, it may be
necessary to qualify for sale or register the
New Notes prior to offering or selling such New
Notes. The Issuer has agreed, pursuant to the
Registration Rights Agreement and subject to
certain specified limitations therein, to
register or qualify the New Notes for offer or
sale under the securities or "blue sky" laws of
such jurisdictions as may be necessary to
permit consummation of the Exchange Offer.
CONSEQUENCES OF FAILURE TO
EXCHANGE OLD NOTES............ Upon consummation of the Exchange Offer,
subject to certain exceptions, holders of Old
Notes who do not exchange their Old Notes for
New Notes in the Exchange Offer will no longer
be entitled to registration rights and will not
be able to offer or sell their Old Notes,
unless such Old Notes are subsequently
registered under the Securities Act (which,
subject to certain limited exceptions, the
Issuer will have no obligation to do), except
pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the
Notes -- Consequences of Failure to Exchange"
and "The Exchange Offer -- Terms of the
Exchange Offer."
9
<PAGE> 12
EXPIRATION DATE............... 5:00 p.m., New York City time, on ,
1998 (30 calendar days following the
commencement of the Exchange Offer), unless the
Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date
and time to which the Exchange Offer is
extended.
INTEREST ON THE NEW NOTES..... Interest on the New Notes will accrue and be
payable, at a rate of 9 1/2% per annum, on
March 1 and September 1 of each year commencing
September 1, 1998.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange
Offer is subject to certain customary
conditions, which may, under certain
circumstances, be waived by the Issuer. See
"The Exchange Offer -- Conditions." Except for
the requirements of applicable federal and
state securities laws, there are no federal or
state regulatory requirements to be complied
with or obtained by the Issuer connection in
with the Exchange Offer.
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, together with the Old Notes to be
exchanged and any other required documentation
to the Exchange Agent (as defined herein) at
the address set forth herein or effect a tender
of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for
Tendering" and "-- Book Entry Transfer."
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes and a properly completed Letter
of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date may tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. To withdraw a tender of
Old Notes, a written notice of withdrawal must
be received by the Exchange Agent at its
address set forth herein under "The Exchange
Offer -- Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES......... Subject to certain conditions, any and all Old
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date will be
accepted for exchange. The New Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer -- Terms of the
Exchange Offer."
CERTAIN TAX CONSIDERATIONS.... The exchange of New Notes for Old Notes should
not be considered a sale or exchange or
otherwise a taxable event for Federal
10
<PAGE> 13
income tax purposes. See "Certain United States
Federal Tax Considerations."
EXCHANGE AGENT................ State Street Bank and Trust Company is serving
as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
FEES AND EXPENSES............. All expenses incident to consummation of the
Exchange Offer and compliance with the
Registration Rights Agreement will be borne by
the Issuer. See "The Exchange Offer -- Fees and
Expenses."
USE OF PROCEEDS............... There will be no cash proceeds payable to the
Issuer from the issuance of the New Notes
pursuant to the Exchange Offer. See "Use of
Proceeds."
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer relates to the exchange of up to $280,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be entitled to the benefits of the same Indenture
that governs the Old Notes and that will govern the New Notes. The form and
terms of the New Notes are the same in all material respects as the form and
terms of the Old Notes, except that the New Notes have been registered under the
Securities Act and therefore will not bear legends restricting the transfer
thereof. See "Description of the New Notes."
MATURITY DATE................. March 1, 2005.
GUARANTEES.................... The Issuer's payment obligations under the
Notes will be jointly and severally guaranteed
(the "Subsidiary Guarantees") by each of the
Issuer's domestic subsidiaries and each other
subsidiary of the Issuer that guarantees any
indebtedness of the Issuer or any other
subsidiary of the Issuer. See "Description of
Notes -- Guarantees."
INTEREST PAYMENT DATES........ March 1 and September 1 of each year,
commencing September 1, 1998.
OPTIONAL REDEMPTION........... Except as described below, the New Notes are
not redeemable at the Issuer's option prior to
March 1, 2002. From and after March 1, 2002,
the New Notes will be subject to redemption at
the option of the Issuer, in whole or in part,
upon not less than 30 nor more than 60 days'
notice, at the redemption prices set forth
herein, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
redemption.
In addition, prior to March 1, 2001, up to 35%
of the aggregate principal amount of the New
Notes will be redeemable at the option of the
Issuer from the net proceeds of one or more
Public Equity Offerings (as defined herein) at
a price of 109.50% of the principal amount of
the Notes, plus accrued and unpaid interest and
Liquidated Damages (as defined herein), if any,
to the date of redemption; provided that at
least $100.0 million in aggregate principal
amount of New Notes remains outstanding
immediately after each such redemption; and
provided, further, that the notice of any such
redemption shall occur within 90 days of the
date of closing of such Public Equity Offering.
SECURITY...................... The New Notes and the Subsidiary Guarantees
will be secured by: (a) a first priority
security interest in substantially all of the
11
<PAGE> 14
Issuer's and its domestic Subsidiaries' real
and personal property, including all plant and
equipment at operating facilities, subject to
Permitted Liens (as defined herein), and
excluding, among other things, inventory,
accounts receivable and the proceeds thereof
and (b) a pledge of all of the capital stock of
the Issuer's domestic subsidiaries and 65% of
the capital stock of the Issuer's foreign
subsidiaries (collectively, the "Collateral").
The Collateral also includes proceeds resulting
from an Event of Loss (as defined herein) or a
Collateral Asset Sale (as defined herein)
pending application thereof. No appraisals of
any of the Collateral have been prepared by or
on behalf of the Issuer in connection with the
sale of the Notes. The value of the Collateral
at any time will depend on market and other
economic conditions, including the availability
of suitable buyers for the Collateral. See
"Description of Notes -- Security."
CHANGE OF CONTROL............. In the event of a Change of Control, the Issuer
will be required to make an offer to repurchase
the New Notes at a price equal to 101% of the
principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. See
"Risk Factors -- Ability to Effect Repurchase
of the Notes upon Change of Control."
RANKING....................... The New Notes and the Subsidiary Guarantees
will be senior secured indebtedness of the
Issuer and the Guarantors ranking pari passu in
right of payment with all other senior
borrowings of the Issuer and the Guarantors and
the New Notes will be structurally subordinated
to all indebtedness and other liabilities and
commitments (including trade payables and
capital lease obligations) of the Issuer's
foreign subsidiaries. Any right of the Issuer
to receive assets of any of its foreign
subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the
holders of the New Notes to participate in
those assets) will be effectively subordinated
to the claims of that subsidiary's creditors,
except to the extent that the Issuer is itself
recognized as a creditor of such subsidiary, in
which case the claims of the Issuer would still
be subordinate to any security in the assets of
such subsidiary and any indebtedness of such
subsidiary senior to that held by the Issuer.
As of April 5, 1998, the indebtedness
(including trade payables and capital lease
obligations) of the Issuer's foreign
subsidiaries was $1.9 million. See "Description
of Notes -- Ranking."
RESTRICTIVE COVENANTS......... The Indenture governing the New Notes contains
certain covenants that among other things,
limit the ability of the Issuer and its
Subsidiaries to incur additional Indebtedness
(as defined herein), issue Disqualified Stock
(as defined herein), pay dividends or
distributions, make investments or certain
other Restricted Payments (as defined herein),
enter into certain transactions with
affiliates, dispose of certain assets, incur
liens and engage in mergers and consolidations.
See "Description of Notes."
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<PAGE> 15
USE OF PROCEEDS
There will be no cash proceeds payable to the Issuer from the issuance of
the New Notes pursuant to the Exchange Offer. The proceeds from the sale of the
Old Notes were used to fund the Recapitalization. See "Use of Proceeds" and "The
Recapitalization."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
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<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth below are summary historical and pro forma financial data of the
Issuer. The summary historical consolidated financial data as of December 31,
1997 and for each of the three years in the period ended December 31, 1997 have
been derived from, and should be read in conjunction with, consolidated
financial statements that have been audited by Ernst & Young LLP, independent
auditors, appearing elsewhere in this Prospectus. The summary historical
consolidated financial data for each of the two years in the period ended
December 31, 1994 have been derived from consolidated financial statements that
have been audited by Ernst & Young LLP, independent auditors, which are not
included or incorporated herein. The summary historical financial data as of
April 5, 1998 and for the three months in the periods ended March 30, 1997 and
April 5, 1998 have been derived from the unaudited financial statements of the
Company included elsewhere in this Prospectus. The Pro Forma Consolidated
Statements of Operations Data and Other Data for the year ended December 31,
1997 and the three months in the period ended April 5, 1998 give effect to the
Recapitalization as though it had occurred on January 1, 1997. The pro forma
adjustments as applied to the respective historical consolidated financial
information of the Issuer reflect and account for the Merger as a
recapitalization. Accordingly, the historical basis of the Issuer's assets and
liabilities has not been impacted by the Recapitalization. The information
presented below should be read in conjunction with "Capitalization," "Unaudited
Pro Forma Consolidated Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the Consolidated
Financial Statements and Notes thereto and other financial information included
elsewhere in this Prospectus. See also "Available Information" and "Disclosure
Regarding Forward-Looking Statements."
<TABLE>
<CAPTION>
HISTORICAL
--------------------
HISTORICAL THREE MONTHS PRO
---------------------------------------------------- PRO FORMA ENDED FORMA
YEAR ENDED DECEMBER 31, ------------ -------------------- --------
---------------------------------------------------- DECEMBER 31, MARCH 30, APRIL 5, APRIL 5,
1993 1994 1995 1996 1997 1997 1997 1998 1998
-------- -------- -------- -------- -------- ------------ --------- -------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Sales..................... $202,727 $223,316 $265,122 $298,425 $261,097 $261,097 $70,136 $ 49,539 $ 49,539
Costs and expenses:
Cost of sales............. 105,727 111,288 135,066 175,319 171,722 171,722 44,028 40,767 40,767
Research and
development............. 20,833 23,048 24,546 30,548 30,467 30,467 6,632 8,104 8,104
Selling, general and
administrative.......... 37,619 37,790 41,943 47,934 47,806 47,806 12,052 13,941 13,941
Recapitalization.......... -- -- -- -- -- -- -- 13,304 --
-------- -------- -------- -------- -------- -------- ------- -------- --------
Total costs and
expenses................ 164,179 172,126 201,555 253,801 249,995 249,995 62,712 76,116 62,812
-------- -------- -------- -------- -------- -------- ------- -------- --------
Operating income (loss)... 38,548 51,190 63,567 44,624 11,102 11,102 7,424 (26,577) (13,273)
Other income (expense):
Interest income........... 2,463 2,496 2,676 2,443 2,892 1,596 595 1,159 1,099
Interest expense.......... -- -- -- -- -- (28,429) -- (2,978) (7,339)
Other..................... 813 860 (360) (911) 832 832 (880) (88) (88)
-------- -------- -------- -------- -------- -------- ------- -------- --------
Income (loss) before
income taxes............ 41,824 54,546 65,883 46,156 14,826 (14,899) 7,139 (28,484) (19,601)
Provision (benefit) for
income taxes............ 15,057 19,637 23,418 16,155 2,965 (7,439) 2,356 (8,545) (5,436)
-------- -------- -------- -------- -------- -------- ------- -------- --------
Net income (loss)......... $ 26,767 $ 34,909 $ 42,465 $ 30,001 $ 11,861 $ (7,460) $ 4,783 $(19,939) $(14,165)
======== ======== ======== ======== ======== ======== ======= ======== ========
OTHER DATA:
EBITDA(1)................. $ 55,489 $ 72,908 $ 90,421 $ 92,028 $ 75,684 $ 75,684 $21,694 $(10,790) $ 2,514(2)
Depreciation.............. 16,128 20,858 27,214 48,315 63,750 63,750 15,150 16,015 16,015
Capital expenditures...... 39,658 60,708 79,346 117,065 38,437 38,437 11,991 7,260 7,260
Ratio of earnings to fixed
charges(3).............. 53.9x 79.7x 81.3x 56.4x 18.2x N/M 34.1x N/M N/M
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA HISTORICAL
------------ ------------ -------------
DECEMBER 31, DECEMBER 31, APRIL 5,
1997 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short-term investments(2)........ $106,311 $ 70,446 $66,890
Working capital............................................. 131,594 92,405 93,791
Net property, plant and equipment........................... 223,577 223,577 214,962
Total assets................................................ 415,639 392,574 373,105
Total debt.................................................. -- 280,000 280,000
Stockholders' equity........................................ 340,482 34,093 23,204
</TABLE>
- ---------------
(1) EBITDA represents earnings (losses) from operations before interest income
and expense (including amortization of deferred financing costs), income
taxes, depreciation, amortization of goodwill and non-cash stock option
compensation expenses. EBITDA is presented because it is a widely accepted
financial indicator of a leveraged company's ability to service and/or incur
indebtedness and because management believes that EBITDA is a relevant
measure of the Issuer's ability to generate cash without regard to the
Issuer's capital structure or working capital needs. EBITDA as presented may
not be comparable to similarly titled measures used by other companies,
depending upon the non-cash charges included. When evaluating EBITDA,
investors should consider that EBITDA (i) should not be considered in
isolation but together with other factors which may influence operating and
investing activities, such as changes in operating assets and liabilities
and purchases of property and equipment; (ii) is not a measure of
performance calculated in accordance with generally accepted accounting
principles; (iii) should not be construed as an alternative or substitute
for income from operations, net income or cash flows from operating
activities in analyzing the Issuer's operating performance, financial
position or cash flows; and (iv) should not be used as an indicator of the
Issuer's operating performance or as a measure of its liquidity.
(2) Reflects the elimination of certain non-recurring Merger related expenses.
See "Unaudited Pro Forma Consolidated Information."
(3) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes, plus fixed charges and (ii)
fixed charges consist of interest expense incurred and the estimated portion
of rental expense deemed by the Company to be representative of the interest
factor of rental payments under operating leases. The pro forma ratio of
earnings to fixed charges reflects the interest expense on the Notes, as if
the Notes had been issued at the beginning of the respective periods
presented. On a pro forma basis, for the year ended December 31, 1997 and
the three months ended April 5, 1998, the deficiency of earnings from
continuing operations before income taxes to cover fixed charges was $14.9
million and $19.6 million, respectively. For the historical three months
ended April 5, 1998, the deficiency of earnings from continuing operations
before income taxes to cover fixed charges was $28.5 million.
15
<PAGE> 18
RISK FACTORS
Prospective holders of the New Notes should carefully consider the
following factors in addition to the other information contained and
incorporated by reference in this Prospectus before making an investment in the
Notes offered hereby. This Prospectus contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain factors and uncertainties set forth below and
elsewhere in this Prospectus. See "Disclosure Regarding Forward-Looking
Statements."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS
The Issuer has incurred substantial indebtedness in connection with the
Recapitalization. At April 5, 1998, Zilog had (i) $280 million of consolidated
long-term indebtedness and (ii) equity of $23.2 million. On a pro forma basis,
the Issuer's earnings would have been insufficient to cover fixed charges by
$19.6 million for the three months ended April 5, 1998.
The Issuer and its Subsidiaries also may incur additional indebtedness in
the future, subject to the limitations imposed by the Indenture dated as of
February 27, 1998 by and between the Issuer, certain of its subsidiaries and
State Street Bank and Trust Company, as trustee (the "Indenture"). The high
degree to which the Issuer is leveraged may have important consequences to
Zilog, including the following: (i) Zilog's ability to obtain additional
financing for future acquisitions (if any), working capital, capital
expenditures, product development or other purposes may be impaired or any such
financing may not be available on terms favorable to Zilog; (ii) a substantial
portion of Zilog's cash flow available from operations after satisfying certain
liabilities arising in the ordinary course of business will be dedicated to the
payment of debt service, thereby reducing funds that would otherwise be
available to Zilog; (iii) a decrease in net operating cash flows or an increase
in expenses of Zilog could make it difficult for Zilog to meet its debt service
requirements or force it to modify its operations; and (iv) high leverage may
place Zilog at a competitive disadvantage, limit its flexibility in reacting to
changes in its operating environment and make it vulnerable to a downturn in its
business or the economy generally. Moreover, the degree to which the Issuer is
leveraged could prevent it from repurchasing all of the New Notes tendered to it
upon the occurrence of a Change of Control. See "-- Ability to Effect Repurchase
of the New Notes upon Change of Control."
In order to satisfy the Issuer's obligations under the New Notes and any
future obligations under the Revolving Credit Facility, the Issuer will be
required to generate substantial operating cash flow. The ability of the Issuer
to meet debt service and other obligations or to refinance any such obligation
will depend on the future performance of the Issuer, which will be subject to
prevailing economic conditions and to financial, business and other factors,
certain of which may be beyond the control of the Issuer. While the Issuer
believes that, based on current levels of operations and its business plan, it
will be able to meet its debt service and other obligations or to refinance its
indebtedness, there can be no assurances with respect thereto. See "Unaudited
Pro Forma Consolidated Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' for information regarding the operating cash flow and debt
service obligations of the Issuer.
RISK OF NOT REALIZING COLLATERAL VALUE
No appraisals of any of the Collateral have been prepared by, or on behalf
of, the Issuer in connection with the sale of the New Notes. The proceeds from a
sale of the Collateral in the event of a foreclosure would depend on various
factors at the time of the sale, including the strength of the market for ASSPs
and general economic conditions, and whether certain components of the
Collateral could be sold intact or would have to be disassembled and sold in
parts, which would likely result in proceeds significantly lower than the
Issuer's investment. The Collateral is currently dedicated to the production of
ASSPs. Because significant time and expense would be required to reconfigure
certain operating facilities, the proceeds from a sale of the Collateral in a
foreclosure would likely be lower if few or none of the parties interested in
purchasing the Collateral intended to utilize the Collateral to produce ASSPs.
Accordingly, there can be no assurance that the proceeds of any sale of the
Collateral following a default would be sufficient to satisfy the aggregate
amounts due on the
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New Notes. If such proceeds were not sufficient to repay all such amounts,
holders of the New Notes (to the extent not repaid from the proceeds of the sale
of the Collateral) would have only an unsecured claim against the Issuer's
remaining assets. See "Description of New Notes -- Security." In addition, the
ability of holders of New Notes to realize upon the Collateral may be subject to
certain federal bankruptcy law limitations in the event of a bankruptcy
involving the Issuer. See "Description of New Notes -- Certain Bankruptcy
Limitations."
RISKS IN CONNECTION WITH AN EVENT OF LOSS AFFECTING COLLATERAL
The New Notes are intended to be secured by liens on substantially all of
the Issuer's and its domestic subsidiaries' real property and personal property,
including all plant and equipment at operating facilities, including any
insurance or condemnation proceeds resulting from an Event of Loss (as herein
defined) with respect to the Collateral. Such proceeds will be held in an
account with the Collateral Agent pending expenditure by the Issuer or until
used to redeem all or a portion of the New Notes. There is no statutory or
otherwise clearly established method for perfecting a security interest in such
an account under the law applicable to the Issuer Security Agreement, dated as
of February 27, 1998 by and between Zilog and the Trustee. Consequently, no
assurance can be given that the holders of the New Notes will obtain the benefit
of a valid and perfected security interest in any insurance or condemnation
proceeds resulting from an Event of Loss. See "Description of
Notes -- Security."
OPERATING SUBSIDIARIES; STRUCTURAL SUBORDINATION
Certain operations of the Issuer are conducted through its foreign
subsidiaries. Except to the extent the Issuer may itself be a creditor with
recognized claims against its foreign subsidiaries, the claims of creditors of
the foreign subsidiaries will have priority with respect to the assets and
earnings of the foreign subsidiaries over the claims of creditors of the Issuer,
including holders of the New Notes, even though subsidiary obligations do not
constitute senior indebtedness of the Issuer. As of April 5, 1998, the
indebtedness (including trade payables and capital lease obligations) of the
Issuer's foreign subsidiaries was $1.9 million. See "Description of New
Notes -- Ranking."
RECENT AND ANTICIPATED OPERATING RESULTS
Zilog's operating results are affected by a wide variety of factors which
could have a material adverse effect on it including, but not limited to,
Zilog's ability to introduce new products and technologies on a timely basis,
changes in product mix or fluctuations in manufacturing yields which affect
Zilog's gross margins, market acceptance of Zilog's and its customers' products,
the level of orders that are received and can be shipped in a quarter, customer
order patterns and seasonality, cyclicality in the semiconductor industry,
increases in freight costs, gain or loss of a significant customer and whether
Zilog's customers buy from a distributor or directly from Zilog. Certain of the
Issuer's products have sustained decreases in average selling prices and the
Issuer has sustained product mix shifts that have caused average selling prices
of Zilog's products in the aggregate to decrease by 24% in 1997 and this trend
may continue. Significant reductions in selling prices may have a material
adverse effect on the Issuer. Zilog will likely experience substantial
period-to-period fluctuations in future operating results due to general
industry conditions including cyclical periods of diminished product demand,
accelerated erosion of average selling prices and production over-capacity or
events occurring in the United States economy or the economies of the worldwide
markets Zilog serves. A significant decline in demand for Zilog's products could
have a material adverse effect on the Issuer, and there can be no assurance that
any new products will receive or maintain substantial market acceptance.
Zilog's revenue and EBITDA have declined from $298.4 million and $92.0
million, respectively, for 1996 to $261.1 million and $75.7 million,
respectively, for 1997. For the three months ended April 5, 1998, Zilog had
revenues of $49.5 million and pro forma EBITDA of $2.5 million. Although the
Issuer believes that it has developed a business strategy that will improve its
operating performance, it is anticipated that revenue and EBITDA will decline
significantly in 1998 while this business strategy is being implemented. Many of
the factors which affect the Issuer's operating performance are outside the
Issuer's control and there can be no assurance that the Issuer's business
strategy will be successful or that results of operations will not continue to
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decline. Implementation of the Issuer's business plan requires significant
expenditures and there can be no assurance that the Issuer will be in a position
to implement it fully or that such expenditures will be offset by any increase
in revenue. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." Continued significant
declines in operating performance could have a material adverse effect on the
Issuer and its ability to meet its debt service and other obligations.
In connection with the Recapitalization, Zilog incurred a significant
amount of non-recurring expenses, which may result in a decrease in Zilog's
current cash balance and interest income as compared to those of previous
periods. See "The Recapitalization."
THE SEMICONDUCTOR INDUSTRY
The semiconductor industry has been characterized by cyclicality. The
industry has experienced significant economic downturns at various times in the
last three decades, characterized by diminished product demand, accelerated
erosion of average selling prices and production over-capacity. During 1995, the
semiconductor industry in general, including Zilog, experienced a period of
increased demand. During 1996, the industry experienced a slowdown from the
growth levels of 1995. Zilog experienced this slowdown during the last two
quarters of 1996. Additionally, during 1997, Zilog's revenue and profit have
been lower than their respective levels in 1996 and there can be no assurance
that revenue and profit will return to historic levels. Zilog will likely
experience substantial period-to-period fluctuations in future operating results
due to general industry conditions or events occurring in the general economy.
The fluctuations are difficult to foresee and there can be no assurance that
future fluctuations will not be more severe or prolonged or otherwise would not
have a material adverse effect on the Issuer.
Certain of Zilog's products are incorporated into printers, mouse-type
pointing devices, keyboards and modems. As a result, a slowdown in the demand
for personal computers and related peripherals could adversely affect Zilog's
operating results. A significant portion of Zilog sales are to the consumer
electronics markets for use in products such as television sets, infrared remote
controls and telephone answering machines. The consumer electronics markets are
volatile and rapid changes in customer preferences for electronics products
could have a material adverse effect on Zilog.
DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES
Zilog's operating results will depend to a significant extent on its
ability to continue to introduce new products. The success of new product
introductions is dependent on several factors, including proper new product
selection, timely completion and introduction of new product designs, complexity
of the new products to be designed and manufactured, development of support
tools and collateral literature that make complex new products easy for
engineers to understand and use and market acceptance of customers' end
products. There can be no assurance that any new products will receive or
maintain substantial market acceptance. The Issuer's new business strategy
includes increased focus on design wins. However, there is a substantial delay
between a design win and sales of new products. Any such sales are subject to
the success or failure of the customer's product. There can be no assurance that
the Issuer 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 Issuer's
products or technologies obsolete or noncompetitive. A fundamental shift in
technology in the Issuer's product markets could have a material adverse effect
on the Issuer.
NEW MANAGEMENT AND KEY PERSONNEL
As of February 27, 1998, upon completion of the Recapitalization, Curtis J.
Crawford became President and CEO of Zilog, replacing Dr. Edgar Sack, the former
CEO. Although Mr. Crawford has significant experience in the industry in which
Zilog competes, there can be no assurance that this management transition and
the implementation of a new management strategy will not adversely affect
operating results. In addition, the Issuer depends upon its ability to hire and
retain qualified technical, sales and management personnel. The
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competition for such personnel is intense, and there can be no assurance that
the Issuer will be successful in attracting and retaining such personnel.
CUSTOMER CONCENTRATION
In 1997, the Issuer's 10 largest customers accounted for approximately 44%
of the Issuer's total revenue, although no single customer accounted for more
than 8% of the Issuer's total revenue. Particular customers may change from
period to period but the Issuer expects that sales to a limited number of
customers will continue to account for a significant percentage of its revenue
in any particular period for the foreseeable future. The Issuer has no long-term
contracts with its customers and there can be no assurance that its current
customers will place additional orders, or that the Issuer will obtain orders of
similar magnitude from other customers. The loss of one or more major customers
or any reduction, delay or cancellation of orders by any such customer or the
failure of the Issuer to market successfully to new customers, could have a
material adverse effect on the Issuer. During 1997, purchases by a major
customer, which had accounted for approximately 13% of the Issuer's total
revenue in 1996, declined to approximately 6% of the Issuer's total revenue in
1997. This decline was primarily attributable to a technology shift at the
customer resulting in a product that did not require a controller. There can be
no assurance that sales to one or more significant customers will not decline in
the future or that any such decline will not have a material adverse effect on
the Issuer.
PRODUCTION YIELDS AND MANUFACTURING RISKS; NEW WAFER FABRICATION FACILITY
The manufacture of semiconductor products is highly complex and production
yields are sensitive to a wide variety of factors, including the level of
contaminants in the manufacturing environment, impurities in the materials used
and the performance of personnel and equipment. In addition, as is common in the
semiconductor industry, Zilog 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. Zilog believes that an important competitive
factor will be its ability to continue to successfully increase production
capacity to meet customer demand and shorten delivery time. No assurance can be
given that Zilog or its outside wafer foundries will not experience production
yield problems in the future which could have a material adverse effect on the
Issuer. While the Issuer believes its manufacturing capacity to be sufficient,
the failure to increase production capacity through the successful and efficient
expansion of production at its new facility in Nampa, Idaho or to obtain wafers
from outside suppliers as needed during periods of increased demand could have a
material adverse effect on the Issuer.
Zilog's future success is dependent upon its ability to develop and
implement new design and process technologies. Semiconductor design and process
methodologies are subject to rapid technological change, requiring large
expenditures for research and development. Most new products are extremely
complex in design and many use Zilog's 0.65 micron CMOS process. Zilog has
developed a 0.35 micron CMOS process, and the first test wafers in this process
were produced in January 1998. A failure to make a successful transition to the
0.35 micron CMOS process could have a material adverse effect on the Issuer.
Manufacture of large complex die involves a significant technological risk. The
failure to complete new product designs in time to meet market requirements and
achieve volume production of new products at acceptable yields using the new
manufacturing processes would have a material adverse effect on the Issuer. See
"Business -- Research and Development."
Zilog also uses outside contract assemblers for packaging a portion of its
production. Shortages in contract assembly capacity could adversely impact
Zilog's financial results. Should Zilog be unable to obtain additional assembly
capacity, Zilog's ability to achieve continued revenue growth may be restricted.
Shortage of product could also result in the loss of customers. See
"Business -- Manufacturing."
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
price erosion, rapid technological change and heightened foreign competition in
many markets. The industry consists of major
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domestic and international semiconductor companies, many of which have
substantially greater financial and other resources than Zilog with which to
pursue engineering, manufacturing, marketing and distribution of their products.
Emerging companies are also increasing their participation in the semiconductor
market. The ability of Zilog to compete successfully in its markets depends on
factors both within and outside of its control including, but not limited to,
success in designing and manufacturing new products that implement new
technologies, protection of the Issuer products by effective utilization of
intellectual property laws, product quality, reliability, ease of use, price,
diversity of product line, efficiency of production, the pace at which customers
incorporate Zilog's microprocessors, microcontrollers and digital signal
processors into their products, success of competitors' products and general
economic conditions. See "Business -- Competition."
EXPORT SALES; INTERNATIONAL OPERATIONS
Approximately 59% of Zilog's sales in 1997 were to foreign customers and
Zilog expects that export sales will continue to represent a significant portion
of sales, although there can be no assurance that export sales, as a percentage
of net sales, will remain at current levels. Beginning in the fourth quarter of
1997, certain countries in Asia, which accounted for approximately 42% of
Zilog's 1997 revenue, experienced general market instability characterized by a
substantial decrease in demand that resulted in significant capital constraints
throughout the region. In many cases, these constraints were exacerbated by the
continuing need of businesses in the region to service indebtedness denominated
in dollars or other foreign currencies. As a result, many businesses in the
region have explored ways to preserve capital, including reducing capital
investment, reducing working capital, outsourcing manufacturing functions,
selling assets and discontinuing lines of business. In addition, substantial
devaluations of local currencies have significantly improved the competitive
position of certain competitors of the Issuer that operate in the affected
regions. Although the Issuer believes that this instability did not have a
material effect on the Issuer's revenue in 1997, there can be no assurance that,
as the instability continues, the Issuer's customers in these regions will not
significantly delay purchases of the Issuer's products, significantly reduce the
production of products which utilize the Issuer's ASSPs or purchase ASSPs from
the Issuer's competitors that operate in the affected regions. Consequently,
there can be no assurance that this instability will not have a material adverse
effect on the Issuer. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments -- Asian Revenue."
Zilog purchases a substantial portion of its raw materials and equipment
from foreign suppliers. While Zilog's export sales are primarily United States
dollar denominated transactions, Zilog is subject to the risks of conducting
business internationally, including unexpected changes in, or impositions of,
legislative or regulatory requirements, fluctuations in the United States dollar
against foreign currencies, which could increase the sales price in local
currencies of Zilog's products in foreign markets or increase the cost of wafers
purchased by Zilog, delays resulting from difficulty in obtaining export
licenses for certain technology, tariffs and other barriers and restrictions,
potentially longer payment cycles, greater difficulty in accounts receivable
collection, potentially adverse taxes and the burdens of complying with a
variety of foreign laws. In addition, Zilog is subject to general geopolitical
risks, such as political and economic instability and changes in diplomatic and
trade relationships, which could affect, among other things, customers' ordering
patterns and inventory levels. Although Zilog has not to date experienced any
material adverse effect on its operations as a result of such regulatory,
geopolitical, economic and other factors, there can be no assurance that such
factors will not adversely impact Zilog in the future or require the Issuer to
modify its current business practices. In addition, the laws of certain foreign
countries may not protect Zilog's intellectual property rights to the same
extent as do the laws of the United States.
Zilog operates two primary assembly and test facilities in the Philippines
through two wholly owned subsidiaries. Zilog has a significant capital
investment at these facilities. Zilog's reliance on personnel and assets and its
maintenance of inventories at these facilities entails certain political and
economic risks, including political instability and expropriation, currency
controls and exchange fluctuations, as well as changes in tax laws, tariff and
freight rates. Political stability in the Philippines appears to have increased
markedly during the past three years, but no assurances of continued stability
can be given. Zilog has not experienced any significant interruptions in its
business operations in the Philippines to date. Nonetheless, any
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loss or disruption of production in the Philippines could have a material
adverse effect on the Issuer, particularly if operations or air transportation
from the Philippines were disrupted for a substantial period of time.
INTELLECTUAL PROPERTY RIGHTS
Zilog's ability to compete will be affected by its ability to protect its
proprietary information. Zilog relies primarily on its trade secrets and
technological know-how in the conduct of its business. There can be no assurance
that the steps taken by Zilog to protect its intellectual property will be
adequate to prevent misappropriation of its technology or that Zilog's
competitors will not independently develop technologies that are substantially
equivalent or superior to Zilog's technology. The semiconductor industry is
characterized by frequent claims and related litigation regarding patent and
other intellectual property rights. There can be no assurance that third parties
will not assert additional claims or initiate litigation against Zilog, its
foundries or its customers with respect to existing or future products. In
addition, Zilog may initiate claims or litigation against third parties for
infringement of Zilog's proprietary rights or to determine the scope and
validity of the proprietary rights of Zilog or others. Litigation by or against
Zilog could result in significant expense to Zilog and divert the efforts of
Zilog's technical and management personnel, whether or not litigation is
determined in favor of Zilog. In the event of an adverse result in any such
litigation, Zilog could be required to pay substantial damages, cease the
manufacture, use, sale, offer for sale and importation of infringing products,
expend significant resources to develop or obtain non-infringing technology,
discontinue the use of certain processes, or obtain licenses to the technology
which is the subject of the litigation. There can be no assurance that Zilog
would be successful in such development or acquisition or that any such
licenses, if available, would be available on commercially reasonable terms, and
any such development or acquisition could require expenditures by Zilog of
substantial time and other resources. Any such litigation or adverse result
therefrom could have an adverse effect on Zilog.
Zilog has been notified by three parties that it may be infringing certain
patent ownership and other intellectual property rights. In the event Zilog
determines that such notices may involve meritorious claims, Zilog may seek a
license. Based on industry practice, Zilog believes that in most cases any
necessary licenses or other rights could be obtained on commercially reasonable
terms. However, no assurance can be given that licenses could be obtained on
acceptable terms or that litigation will not occur. The failure to obtain
necessary licenses or other rights or the advent of litigation arising out of
such claims could have a material adverse effect on Zilog. See
"Business -- Patents and Licenses."
ENVIRONMENTAL REGULATION
Zilog is subject to a variety of government regulations related to the
discharge or disposal of hazardous materials used in its manufacturing process.
Although Zilog believes that it is in substantial compliance with all relevant
regulations and has all permits necessary to conduct its business, the failure
to comply with present or future regulations or the loss of any permit could
result in fines being imposed on Zilog, limitation or suspension of production
or cessation of operations. Compliance with any such future regulations could
require Zilog to acquire additional equipment or to incur substantial other
expenses. Any failure by Zilog to control the use of, or adequately restrict the
discharge of, hazardous materials could subject it to future liabilities.
In 1996, the U.S. District Court for the District of Idaho entered orders
approving a settlement in the lawsuit entitled Tsotung Ko, et al. v. Zilog, Inc.
In the suit, 31 plaintiffs alleged that the Issuer endangered their health and
safety by chemical exposures at one of the Issuer's Nampa, Idaho facilities. In
addition, the plaintiffs alleged that the Issuer discriminated against them
after they were injured by chemical exposures. Although the Issuer made payments
in connection with the settlement, the Issuer strongly denied these allegations.
In January 1998, the newspaper USA Today published a series of articles
about environmental and employee health and safety conditions at semiconductor
manufacturing facilities. The Issuer's operations during 1993 and 1994 and the
Tsotung Ko lawsuit were the primary subject of one article and were mentioned in
other articles. Since 1993, the Issuer has constructed its MOD III facility,
expanded MOD II, closed
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MOD I and has upgraded the environmental monitoring and control equipment at its
MOD II facility. The Issuer believes it is in substantial compliance with all
applicable environmental and employee health and safety regulations. However,
this recent public attention focused on the environmental and employee health
and safety conditions at the Issuer's facilities could increase the incidence of
environmental or employee health and safety complaints or governmental
investigations into the Issuer's operations Zilog recently underwent a
multimedia inspection and is currently being inspected by OSHA. There can be no
assurance that the Issuer will not incur significant expense in connection with
these and other governmental investigations and/or environmental or employee
health and safety matters.
ABILITY TO EFFECT REPURCHASE OF THE NEW NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuer will be required to
make an offer to repurchase the New Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase. Certain events constituting a Change
of Control could result in a default under future indebtedness of the Issuer.
There can be no assurance that the Issuer would have sufficient resources
available at the time of any Change of Control to repurchase the New Notes
and/or to pay its obligations under such indebtedness.
FRAUDULENT CONVEYANCES
In certain circumstances, the incurrence by the Issuer of indebtedness such
as the New Notes may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Issuer. Under these laws, if a court were to
find that, after giving effect to the sale of the New Notes and the application
of the net proceeds therefrom, either (a) the Issuer incurred such indebtedness
with the intent of hindering, delaying or defrauding creditors or contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (b) the Issuer received less than reasonably
equivalent value or consideration for incurring such indebtedness and (i) was
insolvent or rendered insolvent by reason of such transaction, (ii) was engaged
in a business or transaction for which the assets remaining with the Issuer
constituted unreasonably small capital or (iii) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court may subordinate such indebtedness to presently existing and future
indebtedness of the Issuer, avoid the issuance of such indebtedness and direct
the repayment of any amounts paid thereunder to the Issuer's creditors or take
other action detrimental to the holders of such indebtedness.
Zilog obligations under the New Notes are guaranteed by certain of the
Issuer's subsidiaries (the "Guarantors"). In certain circumstances, the
incurrence by a Guarantor of a Guarantee (as defined herein) may be subject to
review under relevant state and federal fraudulent conveyance laws if a
bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of
such Guarantor. Under these laws, if a court were to find that either (a) a
Guarantee was incurred by a Guarantor with the intent of hindering, delaying or
defrauding creditors or such Guarantor contemplated insolvency with a design to
prefer one or more creditors to the exclusion in whole or in part of others or
(b) such Guarantor received less than reasonably equivalent value or
consideration for incurring such Guarantee and (i) was insolvent or rendered
insolvent by reason of such transaction, (ii) was engaged in a business or
transaction for which the assets remaining with such Guarantor constituted
unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, such court
may subordinate such Guarantee to presently existing and future indebtedness of
such Guarantor, avoid the issuance of such Guarantee and direct the repayment of
any amounts paid thereunder to such Guarantor's creditors or take other action
detrimental to the holders of such Guarantee. A legal challenge of a Guarantee
on fraudulent conveyance grounds, may, among other things, focus on the
benefits, if any, realized by the Guarantor as a result of the issuance of the
New Notes by the Issuer.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Issuer or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the salable value of all of its assets at a fair valuation or if
the present fair salable value of its assets were less than the
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amount that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and mature or
(ii) it could not pay its debts as they become due. Similar fraudulent
conveyance and other concerns may be applicable to the Subsidiary Guarantees to
be issued by certain of the Issuer's subsidiaries and similar and other concerns
as to enforceability may apply to Subsidiary Guarantees that may be granted in
the future.
To the extent that any Guarantee was voided as a fraudulent conveyance or
held unenforceable for any other reason, holders of the New Notes would cease to
have any claim in respect of such Guarantee and would be creditors solely of the
Issuer and any Guarantor whose Guarantee was not voided or held unenforceable.
In such event, the claims of the holders of the applicable New Notes against the
issuer of an invalid Guarantee would be subject to the prior payment of all
liabilities and preferred stock claims of such Guarantor. There can be no
assurance that, after providing for all prior claims and preferred stock
interests, if any, there would be sufficient assets to satisfy the claims of the
holders of the applicable New Notes relating to any voided portions of any of
the Guarantees.
Based upon financial and other information currently available to it,
management of the Issuer believes that the New Notes and the Guarantees are
being incurred for proper purposes and in good faith and that, at the time the
New Notes and the Guarantees are issued, the Issuer and each Guarantor, as the
case may be, were (i) neither insolvent nor rendered insolvent thereby, (ii) in
possession of sufficient capital to run its business effectively and (iii)
incurring debts within its ability to pay as the same mature or become due. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." In reaching these conclusions,
the Issuer has relied upon various valuations and estimates of future cash flow
that necessarily involve a number of assumptions and choices of methodology. No
assurance can be given, however, that the assumptions and methodologies chosen
by the Issuer would be adopted by a court or that a court would concur with the
Issuer's conclusions.
SECURITIES CLASS ACTION AND OTHER LEGAL MATTERS
Zilog has been named as a defendant in a purported class action lawsuit
which was filed on January 23, 1998 in the United States District Court for the
Northern District of California. Certain executive officers of the Issuer are
also named as defendants. The plaintiff purports to represent a class of all
persons who purchased the Issuer's Common Stock between June 30, 1997 and
November 20, 1997 (the "Class Period"). The complaint alleges that the Issuer
and certain of its executive officers made false and misleading statements
regarding the Issuer that caused the market price of its Common Stock to be
"artificially inflated" during the Class Period. The complaint does not specify
the amount of damages sought. The Issuer believes the lawsuit lacks merit and
intends to defend it vigorously. There can be no assurance that the Issuer will
prevail in its defense of the lawsuit or that any judgment against the Issuer
will not be material.
Zilog is participating in other litigation and responding to claims arising
in the ordinary course of business. Zilog intends to defend itself vigorously in
these matters. Zilog's management believes that it is unlikely that the outcome
of these matters will have a material adverse effect on the Issuer, although
there can be no assurance in this regard.
RESTRICTIVE DEBT COVENANTS
The Indenture contains a number of significant covenants that, among other
things, restrict the ability of the Issuer to dispose of assets, incur
additional indebtedness, prepay other indebtedness (including the New Notes) or
amend certain debt instruments, pay dividends, create liens on assets, enter
into sale and leaseback transactions, make investments, loans or advances, make
acquisitions, engage in mergers or consolidations, change the business conducted
by Issuer or its subsidiaries, make capital expenditures or engage in certain
transactions with affiliates and otherwise restrict certain corporate
activities. In addition, under the Revolving Credit Facility, the Issuer is
required to comply with specified financial ratios and tests, including minimum
interest coverage ratios, leverage ratios below a specified maximum, minimum net
worth levels and minimum ratios of inventory to senior debt. See "Description of
the New Notes" and "Description of the Issuer Indebtedness."
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<PAGE> 26
Zilog's ability to comply with such agreements may be affected by events
beyond its control, including prevailing economic, financial and industry
conditions. The breach of any of such covenants or restrictions could result in
a default under the Revolving Credit Facility and the Indenture, which would
permit the senior lenders, or the holders of the New Notes to declare all
amounts borrowed thereunder to be due and payable, together with accrued and
unpaid interest, and the commitments of the senior lenders to make further
extensions of credit under the Revolving Credit Facility could be terminated. If
the Issuer were unable to repay its indebtedness to its senior lenders, such
lenders could proceed against the collateral securing such indebtedness as
described under "Description of the Issuer Indebtedness."
PROCEDURES FOR TENDER OF OLD NOTES
The New Notes will be issued in exchange for Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. Failure by a holder in
following such procedures may result in delay in receiving an Exchange Note on a
timely basis. Neither the Exchange Agent nor the Issuer is under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes for exchange. Any holder of Old Notes who tenders in the Exchange Offer
for the purpose of participating in a distribution of the New Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of New Notes. See "The
Exchange Offer -- Procedures for Tendering" and "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old 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 Issuer does not currently anticipate that
it will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
LACK OF PUBLIC MARKET FOR THE NOTES
The Old Notes have been designated as eligible for trading in the PORTAL
market. Prior to this Exchange Offer, there has been no public market for the
New Notes. If such a market were to develop, the New Notes could trade at prices
that may be higher or lower than their principal amount. The Issuer does not
intend to apply for listing of the New Notes on any securities exchange or for
quotation of the New Notes on The Nasdaq Stock Market. The Initial Purchasers
have previously made a market in the Old Notes, and the Issuer has been advised
that the Initial Purchasers currently intend to make a market in the New Notes,
as permitted by applicable laws and regulations, after consummation of the
Exchange Offer. The Initial Purchasers are not obligated, however, to make a
market in the Old Notes or the New Notes and any such market making activity may
be discontinued at any time without notice at the sole discretion of the Initial
Purchasers. There can be no assurance as to the liquidity of the public market
for the New Notes or that any active public market for the New Notes will
develop or continue. If an active public market does not develop or continue,
the market price and liquidity of the New Notes may be adversely affected.
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<PAGE> 27
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
In connection with the issuance of the Old Notes pursuant to the Purchase
Agreement by and among the Issuer and the Initial Purchasers, the Initial
Purchasers and their respective assignees became entitled to the benefits of the
Registration Rights Agreement.
Under the Registration Rights Agreement, the Issuer is required to file
within 60 days after February 27, 1998 (the date the Registration Rights
Agreement was entered into (the "Closing Date")) a registration statement (the
"Exchange Offer Registration Statement") for a registered exchange offer with
respect to an issue of new notes identical in all material respects to the Old
Notes except that the new notes shall contain no restrictive legend thereon.
Under the Registration Rights Agreement, the Issuer is required to (i) cause the
Exchange Offer Registration Statement to be filed with the Commission no later
than 60 days after the Closing Date, (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective no later than 135 days
after the Closing Date, (iii) use its best efforts to keep the Exchange Offer
open for at least 20 Business Days (or longer if required by applicable law),
(iv) use its best efforts to consummate the Exchange Offer as soon as
practicable following the date on which the Exchange Offer Registration
Statement is declared effective by the Commission, but in no event later than
180 days after the Closing Date and (v) cause the Exchange Offer to comply with
all applicable federal and state securities laws. The Exchange Offer being made
hereby, if commenced and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Old Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes of the same class will be issued in exchange
for an equal principal amount of outstanding Old Notes accepted in the Exchange
Offer. Old Notes may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of , 1998. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered in
exchange. However, the obligation to accept Old Notes for exchange pursuant to
the Exchange Offer is subject to certain conditions as set forth herein under
"-- Conditions."
Old Notes shall be deemed to have been accepted as validly tendered when,
as and if the Trustee has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving the New Notes and delivering New Notes to
such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Issuer believes that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
each holder thereof (other than a broker-dealer who acquires such New Notes
directly from the Issuer for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act and other than any
holder that is an "affiliate" (as defined in Rule 405 under the Securities Act)
of the Issuer without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder is not engaged in,
and does not intend to engage in, a distribution of such New Notes and has no
arrangement with any person to participate in a distribution of such New Notes.
By tendering the Old Notes in exchange for New Notes, each holder, other than a
broker-dealer, will represent to the Issuer that: (i) it is not an affiliate (as
defined in Rule 405 under the Securities Act) of the Issuer; (ii) it is not a
broker-dealer tendering Old Notes acquired for its own account directly from the
Issuer; (iii) any New Notes to be received by it will be acquired in the
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<PAGE> 28
ordinary course of its business; and (iv) it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of the New Notes. If a holder of
Old Notes is engaged in or intends to engage in a distribution of the New Notes
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such holder may not
rely on the applicable interpretations of the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Each
Participating Broker-Dealer that receives New 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 New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
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 Participating Broker-Dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Issuer has agreed that
it will make this Prospectus available to any Participating Broker-Dealer for a
period of time not to exceed one year after the date on which the Exchange Offer
is consummated for use in connection with any such resale. See "Plan of
Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Issuer to effect the Exchange
Offer, or (ii) if any holder of Old Notes shall notify the Issuer within 20
business days following the consummation of the Exchange Offer that (A) such
holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such holder may not resell the New Notes acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder or (C) such holder is a
broker-dealer and holds Old Notes acquired directly from the Issuer or one of
its affiliates, then the Issuer shall (x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") on or prior to 60 days after the date on which the Issuer determines
that it is not required to file the Exchange Offer Registration Statement
pursuant to clause (i) above or 60 days after the date on which the Issuer
receives the notice specified in clause (ii) above and shall (y) use its best
efforts to cause such Shelf Registration Statement to become effective within
135 days after the date on which the Issuer becomes obligated to file such Shelf
Registration Statement. If, after the Issuer has filed an Exchange Offer
Registration Statement, the Issuer is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above. The Issuer shall use its best efforts to keep the Shelf Registration
Statement continuously effective, supplemented and amended to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Securities (as defined below) by the holders thereof for a period of at least
two years following the date on which such Shelf Registration Statement first
becomes effective under the Securities Act. The term "Transfer Restricted
Securities" means each Note, until the earliest to occur of (a) the date on
which such Note is exchanged in the Exchange Offer and entitled to be resold to
the public by the holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such Note
is disposed of by a broker-dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the prospectus contained therein) or (d) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Act.
If (i) the Exchange Offer Registration Statement or the Shelf Registration
Statement is not filed with the Commission on or prior to the date specified in
the Registration Rights Agreement, (ii) any such Registration Statement has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in the Registration Rights Agreement, (iii) the Exchange
Offer has not been consummated within 180 days after the Closing Date or (iv)
any Registration Statement required by the Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
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<PAGE> 29
in clauses (i) through (iv), a "Registration Default"), then the Issuer has
agreed to pay liquidated damages to each holder of Transfer Restricted
Securities. With respect to the first 90-day period immediately following the
occurrence of such Registration Default the liquidated damages shall equal $.05
per week per $1,000 in principal amount of Transfer Restricted Securities held
by such holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.25 per week
per $1,000 principal amount of Transfer Restricted Securities. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities a result of such clause (i), (ii), (iii) or (iv),
as applicable, shall cease.
All accrued liquidated damages shall be paid to the holder of the global
note representing the Old Notes by wire transfer of immediately available funds
or by federal funds check and to holders of certificated securities by mailing
checks to their registered addresses on each June 15 and December 15. All
obligations of the Issuer set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Notes who do not exchange their Old Notes for New Notes in the
Exchange Offer will no longer be entitled to registration rights and will not be
able to offer or sell their Old Notes, unless such Old Notes are subsequently
registered under the Securities Act (which, subject to certain limited
exceptions, the Issuer will have no obligation to do), except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. See "Risk Factors-Risk Factors Relating to the
Notes -- Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean , 1998 (30 calendar days
following the commencement of the Exchange Offer), unless the Exchange Offer is
extended, if and as required by applicable law, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Issuer will notify the Exchange
Agent of any extension by oral or written notice and will notify the holders of
the Old Notes 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.
The Issuer reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Old Notes not previously accepted if any of the conditions set
forth herein under "-- Conditions" shall have occurred and shall not have been
waived by the Issuer, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by the
Issuer to constitute a material change, the Issuer will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment.
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INTEREST ON THE NEW NOTES
The New Notes will accrue interest at a rate of 9 1/2%. Commencing
September 1, 1998, cash interest on the New Notes will accrue and be payable, at
a rate of 9 1/2% per annum, semi-annually in arrears on each March 1 and
September 1.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, have the signatures thereon guaranteed if required by the
Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal,
together with any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at DTC (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS OF THE NOTES. 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 OLD NOTES SHOULD
BE SENT TO THE ISSUER. Delivery of all documents must be made to the Exchange
Agent at its address set forth below. Holders of Notes may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuer or any other person who
has obtained a properly completed bond power from the registered holder.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
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 Exchange Act (each an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers 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 Issuer,
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<PAGE> 31
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Issuer in its sole discretion, which determination will be final and binding.
The Issuer reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted, would, in the opinion of
counsel for the Issuer, be unlawful. The Issuer also reserves the absolute right
to waive any irregularities or conditions of tender as to particular Old Notes.
The Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Issuer reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under "-- Conditions," (ii) to terminate the Exchange Offer in accordance with
the terms of the Registration Rights Agreement and (iii) to the extent permitted
by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted, promptly after the Expiration
Date, and the New Notes will be issued promptly after acceptance of the old
Notes. See "-- Conditions" below. For purposes of the Exchange Offer, Old Notes
shall be deemed to have been accepted as validly tendered for exchange when, as
and if the Issuer has given oral or written notice thereof to the Exchange
Agent.
In all cases, issuance of New Notes for Old 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 Old Notes or a timely Book-Entry
Confirmation of such Old 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 Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or nonexchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old 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 Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal with any required
signature guarantees and any other required documents must, in any case, be
transmitted to and received by
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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.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedures 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 receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal and Notice of Guaranteed Delivery, substantially
in the form provided by the Issuer (by mail or hand delivery), setting forth the
name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old 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 Old 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 received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date 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 Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes) and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old 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 Old 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 Old 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 Issuer, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old 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 Old 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 Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering" and "-- Book-Entry
Transfer" above at any time on or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for exchange, nor will New Notes be issued in exchange
for any Old Notes, and the Issuer may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Old Notes, if because of any
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<PAGE> 33
change in law, or applicable interpretations thereof by the Commission, the
Issuer determines that they are not permitted to effect the Exchange Offer. The
Issuer has no obligation to, and will not knowingly, permit acceptance of
tenders of Old Notes from affiliates (within the meaning of Rule 405 under the
Securities Act) of the Issuer or from any other holder or holders who are not
eligible to participate in the Exchange Offer under applicable law or
interpretations thereof by the Commission, or if the New Notes to be received by
such holder or holders of Old Notes in the Exchange Offer, upon receipt, will
not be tradable by such holder without restriction under the Securities Act and
the Exchange Act and without material restrictions under the "blue sky" or
securities laws of substantially all of the states of the United States.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Overnight Mail or Courier:
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02102
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand in New York to 5:00 p.m By Hand in Boston to 5:00 p.m.
(as drop agent): Two International Place
61 Broadway Fourth Floor
15th Floor Corporation Trust
Corporate Trust Window Boston, Massachusetts 02110
New York, New York 10006
</TABLE>
For information call:
(617) 664-5587
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Issuer.
The Issuer will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Issuer may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuer, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old 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 Old Notes
tendered, or if tendered Old Notes are registered in the name of, any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
31
<PAGE> 34
THE RECAPITALIZATION
Zilog was established in 1974 and became a wholly owned subsidiary of Exxon
Corporation in 1981. In 1989, Zilog was acquired in a leveraged buyout
transaction sponsored by Warburg Pincus Capital Issuer, L.P. In 1991, Zilog
became a publicly traded company, and its Common Stock was initially listed on
Nasdaq and traded under the symbol "ZLOG". Zilog's Common Stock was subsequently
listed on the New York Stock Exchange and traded under the symbol "ZLG" until
February 27, 1998.
Pursuant to the Merger Agreement, Merger Sub merged with and into Zilog on
February 27, 1998, and Zilog continues as the surviving corporation (the
"Merger"). By virtue of the Merger, shares of Zilog common stock having an
implied value of approximately $7.5 million held by certain of Zilog's
stockholders prior to the Merger were converted into common stock of Zilog. All
other shares of outstanding common stock were canceled and, except for shares of
common stock held in Zilog's treasury, owned by Zilog or any subsidiary of
Zilog, or held by a stockholder of Zilog who has properly exercised appraisal
rights under Delaware law, were converted into the right to receive cash
consideration, all as set forth in the Merger Agreement. By virtue of the
Merger, the common stock of Merger Sub was converted into new shares of Common
Stock, Non-Voting Common Stock and Preferred Stock of Zilog. Also, in connection
with the Merger, options to purchase shares of Common Stock issued under Zilog's
stock plans outstanding immediately prior to the consummation of the Merger were
canceled and, in certain instances, were converted into the right to receive an
amount in cash, as set forth in the Merger Agreement. Zilog has paid
approximately $4.1 million to redeem outstanding options as a result of the
Merger. The Merger was approved by Zilog's stockholders on January 27, 1998.
Effective immediately after the consummation of the Merger on February 27,
1998, the Board of Directors of Zilog, the surviving corporation, declared a
4-for-1 stock split in the form of a dividend for each share of Common Stock and
Class A Non-Voting Common Stock and designated 1,500,000 shares of Series A
Cumulative Preferred Stock. Unless otherwise specified, all share amounts in
this Prospectus do not give effect to this stock split.
Cash funding requirements for the Merger were satisfied through the
following: (i) the Equity Investment; (ii) use of approximately $36.1 million of
Zilog's cash and cash equivalents; and (iii) $280.0 million of gross proceeds
from the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." Upon
the consummation of the Merger, Zilog became able to borrow up to $25.0 million
under a revolving credit facility (the "Revolving Credit Facility").
The Merger was accounted for as a recapitalization transaction for
accounting purposes. The following table sets forth the sources and uses of
funds in connection with the Recapitalization.
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES:
Notes..................................................... $280,000
New Equity Contribution................................... 117,500
Continuing Equity Investment.............................. 7,500
--------
Total............................................. $405,000
Excess Cash............................................... 36,067
--------
Total............................................. $441,067
========
USES:
Continuing Equity Investment.............................. $ 7,500
Payment for Outstanding Shares............................ 399,472
Payment for Outstanding Stock Options..................... 4,095
Estimated Fees and Expenses............................... 30,000(1)
--------
Total............................................. $441,067
========
</TABLE>
- ---------------
(1) Includes approximately $9.3 million of debt issuance costs which will be
capitalized and amortized over the terms of the related debt, and
approximately $20.7 million of non-financing related transaction expenses
which will primarily be netted against stockholder's equity. As of April 5,
1998, Zilog has paid $28.1 million of the estimated $30.0 million in fees
and expenses.
32
<PAGE> 35
NEW CHIEF EXECUTIVE OFFICER
Curtis J. Crawford became President, CEO and a Director of Zilog upon
completion of the Recapitalization. Mr. Crawford, 50, has more than 24 years of
experience in software, systems and semiconductors. He recently served as Group
President of the Microelectronics Group and President of the Intellectual
Property Division of Lucent, a leading designer and manufacturer of a wide range
of communications technologies.
As President of Lucent's Microelectronics Group, Mr. Crawford managed the
worldwide development, design, manufacture and sale of semiconductors and
optoelectronic components for applications in telecommunications, networked
computing, multimedia, wireless and consumer electronics. During Mr. Crawford's
tenure, the Microelectronics Group grew external sales from $0.8 billion in 1991
to $2.8 billion in 1997, representing a 23% compound annual growth rate. As
President of Lucent's Intellectual Property Division, Mr. Crawford managed a
broad portfolio of technology patents and licenses.
TEXAS PACIFIC GROUP
TPG was founded by David Bonderman, James G. Coulter and William S. Price,
III in 1992 to pursue public and private investment opportunities through a
variety of methods, including leveraged buyouts, recapitalizations, joint
ventures, restructurings and strategic public securities investments. The
principals of TPG operate TPG Partners, L.P. and TPG Partners II, both Delaware
limited partnerships with aggregate committed capital of over $3.2 billion.
Among TPG's investments are technology and telecommunications companies Paradyne
Corporation, GlobeSpan Semiconductor and GT Com. Other TPG portfolio companies
include America West Airlines, Belden & Blake, Beringer Wine Estates, Del Monte
Foods, Denbury Resources, Ducati Motor, Favorite Brands International, Genesis
ElderCare, J. Crew, Virgin Entertainment, and Vivra Specialty Partners. In
addition, the principals of TPG led the $9 billion reorganization of Continental
Airlines in 1993. The principal executive office of TPG is located at 201 Main
Street, Suite 2420, Fort Worth, Texas 76102 and its telephone number is (817)
871-4000.
USE OF PROCEEDS
There will be no cash proceeds payable to Zilog from the issuance of the
New Notes pursuant to the Exchange Offer. The proceeds from the sale of the Old
Notes were used by Zilog to finance the Recapitalization.
33
<PAGE> 36
CAPITALIZATION
The following table sets forth the cash and historical consolidated
capitalization of Zilog as of April 5, 1998. The following table should be read
in conjunction with the Unaudited Pro Forma Consolidated Financial Information,
the Consolidated Financial Statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 5, 1998
--------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 66,890
Long-term debt:
The Notes................................................. $280,000
--------
Total debt(1)..................................... 280,000
Stockholders' equity:
Stock and paid-in capital................................. 25,200
Retained earnings (deficit)............................... (1,996)
Net unrealized gain on securities......................... --
--------
Total stockholders' equity........................ $ 23,204
--------
Total capitalization.............................. $303,204
========
</TABLE>
- ---------------
(1) In addition, subject to the satisfaction of certain conditions precedent,
Zilog is able to borrow up to $25.0 million under the Revolving Credit
Facility.
34
<PAGE> 37
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1997 and the three months in the period ended April
5, 1998 give effect to the Recapitalization as though it had occurred on January
1, 1997. The pro forma adjustments as applied to the respective historical
consolidated financial information of the Issuer reflect and account for the
Merger as a recapitalization. Accordingly, the historical basis of the Issuer's
assets and liabilities has not been impacted by the Merger. The pro forma
adjustments presented are based upon available information and certain
assumptions that Zilog's management believes are reasonable.
The following should be read in conjunction with Zilog's Consolidated
Financial Statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus. The Unaudited Pro Forma Consolidated Financial Information and
related notes are provided for informational purposes only and are not
necessarily indicative of the results that actually would have occurred had the
Recapitalization been completed on the date indicated nor is such financial
information necessarily indicative of the results that may be expected to occur
in the future.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 THREE MONTHS ENDED APRIL 5, 1998
------------------------------------- -------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales....................... $261,097 $261,097 $ 49,539 $ 49,539
Costs and expenses:
Cost of sales............. 171,722 171,722 40,767 40,767
Research and
development............ 30,467 30,467 8,104 8,104
Selling, general and
administrative......... 47,806 47,806 13,941 13,941
Recapitalization.......... 13,304 $ (13,304)(1) --
-------- -------- -------- -------- ---------- --------
Total costs and
expenses............. 249,995 249,995 76,116 (13,304) 62,812
-------- -------- -------- -------- ---------- --------
Operating income (loss)..... 11,102 11,102 (26,577) 13,304 (13,273)
Other income (expense):
Interest income........... 2,892 $ (1,296)(1) 1,596 1,159 (60)(2) 1,099
Interest expense.......... -- (28,429)(2) (28,429) (2,978) (4,361)(3) (7,339)
Other..................... 832 -- 832 (88) -- (88)
-------- -------- -------- -------- ---------- --------
Income (loss) before income
taxes..................... 14,826 (29,725) (14,899) (28,484) 8,883 (19,601)
Provision (benefit) for
income taxes.............. 2,965 (10,404)(3) (7,439) (8,545) 3,109(4) (5,436)
-------- -------- -------- -------- ---------- --------
Net income (loss)........... $ 11,861 $(19,321) $ (7,460) $(19,939) $ 5,774 $(14,165)
======== ======== ======== ======== ========== ========
</TABLE>
- ---------------
(1) Represents the elimination of non-recurring Merger related expenses in
executive and employee bonuses, severance payments and consulting fees and
payments in respect of employee stock options outstanding prior to the
Merger and approximately $10 million in executive and employee bonuses will
be recorded during the second and third quarters of fiscal 1998.
(2) Represents reduction of interest income due to the reduction of cash and
cash equivalents as a result of the Merger.
(3) Represents interest expense and amortization of debt issuance costs as a
result of the Merger.
(4) Benefit provided at United States statutory rate.
35
<PAGE> 38
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
of the Issuer and its subsidiaries. The selected consolidated financial data as
of December 31, 1997 and for each of the three years in the period ended
December 31, 1997 have been derived from, and should be read in conjunction
with, consolidated financial statements that have been audited by Ernst & Young
LLP, independent auditors, appearing elsewhere herein. The selected consolidated
financial data for each of the two years in the period ended December 31, 1994
have been derived from consolidated financial statements that have been audited
by Ernst & Young LLP, independent auditors, which are not included or
incorporated herein. The selected consolidated financial data for the three
months in the periods ended March 30, 1997 and April 5, 1998 and as of April 5,
1998 have been derived from, and should be read in conjunction with, the
unaudited consolidated financial statements included elsewhere herein and
include, in the opinion of management, all adjustments, including normal
recurring adjustments, necessary for a fair presentation of the results for the
unaudited interim periods. Results for the three months in the period ended
April 5, 1998 are not necessarily indicative of the results that may be expected
for the entire year, and includes charges related to the Recapitalization. The
information presented below should be read in conjunction with "Capitalization,"
"Unaudited Pro Forma Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the Consolidated Financial Statements and Notes thereto and other financial
information included elsewhere in this Prospectus. See also "Available
Information" and "Disclosure Regarding Forward-Looking Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------
---------------------------------------------------- MARCH 30, APRIL 5,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Sales.......................................... $202,727 $223,316 $265,122 $298,425 $261,097 $70,136 $ 49,539
Costs and expenses:
Cost of sales................................ 105,727 111,288 135,066 175,319 171,722 44,028 40,767
Research and development..................... 20,833 23,048 24,546 30,548 30,467 6,632 8,104
Selling, general and administrative.......... 37,619 37,790 41,943 47,934 47,806 12,052 13,941
Recapitalization............................. 13,304
-------- -------- -------- -------- -------- ------- --------
Total costs and expenses....................... 164,179 172,126 201,555 253,801 249,995 62,712 76,116
-------- -------- -------- -------- -------- ------- --------
Operating income (loss)........................ 38,548 51,190 63,567 44,624 11,102 7,424 (26,577)
Other income (expense):
Interest income.............................. 2,463 2,496 2,676 2,443 2,892 595 1,159
Interest expense............................. (2,978)
Other........................................ 813 860 (360) (911) 832 (880) (88)
-------- -------- -------- -------- -------- ------- --------
Income (loss) before income taxes.............. 41,824 54,546 65,883 46,156 14,826 7,139 (28,484)
Provision (benefit) for income taxes........... 15,057 19,637 23,418 16,155 2,965 2,356 (8,545)
-------- -------- -------- -------- -------- ------- --------
Net (loss) income.............................. $ 26,767 $ 34,909 $ 42,465 $ 30,001 $ 11,861 $ 4,783 $(19,939)
======== ======== ======== ======== ======== ======= ========
OTHER DATA:
EBITDA(1)...................................... $ 55,489 $ 72,908 $ 90,421 $ 92,028 $ 75,684 $21,694 $(10,790)
Depreciation................................... 16,128 20,858 27,214 48,315 63,750 15,150 16,015
Capital expenditures........................... 39,658 60,708 79,346 117,065 38,437 11,991 7,260
Ratio of earnings to fixed charges(2).......... 53.9x 79.7x 81.3x 56.4x 18.2x 34.1x N/M
CONSOLIDATED BALANCE SHEET DATA (AT END OF
PERIOD):
Cash, cash equivalents and short-term
investments.................................. $106,311 $ 66,890
Working capital................................ 131,594 93,791
Net property, plant and equipment.............. 223,577 214,962
Total assets................................... 415,639 373,105
Total debt..................................... -- 280,000
Stockholders' equity........................... 340,482 23,204
</TABLE>
- ---------------
(1) EBITDA represents earnings (losses) from operations before interest income
and expense (including amortization of deferred financing costs), income
taxes, depreciation, amortization of goodwill and non-cash stock option
compensation expenses. EBITDA is presented because it is a widely accepted
financial indicator of a leveraged company's
36
<PAGE> 39
ability to service and/or incur indebtedness and because management believes
that EBITDA is a relevant measure of the Issuer's ability to generate cash
without regard to the Issuer's capital structure or working capital needs.
EBITDA as presented may not be comparable to similarly titled measures used
by other companies, depending upon the non-cash charges included. When
evaluating EBITDA, investors should consider that EBITDA (i) should not be
considered in isolation but together with other factors which may influence
operating and investing activities, such as changes in operating assets and
liabilities and purchases of property and equipment; (ii) is not a measure
of performance calculated in accordance with generally accepted accounting
principles; (iii) should not be construed as an alternative or substitute
for income from operations, net income or cash flows from operating
activities in analyzing the Issuer's operating performance, financial
position or cash flows; and (iv) should not be used as an indicator of the
Issuer's operating performance or as a measure of its liquidity.
(2) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes, plus fixed charges and (ii)
fixed charges consist of interest expense incurred and the estimated portion
of rental expense deemed by the Company to be representative of the interest
factor of rental payments under operating leases. For the three months ended
April 5, 1998, the deficiency of earnings from continuing operations before
income taxes to cover fixed charges was $28.5 million.
37
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the financial
condition and results of operations of Zilog for the fiscal years ended December
31, 1995, 1996 and 1997 and the three months in the periods ended March 30, 1997
and April 5, 1998. This discussion and analysis should be read in conjunction
with, and is qualified in its entirety by, the sections entitled "Selected
Consolidated Financial Data," "Unaudited Pro Forma Consolidated Financial
Information" and the financial statements and notes thereto included elsewhere
herein. Management's discussion and analysis provides information concerning
Zilog's business environment, consolidated results of operations and liquidity
and capital resources. In addition to historical information, management's
discussion and analysis includes certain forward-looking statements regarding
events and financial trends that may affect Zilog's future operating results and
financial position. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. Such
statements are subject to risks and uncertainties that could cause Zilog's
actual results and financial position to differ materially. Such risks and
uncertainties include, but are not limited to, those specifically discussed
below as well as those set forth in "Risk Factors" and "Disclosure Regarding
Forward-Looking Statements."
GENERAL
Zilog is a worldwide designer, manufacturer and marketer of ASSPs for use
in the consumer electronics, data communications, and computer peripherals end
markets. ASSPs are logic devices designed for a particular application but are
not proprietary to a specific customer. Zilog's products, many of which are
"designed in" to customers' end-products, demonstrate generally greater customer
acceptance, longer life cycles, and less obsolescence than general purpose
microprocessors.
Zilog, a pioneer in the semiconductor market, is headquartered in Campbell,
California, and operates two fabrication facilities in Nampa, Idaho and two test
and assembly centers in the Philippines. For the fiscal year ended December 31,
1997, Zilog generated revenue and EBITDA of $261.1 million and $75.7 million,
respectively. For the three months in the period ended April 5, 1998, Zilog's
revenue and pro forma EBITDA were $49.5 million and $2.5 million, respectively.
RECENT DEVELOPMENTS
Asian Revenue. In 1997, Zilog generated approximately $110.5 million, or
42.3% of its total revenue, from sales to customers located in Korea, Singapore,
Taiwan, Hong Kong, Japan, and China. While economic activity in some of these
countries, most notably Korea, has been adversely affected by recent
developments in local currency and banking markets, Zilog believes that the
effect of these developments on Zilog's business is somewhat mitigated by the
financial condition of many of Zilog's customers in these markets, such as
Samsung, Hitachi, Logitech, and NMB. Many of these customers are leaders in
their respective industries and conduct their business on a multinational basis.
In addition, a substantial portion of Zilog's total revenue generated from the
Asian region in 1997 was related to end-products subsequently exported to
non-Asian markets such as the United States and Europe and therefore represent
an important source of foreign currency for these customers. Zilog does not
believe that economic conditions in Asia had a material effect on 1997 revenue.
Zilog believes that it will continue to benefit from the geographic diversity of
its customers and the diverse end-markets for its customers' products. No
assurance can be given that continued negative developments in the Asian region
will not have an adverse effect on Zilog's future operating performance. See
"Risk Factors -- Export Sales; International Operations."
Standard & Poors's. On April 18, 1998, Standard & Poor's revised its
outlook on Zilog to negative from positive, while affirming Zilog's credit
rating, and the ratings on the Notes and the Revolving Credit Facility.
QUARTER ENDED MARCH 31, 1997 AND APRIL 5, 1998
Sales in the first quarter of 1998 were $49.5 million, compared to $70.1
million in the first quarter of 1997, a decrease of $20.6 million, or 29.4%. The
decline in sales was primarily attributable to a decline of $13.1
38
<PAGE> 41
million in the data communications group as a result of lower volume and prices,
particularly in the modem product line. The modem volume decline was affected by
the loss of a significant design position with a data communications equipment
manufacturer. The customer placed no orders in the first quarter of 1998 and
Zilog does not anticipate receiving future orders. Revenue declined
approximately $3.7 million in the peripherals group, primarily as a result of
the discontinuation of the development and marketing of the hard disk products.
This reflected Zilog's strategic decision to refocus its development efforts on
other market opportunities. In addition, sales of keyboard products declined as
a result of the industry slowdown in personal computer sales. Revenue also
declined further due to approximately $3.8 million in price declines in the
television and infrared remote product lines of the consumer group.
Overall unit volumes declined by 13.0% in the first quarter of 1998
compared to the same period in 1997 largely due to lower shipments in the modem
and keyboard product lines as described above. Average selling prices also
declined as a result of changes in the sales mix and factors described above,
together with the continuing over-capacity in the industry.
Domestic and international sales in the first quarter of 1998 were 36.8%
and 63.2% of revenue, respectively, compared to 38.0% and 62.0%, respectively,
in the first quarter of 1997.
Cost of Sales in the first quarter of 1998 was $40.8 million, or 82.3% of
sales, compared to $44.0 million, or 62.8% of sales in the first quarter of
1997, a decrease of $3.3 million, or 7.4%. This increase in cost of sales as a
percentage of sales was primarily attributable to a decrease in revenue as a
result of lower average selling prices. The decrease in cost of sales in
absolute dollars in the first quarter of 1998, when compared to the same period
of 1997, is a result of producing less units.
Research and Development expenses in the first quarter of 1998 were $8.1
million, compared to $6.6 million in the first quarter of 1997, an increase of
$1.5 million, or 22.2%. This increase primarily reflects continued investments
in outside design services to assist in the development of new products and
added depreciation due to the capital investments in Zilog's new research and
development technology center in Idaho. Zilog plans to invest a major portion of
its estimated $37 million capital expenditures budget for 1998 in completing its
research and development technology center, which will have the capability of
designing to a 0.35 micron feature size in mixed signal processes.
Selling, General and Administrative expenses in the first quarter of 1998
were $13.9 million compared to $12.1 million in the first quarter of 1997, an
increase of $1.8 million, or 15.7%. This increase was due to higher personnel
costs associated with increasing the sales force and a worldwide sales meeting.
Operating Income (loss) in the first quarter of 1998 was ($26.6) million
compared to $7.4 million of income in the first quarter of 1997. The reduction
in operating income in the first quarter of 1998 was primarily due to
recapitalization expenses associated with the Merger and lower revenue as a
result of lower average selling prices and product mix.
Benefit for Taxes. The benefit for income taxes was 30.0% for the first
quarter of 1998, compared to 33.0% in the first quarter of 1997. The 1998
benefit differs from the federal statutory rate primarily as a result of foreign
taxes, and the expiration of the Philippines tax holiday. The tax provision for
the first quarter of 1997 differed from the federal statutory rate primarily as
a result of tax exempt earnings and foreign earnings taxed at a lower than U.S.
tax rate offset by state taxes.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Sales for 1997 were $261.1 million, compared to $298.4 million in 1996, a
decrease of $37.3 million, or 12.5%. The sales decline was primarily
attributable to (i) the loss of a significant design position with a data
communications equipment manufacturer and (ii) the decrease of microprocessor
sales to hard disk manufacturers. The data communications customer, which
generated approximately 12.8% of 1996 revenues, changed the technology of its
newest model(s) of its modem product, which resulted in a decrease to Zilog of
approximately $23 million in revenue versus the year-earlier period, although
this particular customer continues to purchase Zilog's products for other
applications. No single customer accounted for more than 8% of revenue in 1997.
The discontinuation of the development and marketing of the hard disk products,
which
39
<PAGE> 42
resulted in a decrease to Zilog of approximately $8.5 million in revenue versus
the year-earlier period, reflected Zilog's strategic decision to refocus its
development efforts on other market opportunities.
Overall unit volume increased by 15.4% in 1997, largely driven by increased
demand for Zilog's keyboard and pointing device ASSPs. Revenue growth, however,
was adversely affected by generally declining average selling prices as a result
of changes in sales mix described above and continuing over-capacity in the
industry.
Cost of Sales in 1997 was $171.7 million or 65.8% of sales, compared to
$175.3 million or 58.7% of sales in 1996, a decrease of $3.6 million or 2.1%.
The decrease in cost of sales was primarily attributable to the elimination in
1997 of outside wafer foundry cost offset by increased depreciation of $15.8
million and overhead associated with the new MOD III manufacturing facility in
Nampa, Idaho, which was completed in 1996. Excluding this increase in
depreciation expense associated with the new facility, 1997 cost of sales as a
percent of revenues was relatively unchanged at 59.7% compared to 58.7% in 1996.
Research and Development expenses for 1997 and 1996 were both $30.5
million. Research and Development expenses could increase in 1998 due to higher
depreciation charges associated with Zilog's investments in its new Research and
Development Technology Center, which is located in the new MOD III manufacturing
facility.
Selling, General and Administrative expenses for 1997 were $47.8 million,
which is relatively unchanged from the $47.9 million recorded in 1996.
Administrative expenses were $1.5 million less in 1997 than in 1996 due to a
litigation settlement in 1996, partially offset by higher recruiting and
personnel costs in 1997 associated with increasing the sales force.
Operating Income for 1997 was $11.1 million, or 4.3% of sales, compared to
$44.6 million, or 15.0% of sales, for 1996. The reduction in operating income in
1997 was primarily due to a higher percentage of cost of goods sold as a result
of lower revenues and increased depreciation charges associated with Zilog's new
MOD III manufacturing facility.
Provision for Taxes. Zilog's effective tax rate was 20% for 1997 compared
to 35% for 1996. The lower provision for income taxes for 1997 is primarily
attributable to a larger impact of tax exempt interest income, foreign earnings
taxed at a lower rate than the United States rate and the reinstatement of the
research and development tax credit on reduced pre-tax earnings. During 1997,
the President signed new legislation into law retroactively reinstating the
research and development tax credit for 1997. In addition, through December 27,
1997, Zilog was entitled to a partial tax holiday in the Philippines. As of
1998, Zilog's Philippines earnings will effectively be taxed at higher rates.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Sales for 1996 were $298.4 million, compared to $265.1 million in 1995, an
increase of $33.3 million, or 12.6%. The growth in 1996 was driven by increased
unit volumes of data communications and consumer electronics products with no
single customer accounting for more than 12.8% of sales. See "Risk Factors --
Key Customers."
Cost of Sales in 1996 was $175.3 million, compared to $135.1 million for
1995, an increase of 29.8%. As a percentage of sales, cost of sales increased to
58.7% in 1996 from 50.9% in 1995, primarily as a result of additional
depreciation expenses and production overhead costs related to Zilog's new MOD
III manufacturing facility.
Research and Development expenses for 1996 were $30.5 million, compared to
$24.5 million for 1995, an increase of 24.5%. The increase primarily reflects
continued investment in new product development.
Selling, General and Administrative expenses for 1996 were $47.9 million,
compared to $41.9 million for 1995, an increase of 14.3%. As a percentage of
sales, selling, general and administrative expenses increased to 16.1% in 1996
from 15.8% in 1995. This increase in absolute dollars and as a percentage of
sales is primarily attributable to costs associated with a litigation
settlement. See "Risk Factors -- Environmental Regulation."
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Operating Income for 1996 was $44.6 million, or 15.0% of sales, compared to
$63.6 million, or 24.0% of sales, for 1995. The decrease in operating income in
1996 was primarily due to a higher percentage of costs of goods sold as a result
of increased depreciation charges and production overhead associated with
Zilog's new MOD III manufacturing facility.
Provision for Taxes. Zilog's effective tax rate was 35% for 1996 compared
to 35.5% for 1995. The 1996 effective tax rate differs from the 1995 effective
tax rate primarily because of Zilog's increased investment in tax exempt
securities and state income tax credits.
LIQUIDITY AND CAPITAL RESOURCES
On February 27, 1998, Zilog issued $280 million principal amount of the Old
Notes. Proceeds, net of debt issuance costs, were approximately $270.7 million
and were used to finance the Merger.
In conjunction with the Merger, the Issuer entered into the Revolving
Credit Facility. To date, no amount has been borrowed under the Revolving Credit
Facility.
During the first quarter of fiscal 1998, Zilog incurred operating and net
losses due in large part to the $13.3 million recapitalization charges,
depreciation expense and amortization and interest expenses related to the
Notes.
Cash used by operating activities was $5.9 million for the three months
ended April 5, 1998, as compared to cash provided by operating activities of
$11.2 million for the three months ended March 30, 1997. Because of the sale of
short term investments, cash provided from investing activities was $6.9 million
for the three months ended April 5, 1998, as compared to cash used by investing
activities of $15.6 million for the three months ended March 30, 1997. Cash used
by financing activities for the three months ended April 5, 1998 was $26.2
million and was primarily attributable to cash transactions related to the
Merger, compared to $0.4 million in cash provided by financing activities for
the three months ended March 30, 1997.
Zilog expects to make total capital expenditures of approximately $37.0
million in 1998. These expenditures will primarily be used to complete Zilog's
investment in its new research and development technology facility in Idaho, to
purchase production equipment for its fabrication facility, and for computer
networks and office productivity tools.
Subject to the fulfillment of certain conditions precedent, Zilog may
borrow on the Revolving Credit Facility, if needed. At present, the Company
would not be able to satisfy such conditions; however, Zilog believes its
current cash and cash equivalents, together with funds expected to be generated
from operations, will provide adequate cash to fund the Issuer's anticipated
liquidity needs for at least the next twelve months.
Zilog's primary cash needs are working capital and capital expenditures.
Zilog has financed these cash requirements primarily through internally
generated cash flow and cash received upon the exercise of stock options. As of
December 31, 1997, Zilog had cash and short term investments of approximately
$106.3 million.
Cash provided by operating activities for fiscal 1997 was $72.6 million
compared to $91.6 million for fiscal 1996. The major component for both periods
was depreciation and amortization of $63.8 million and $48.3 million for 1997
and 1996, respectively, as well as a reduction in outstanding accounts
receivable and higher net income in 1996.
Zilog generated cash from investing activities of $1.1 million in 1997
compared to using cash of $96.9 million in 1996 and $71.4 million in 1995,
primarily as a result of capital expenditures of $117.1 million and $79.3
million in 1996 and 1995, respectively. Zilog has made approximately $38.4
million of capital expenditures through the end of fiscal 1997, principally for
equipment in the new research and development technology center for development
of 0.35 micron and mixed signal process.
Cash provided by financing activities was $3.0 million and $13.0 million
for 1997 and 1996, respectively, representing the proceeds from the exercise of
stock options and purchases under Zilog's Stock Purchase Plan.
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<PAGE> 44
Zilog expects its capital expenditures for 1998 to be approximately $37.3
million, principally for equipment for the MOD III fabrication facility and the
technology center, computer networks and office productivity tools (E-mail,
voicemail and personal computers). Zilog estimates that in 1998 following the
Recapitalization it will spend approximately $20 million on non-recurring
expenses relating to the Recapitalization including executive and employee
bonuses and severance payments, payments in respect of outstanding employee
stock options and consulting fees. Zilog also intends to move to a larger
headquarters building and to increase the number of its design engineers, sales
personnel, field application engineers and distribution partners. See
"Business -- Business Strategy." While Zilog is unable to estimate the annual
cost of this increase, Zilog anticipates that it may be significant. Zilog
expects to fund these capital expenditures and other costs from cash on hand and
internally generated cash flows. As of December 31, 1997, after giving effect to
the Recapitalization, Zilog would have had $70.4 million of cash and short-term
investments on hand. See "Risk Factors -- Recent and Anticipated Operating
Results."
As a result of the Recapitalization, Zilog's capital structure changed
substantially. At the closing of the Recapitalization, Zilog's capital structure
consisted of the Old Notes, a $25.0 million Revolving Credit Facility (as to
which no amount was drawn at closing) and stockholders' equity of $34.1 million.
Upon consummation of the Merger, the Revolving Credit Facility became available
to fund Zilog's working capital needs. The Revolving Credit Facility will mature
in 2003 and has no scheduled interim amortization.
Zilog's ability to make scheduled payments of the principal of, or to pay
the interest or premium, if any, on, or to refinance, its indebtedness
(including the Notes), or to fund planned capital and other expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings under the Revolving Credit Facility, will be adequate
to meet Zilog's anticipated future requirements for working capital, budgeted
capital and other expenditures and scheduled payments of principal and interest
on its indebtedness, including the New Notes, for the next several years. There
can be no assurance that Zilog's business will generate sufficient cash flow
from operations or that future borrowings will be available under the Revolving
Credit Facility in an amount sufficient to enable Zilog to service its
indebtedness, including the New Notes, or make anticipated capital and other
expenditures.
Zilog currently recognizes revenue in respect of orders from distributors
at the time the products are shipped by Zilog. Zilog is considering changing
this practice to defer recognition of revenue until products are shipped by
distributors, which could adversely impact revenue.
As part of its business strategy, Zilog plans to replace the majority of
its computer systems. Such systems will function properly with respect to dates
in the year 2000 and thereafter. Zilog is investigating Year 2000 compliance by
its vendors and customers. There can be no assurance that the systems of such
other companies will be converted in a timely manner and will not have an
adverse effect on Zilog.
INFLATION
Zilog does not believe that inflation has had a material impact on its
results of operations.
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<PAGE> 45
BUSINESS
THE ISSUER
Zilog is a worldwide designer, manufacturer and marketer of ASSPs for use
in the high-growth consumer electronics, data communications and computer
peripherals end markets. Through proprietary design technology, the Issuer works
with customers to customize its ASSPs to control the basic function and
performance of electronic devices. ASSPs typically comprise some combination of
a microprocessor, digital signal processor, memory and input/output functions on
a single semiconductor. Examples of the Issuer's product applications include
chips in televisions that provide picture-in-picture display and in remote
control units that send instructions to televisions and video cassette
recorders, and chips that operate keyboards and mouse-type pointing devices.
Through its worldwide distribution network of more than 120 representatives and
distributors, the Issuer supplies over 800 customers with over 700 products. The
average life cycles of these products are over eight years.
The Issuer places significant emphasis on anticipating and meeting its
customers' needs as new electronic devices are designed. As customers "design
in" Zilog's products, the Issuer is able to gain a greater share of its
customers' purchases while maintaining its embedded position within its
customers' existing products. The Issuer believes that this design strategy is
at the core of its ability to achieve a high degree of customer acceptance
within specific applications. Reflecting the proprietary and often sole-source
nature of its products within its customers' applications, the Issuer's
relationships with its top 10 customers average seven years. In addition,
Zilog's customer base includes many leaders in their respective industries,
including Black & Decker, Cellnet, Cisco, DSC Communications, Fujitsu, General
Instrument, Hewlett-Packard, IBM, Logitech, Lucky Goldstar, Microsoft, NMB,
Samsung, Sharp and VeriFone.
Founded in 1974, Zilog is a pioneer in the semiconductor market. The
Issuer's Z-80 product, introduced in 1975, is the largest selling 8-bit
microprocessor in history and is still being sold today. In 1997, Zilog products
based on the Z-80 architecture accounted for approximately $75 million in
revenue, representing 29% of the Issuer's total revenue. Headquartered in
Campbell, California, the Issuer has two fabrication facilities in Nampa, Idaho
and two test and assembly centers in the Philippines. For the fiscal year ended
December 31, 1997, the Issuer had revenue of $261.1 million and EBITDA of $75.7
million. For the three month period ended April 5, 1998, the Issuer had revenue
of $49.5 million and pro forma EBITDA of $2.5 million.
THE INDUSTRY
According to trade statistics published by the SIA, revenue for the
worldwide semiconductor market was $137 billion in 1997. The overall
semiconductor market has expanded at a compound annual growth rate of 17% from
1991 to 1997. The semiconductor industry is comprised of three broad product
segments: logic devices, including microprocessors, microcontrollers and digital
signal processors, which process data (approximately 50% of total industry
sales); memory devices, which store data (approximately 22% of total industry
sales); and analog and discrete devices, which process electronic signals
(approximately 28% of total industry sales). Zilog develops, manufactures and
markets products in the logic device segment. The logic device segment further
consists of three distinct categories: (i) general purpose logic products, such
as the Intel Pentium(R) microprocessor, which are neither application nor
customer specific, are used for a wide array of logic-related functions and are
typically capable of more functions than are actually required for any given
application; (ii) ASICs, which are designed to meet particular application
requirements, are usually proprietary to one customer and are generally produced
in relatively small volumes; and (iii) ASSPs, which are designed for a
particular application, but are not proprietary to a single customer. The
Issuer's ASSPs typically comprise some combination of a microprocessor, digital
signal processor, memory and input/output functions on a single semiconductor to
control the basic function and performance of its customers' products.
Revenue for the ASSP segment of the semiconductor industry has grown from
$14.6 billion in 1994 to $27.8 billion in 1997, a compound annual growth rate of
approximately 24%, and is forecasted to grow to $44.6 billion by the year 2000.
The Issuer believes that the market for ASSPs is distinct from other logic and
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memory markets in that it is less cyclical and that ASSPs typically have longer
product life cycles. Applications in the ASSP market generally do not demand the
processing power of general purpose microprocessors such as the Intel Pentium(R)
microprocessor, which operates personal computers; rather, Zilog's products
operate or perform specialized functions in everyday products such as
telephones, garage door openers and televisions, all of which exhibit growing
degrees of silicon content.
ZILOG'S STRENGTHS
As a pioneer in the industry, Zilog has established a well-recognized and
respected brand name in its markets and has developed strong, long-term
relationships with numerous customers who are leaders in their respective
markets. The Issuer's franchise is built upon several specific strengths,
including the following:
LEADING MARKET POSITION WITH HIGH QUALITY CUSTOMER BASE. The Issuer
believes it maintains a leading market position in several niches, including
television remote controls, keyboards and mouse-type pointing devices.
Approximately 70% of its revenue is derived from proprietary relationships with
customers for a particular product design. The Issuer believes that these
relationships provide a significant recurring revenue stream and represent a
strong competitive advantage for Zilog as a redesign of the customer's hardware
and software to use a competitor's ASSP would often involve substantial costs to
the customer. In addition, Zilog believes that it has established strong,
long-term relationships by partnering with customers throughout the iterative
product design and manufacturing process. Currently, the Issuer sells to more
than 800 customers worldwide, and its relationships with its top 10 customers
average seven years. In consumer electronics, Zilog sells to customers that
include Black & Decker, Samsung, SGS-Thomson, Sony and Zenith. In data
communications, Zilog's customers include Lucent, Cisco, IBM, Motorola and
VeriFone. Zilog's computer peripheral customers include Hewlett-Packard,
Microsoft and NMB, the largest keyboard manufacturer in the world.
DIVERSIFIED PRODUCTS AND MARKETS. Within the consumer electronics, data
communications and computer peripherals end markets, Zilog sells and markets
over 700 products to more than 800 customers worldwide. The Issuer sells either
directly through its 29 sales offices or indirectly through its more than 120
sales representatives and distributors located throughout the world. In 1997, no
single product or single customer accounted for more than 8% of total revenue.
The Issuer believes that its product and market diversity, its independence from
reliance on any one customer and its numerous sales personnel and locations
around the world help to insulate the Issuer from some of the volatility that
affects other companies in the semiconductor industry. The Issuer also believes
no competitor addresses exactly the same diverse set of markets.
COMPREHENSIVE PROPRIETARY DESIGN LIBRARY. Based upon over 20 years of
design expertise, Zilog's proprietary design library allows customers to select
or modify proven components that can be combined and assembled to create new
products or new applications. Zilog's customers that have designed their
products using one or more of the Issuer's devices can redesign and upgrade to
new Zilog ASSPs, often without the loss of hardware or software compatibility.
This methodology allows customers to leverage Zilog's vast component library to
advance their own product development processes. Because of extensive
customization, Zilog's customers depend upon Zilog's expertise for much of their
end-product functionality. A Zilog customer switching to a non-Zilog design
could incur significant learning, design, software and manufacturing costs.
OWNERSHIP OF STATE-OF-THE-ART MANUFACTURING FACILITIES. Over the last three
years, Zilog has spent $235 million to increase capacity and improve efficiency
by building a new wafer fabrication facility, renovating an existing facility
and equipping both facilities with state-of-the-art equipment. These facilities
contain fabrication modules equipped to manufacture products with competitive
submicron dimensions. Overall, the Issuer estimates that it is operating its
fabrication facilities at 60% capacity, enabling Zilog to capitalize on future
upswings in industry demand. The present building also has sufficient space and
infrastructure to accommodate the additional machinery for a 50% increase in
total capacity. The Issuer believes that its manufacturing facilities will
remain highly competitive in the current market environment without additional
significant capital expenditures, and that the Issuer's manufacturing, assembly
and test facilities are among the most efficient in the industry.
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BUSINESS STRATEGY
Under the leadership of Curtis J. Crawford, formerly Group President of the
Microelectronics Group and President of the Intellectual Property Division of
Lucent, who joined Zilog as President and CEO upon the closing of the
Recapitalization, the Issuer intends to capitalize on its core strengths with
the following business strategies:
INCREASE CUSTOMER FOCUS. The Issuer intends to increase the number of field
application engineers, sales personnel, design engineers and distribution
partners to respond more effectively to its customers' changing product needs.
As competition occurs primarily at the design stage, Zilog believes that once a
customer commits to a design (a "design win"), it typically results in a
proprietary supplier relationship. Zilog believes a strong focus on design wins
through an increase in field application engineers and improvements in design
tools should lead to an increased base of recurring revenues from its customers.
The Issuer increased its design wins from 180 in 1995 to over 220 in each of
1996 and 1997.
BROADEN APPLICATIONS. Utilizing its library of proprietary designs, the
Issuer has introduced an average of 39 new products annually since 1993,
including 36 new products in 1997. The Issuer's strategy is to upgrade its
existing product lines to meet the changing requirements of evolving
applications and to design new products in new markets. In addition to releasing
new or upgraded products in its historic market applications (e.g., keyboards,
mouse-type pointing devices and television remote controls), Zilog expects to
introduce products in several new areas in 1998, including transaction
processing (credit card) modems, internet-access devices for televisions and
telephones and enhanced USB keyboard and pointing device microcontrollers for
personal computers.
EXPAND PRODUCT CAPABILITIES. The Issuer's position within its markets
depends in part upon the strength and capabilities of its library of proprietary
designs. Zilog intends to expand its existing library by recruiting additional
engineers, investing in computer-aided development tools to assist the Issuer's
design engineers and acquiring additional design technology from third parties.
By investing in its design library, Zilog will be able to offer more products
with broader functionalities and enhance its competitive position with new and
existing customers.
STRENGTHEN INTERNAL SYSTEMS AND CUSTOMER SUPPORT TOOLS. The Issuer intends
to increase the efficiency of its experienced employee workforce by investing in
appropriate productivity tools and upgrading office workspace. For example, the
Issuer intends to invest over $8 million in 1998 in improved internal systems
such as E-mail, computer networks and voicemail. In addition, the Issuer intends
to move its headquarters to a nearby facility providing approximately 28,000
additional square feet of office space. Zilog also intends to improve its
offering of customer support tools such as compilers, emulators and debuggers,
which facilitate customer adoption of Zilog products. With these tools, Zilog
believes the value of its existing product portfolio to its customers, as well
as from its ability to create new products, should be significantly enhanced.
LEVERAGE MANUFACTURING CAPABILITIES. The Issuer's ownership of a
substantial portion of its manufacturing resources provides an important
strategic advantage. Direct control over fabrication, assembly and test
operations allows Zilog to offer its customers continuous supply, shortens the
Issuer's design and production cycles and allows Zilog to capture the
manufacturing margin. Having spent $235 million over the last three years in
order to increase capacity and improve efficiency in its manufacturing
facilities, Zilog believes it is well positioned to increase revenue and margins
in the future.
MARKETS AND PRODUCTS
Zilog relies upon its knowledge, experience, customer relationships and
proprietary core and cell designs to target products in the rapidly growing
consumer electronics, data communications and computer peripheral end markets.
Because Zilog creates ASSPs which have a high degree of integration and which
are designed for a particular application, but which are not proprietary to a
single customer, Zilog's ASSPs typically address larger aggregate markets and
generally have higher production volumes than ASICs. Zilog works closely with
industry leaders in its selected markets to design innovative products. Through
its customer relationships, Zilog has been able to establish and maintain
technological leadership, attract multiple customers in the same
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market and create industry standards. The Issuer believes that it is
well-positioned with respect to the trends in its target market areas, which
trends include the increase in the complexity and sophistication of consumer
electronics products and the networking of, and increased demand for, personal
computers and peripherals.
Zilog's ASSP products are primarily based upon 8-bit and 16-bit
microprocessor, microcontroller or digital signal processors. Applications in
the ASSP market generally do not demand the processing power of microprocessors
such as the Intel Pentium(R) microprocessor, which operates personal computers.
Rather, Zilog's products operate or perform specialized functions in everyday
products such as telephones, garage door openers and televisions, all of which
exhibit growing degrees of silicon content.
Zilog currently offers over 700 products (independent of ROM codes), sold
in a wide selection of package, speed grade and other configurations to more
than 800 customers worldwide. Zilog's customers include Black & Decker, Cisco,
Cellnet, DSC Communication, Fujitsu, General Instrument, Hewlett-Packard,
Hitachi, IBM, Logitech, Lucent, Lucky Goldstar, Microsoft, NMB, Motorola,
Northern Telecom, Samsung, Sharp, Sony, Texas Instruments, VeriFone and Zenith
Electronics. The Issuer believes its product portfolio, with an average product
life cycle of over eight years, has relatively less obsolescence risk than those
of other semiconductor companies.
Zilog's three target markets are consumer electronics, data communications
and computer peripherals:
Consumer Electronics. The increase in the use of ASSPs in consumer
electronics has created a significant market opportunity for Zilog.
Sophisticated ASSPs are increasingly found in consumer electronics such as
spread spectrum cordless telephones, audiovisual equipment, telephone answering
machines and household appliances. Other consumer electronics applications that
use Zilog's products are television controllers, infrared remote controls,
internet appliances, battery chargers, garage door openers, home security
systems, cable television systems, video cassette recorders and automotive
controllers such as airbags.
Data Communications. The data communications market is growing in response
to the need to connect computer systems at remote locations and the need for
multiple users to share peripherals such as printers and facsimile machines. By
networking computers and peripherals, it is possible to share information files,
distribute computer loads more efficiently and facilitate communications between
terminals, computers and peripherals, thereby maximizing the benefit from an
organization's investment in its installed base of computer equipment. Zilog
sells microprocessors optimized for use in the following data communications
applications: ethernet routers, bridges, data switches, modems, terminals,
printers, workstations, local area networks and wide area networks.
Computer Peripherals. Strong unit demand for personal computers and
peripherals has driven growth for ASSPs. The typical computer system may have up
to six or seven peripherals which facilitate the human interface, provide memory
functions, or service the communications link with other computers. Among the
most common peripherals are the printer, keyboard, monitor, mouse-type pointing
device, facsimile and modem. Zilog ASSPs are used in each of these applications.
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The following table summarizes selected applications of the Issuer's
products in the consumer electronics, data communications and computer
peripherals markets.
<TABLE>
<CAPTION>
DATA
END MARKET: CONSUMER ELECTRONICS COMMUNICATIONS COMPUTER PERIPHERALS
- -------------------------------- ----------------------- --------------- --------------------
PERCENTAGE OF REVENUE
FOR 1997 36% 37% 27%
- -------------------------------- ----------------------- --------------- --------------------
<S> <C> <C> <C>
Applications: Cordless phones ISDN Mouse-type pointing
Television controllers WAN device
Infrared remote
controls XDSL Keyboard
Battery chargers Modems Fax/Printer/Scanner
Household appliances ATM/frame relay PCMCIA
Meter reader
Automotive
Card reader/smart cards
Security systems
Customers: Black & Decker Cisco Acer
Samsung Lucent Hewlett-Packard
SGS-Thomson Motorola Logitech
Sharp VeriFone Microsoft
Sony NMB
Zenith
Example of Product Application: Television Modem Mouse
Transmits and Causes cursor to
Example of Zilog ASSP Function: Picture-in-Picture receives data move
</TABLE>
RESEARCH AND DEVELOPMENT
Zilog believes that the continued introduction of new ASSPs in its target
markets and application support tools for these products are essential to its
growth. As of December 31, 1997, Zilog employed 140 people in research and
development. Expenditures for research and development in 1995, 1996 and 1997
were approximately $24.5 million, $30.5 million and $30.5 million, respectively,
representing approximately 9%, 10% and 12%, respectively, of sales.
Most of Zilog's new products are created by design engineers through the
use of its proprietary design library. All of the designs in Zilog's library are
produced by a subset of Zilog's standard manufacturing process. The design rules
employed ensure that the need to adjust the library is minimal as manufacturing
technology advances to smaller dimensions. Zilog employs the concept of
"concurrent engineering." Designers and process engineers work side by side in
the product definition and design stages to manufacture a new product that will
maximize efficiencies and yields when the design cycle and fabrication processes
are completed.
Zilog has three design centers with different specialties. The Campbell,
California, design center specializes in consumer electronics, while the Nampa,
Idaho, design center focuses primarily on Zilog's memory libraries. The Austin,
Texas, design center concentrates its efforts mainly on digital signal processor
products and applications. While cross-fertilization occurs, by concentrating
design efforts in these centers, engineers develop valuable expertise in their
respective areas.
MANUFACTURING
Zilog owns a substantial portion of its manufacturing resources and
believes this is an important part of its strategy. The Issuer has made
significant capital expenditures of $235 million over the last three years to
increase capacity and improve efficiency at its facilities. Direct control over
wafer fabrication, assembly and
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test operations allows Zilog to provide customers with continuous supply,
shorten Zilog's design and production cycles, and capture manufacturing margins.
By operating two semiconductor fabrication facilities in Nampa, Idaho,
Zilog enjoys significant manufacturing flexibility. These facilities contain
fabrication modules equipped to produce products with submicron dimensions. The
Issuer can manufacture certain ASSPs using low volume, low cost production runs
from its MOD II facility built in 1984, as well as more tightly integrated,
newly developed ASSPs from its MOD III facility built in 1996. Additionally, the
Issuer's facilities enable Zilog to produce mixed-signal (analog-digital
conversion) ASSPs. Zilog's MOD III facility is currently producing ASSPs at 0.65
micron dimensions and produced its first test wafers at 0.35 micron dimensions
in January 1998. Overall, the Issuer estimates its facilities are operating at
60% capacity which should enable the Issuer to capitalize on future upswings in
industry demand. The Issuer further believes that its manufacturing facilities
provide cost and quality competitive advantages. In addition, the Issuer
conducts high volume assembly and test operations in two facilities in the
Philippines. Zilog also uses outside contract assemblers for packaging a portion
of its products. The Issuer believes that its manufacturing facilities will
remain competitive in the current market environment without additional
significant capital expenditures, and that the Issuer's manufacturing, assembly
and test facilities are among the most efficient in the industry.
The Idaho and Philippines plants operate 24 hours per day, seven days a
week. Automated data collection and analysis systems are used to maintain
efficient manufacturing line loading and to assure that the production mix is in
accord with the Issuer's sales order forecast. A skilled workforce is very
important to high productivity in semiconductor manufacturing. Zilog maintains
an extensive personnel training and certification program in its plants and
believes that this leads to lower turnover and higher worker involvement. All of
Zilog's operations are managed through the use of statistical process control
techniques.
SALES AND MARKETING
In 1997, Zilog shipped its products to over 800 customers through its
direct sales force and through manufacturers' sales representatives and
distributors. The Issuer's products are sold to manufacturers in the consumer
electronics, data communications and computer peripherals markets as well as the
military and aerospace industries. Zilog's worldwide headquarters are in
Campbell, California. The Issuer has sales offices located in the metropolitan
areas of Atlanta, Boston, Boulder, Chicago, Cleveland, Dallas, El Paso,
Minneapolis, Orange County, Philadelphia, Portland, San Diego, Beijing, Erfurt,
Hong Kong, Kuala Lumpur, London, Munich, Seoul, Shanghai, Shenzhen, Singapore,
Taipei, Teichung, Tokyo, Toronto and Vancouver. Each of these offices has a
direct sales force who calls on large accounts and manages the activities of
Zilog's 31 sales representative organizations. The Issuer frequently holds
technical sales conferences and training sessions for its direct sales and sales
representative personnel.
Zilog's direct marketing force consists of technical specialists and field
application engineers. Zilog's technical specialists are based at corporate
headquarters and focus exclusively on one of consumer electronics, data
communications or computer peripherals applications. Field application engineers
are located in Zilog's sales offices around the world and work directly with
local customers in close consultation with the Issuer's technical specialists.
Field application engineers typically develop technology expertise in the market
segment which is most prominent in their geographic area. The Issuer intends to
hire additional field application engineers as part of its business strategy.
Zilog also markets and sells its products through four North American
distributors and 32 international distributors. As is common in the
semiconductor industry, Zilog grants price protection and limited rights of
return to distributors. In certain circumstances, distributors are granted a
credit for the difference between the price they were originally charged for
products in inventory at the time of a price reduction and the reduced price
which Zilog subsequently charges. In 1997, the aggregate amount of this credit
was $67,000.
For the years ended December 31, 1995, 1996 and 1997, sales to customers
located outside of the United States aggregated approximately 57%, 56% and 59%,
respectively, of sales for these periods. Total sales to these international
customers in each of such periods were approximately $150.4 million, $166.9
million and $154.3 million, respectively. See "Risk Factors -- Export Sales;
International Operations."
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During the year ended December 31, 1997, no single customer represented
more than 8% of Zilog's sales and no distributor accounted for more than 7% of
Zilog's sales. Zilog believes that its customer and geographic balance help it
to reduce volatility in operating results.
COMPETITION
The principal competitive factors in Zilog's markets include design and
end-market applications expertise, product features and performance, including
the ability to preserve the customers' software, price, time to market and
manufacturing. Zilog believes its competitive strengths include its expertise in
the technology of a broad range of applications in the consumer electronics,
data communications and computer peripherals markets, its design methodology
which includes its design system with its extensive library of customer familiar
cores and cells and its manufacturing facilities and capabilities.
The semiconductor industry is intensely competitive and is characterized by
price erosion, rapid technological change and heightened foreign competition in
many markets. The industry consists of major domestic and international
semiconductor companies, many of which have substantially greater financial and
other resources than Zilog with which to pursue engineering, manufacturing,
marketing and distribution of their products. Emerging companies are also
expected to increase their participation in the semiconductor market. The
ability of Zilog to compete successfully in its markets depends on factors both
within and outside of its control, including, but not limited to, success in
designing and manufacturing new products that implement new technologies,
protection of the Issuer products by effective utilization of intellectual
property laws, product quality, reliability, ease of use, price, diversity of
product line, efficiency of production, the pace at which customers incorporate
Zilog's microcontrollers, microprocessors and digital signal processors into
their products, success of competitors' products and general economic
conditions.
Zilog competes with its licensees on certain products. With respect to
certain products, Zilog competes with other ASSP manufacturers which target the
same specific market segment. However, no single competitor addresses exactly
the same set of products or markets as Zilog.
PATENTS AND LICENSES
Zilog holds 94 United States patents and has 14 United States patent
applications pending, as well as 16 pending foreign patent applications. Zilog
has also filed and received one patent outside of the United States. Zilog has
more than 49 United States mask work registrations on its products. Copyright
registrations are held by Zilog to protect proprietary software employed in over
100 of its products. The Issuer has claimed more than 40 trademarks or
servicemarks.
Zilog's ability to compete may be enhanced by its ability to protect its
proprietary information, including the issuance of patents, copyrights, mask
work registrations and trademarks. Only a few of these intellectual property
rights have been litigated. While no intellectual property right of Zilog has
been invalidated or declared unenforceable, there can be no assurance that such
rights will be upheld in the future. Accordingly, management believes that, in
view of the rapid pace of technological change in the semiconductor industry,
the technical experience and creative skills of the Issuer's engineers and other
personnel will be extremely important in determining Zilog's future
technological success.
Zilog has more than 100 active licenses for product or technology exchange.
The purpose of these licenses has, in general, been to provide second sources
for standard products or to convey or receive rights to certain proprietary or
patented cores, cells or other technology.
As is typical in the semiconductor industry, Zilog has from time to time
received, and may in the future receive, communications from third parties
asserting patent rights, mask work rights, copyrights or trademark rights
covering certain of Zilog's products, technologies or information. See "Risk
Factors -- Intellectual Property Rights."
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<PAGE> 52
PROPERTIES
Zilog's headquarters and research and development facilities are located at
910 East Hamilton Avenue, Campbell, California. Zilog executed a six-year lease
on this new 108,000 square foot headquarters and research and development
facility commencing May 1, 1998. Zilog performs wafer fabrication at its 77,000
square foot and 128,000 square foot buildings located on a 65-acre site in
Nampa, Idaho. Zilog owns these Idaho facilities.
Assembly and test operations are performed at Zilog's two facilities in
Manila, the Philippines, which are 54,000 square feet and 34,000 square feet,
respectively. Zilog owns the larger facility subject to a ground lease which
expires in 2004, and leases the second Manila facility. This lease expires in
July 1998, but has an option for Zilog to renew for a term of five years. Zilog
has leased a 4,000 square foot engineering design center in Austin, Texas. This
lease expires in March 1998, prior to which time the Issuer plans to move this
facility to a new location. In addition, Zilog has short-term leases for its
sales offices located around the world in the United States, Canada, England,
Germany, Hong Kong, Japan, Korea, Malaysia, the People's Republic of China,
Singapore and Taiwan.
EMPLOYEES
As of April 5, 1998, Zilog employed 1,706 full-time persons, including
1,302 in manufacturing, 145 in research and development, 192 in sales and
marketing and 67 in finance and administration. Approximately one-half of
Zilog's employees work at its assembly and test facilities located in Manila,
the Philippines. Zilog considers its relations with its employees to be good.
ENVIRONMENTAL
Zilog is subject to a variety of government regulations related to the
discharge or disposal of toxic, volatile or otherwise hazardous chemicals used
in its manufacturing process, including the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Superfund Amendment and Reauthorization Act, the Clean Air Act and the Water
Pollution Control Act. Zilog believes it has also obtained all necessary
environmental permits to conduct its business, which generally relate to the
discharge of hazardous wastes. Nevertheless, the failure to comply with present
or future regulations could result in fines being imposed on Zilog, suspension
of production or cessation of operations. Such regulations could require the
Issuer to acquire significant equipment or to incur substantial other expenses
to comply with environmental regulations. Any failure by Zilog to control the
use of, or adequately restrict the discharge of, hazardous substances could
subject it to future liabilities.
In 1996, the U.S. District Court for the District of Idaho entered orders
approving a settlement in the lawsuit entitled Tsotung Ko, et al. v. Zilog, Inc.
In the suit, 31 plaintiffs alleged that the Issuer endangered their health and
safety by chemical exposures at one of the Issuer's Nampa, Idaho facilities. In
addition, the plaintiffs alleged that the Issuer discriminated against them
after they were injured by chemical exposures. Although the Issuer made payments
in connection with the settlement, the Issuer strongly denied these allegations.
In January 1998, the newspaper USA Today published a series of articles
about environmental and employee health and safety conditions at semiconductor
manufacturing facilities. The Issuer's operations during 1993 and 1994 and the
Tsotung Ko lawsuit were the primary subject of one article and were mentioned in
several other articles. Since 1993, the Issuer has constructed its MOD III
facility, expanded MOD II, closed MOD I and has upgraded the environmental
monitoring and control equipment at its MOD II facility. The Issuer believes it
is in substantial compliance with all applicable environmental and employee
health and safety regulations. However, this recent public attention focused on
the environmental and employee health and safety conditions at the Issuer's
facilities could increase the incidence of environmental or employee health and
safety complaints or governmental investigations into the Issuer's operations.
Zilog recently underwent a multimedia inspection and is currently being
inspected by OSHA. There can be no assurance that the Issuer will not incur
significant expense in connection with these and other governmental
investigations and/or environmental or employee health and safety matters.
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<PAGE> 53
LEGAL MATTERS
The Issuer has been named as a defendant in a purported class action
lawsuit which was filed on January 23, 1998 in the United States District Court
for the Northern District of California. Certain executive officers of the
Issuer are also named as defendants. The plaintiff purports to represent a class
of all persons who purchased the Issuer's Common Stock during the Class Period.
The complaint alleges that the Issuer and certain of its executive officers made
false and misleading statements regarding the Issuer that caused the market
price of its Common Stock to be "artificially inflated" during the Class Period.
The complaint does not specify the amount of damages sought. The Issuer believes
the lawsuit lacks merit and intends to defend it vigorously. There can be no
assurance that the Issuer will prevail in its defense of the lawsuit or that any
judgment against the Issuer will not be material.
Zilog is participating in other litigation and responding to claims arising
in the ordinary course of business. Zilog intends to defend itself vigorously in
these matters. Zilog's management believes that it is unlikely that the outcome
of these matters will have a material adverse effect on the Issuer, although
there can be no assurance in this regard.
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<PAGE> 54
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding individuals
who are serving as directors and executive officers of Zilog. It is anticipated
that additional individuals will be elected to serve as directors of Zilog. Each
director will hold office until the next annual meeting of stockholders or until
his or her successor is elected and qualified. Officers are appointed by the
Board of Directors and serve at the Board's discretion.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Curtis J. Crawford....................... 50 President and Chief Executive Officer; Director
William S. Price III..................... 42 Director
David M. Stanton......................... 36 Director
Carrie A. Wheeler........................ 26 Director
Michael J. Bradshaw...................... 49 Senior Vice President, Operations
Thomas C. Carson III..................... 57 Senior Vice President, Worldwide Sales
Richard L. Moore......................... 62 Senior Vice President, Technology
Robert E. Collins........................ 50 Vice President and Chief Financial Officer
Richard R. Pickard....................... 44 Vice President, General Counsel and Secretary
Sally M. Baumwell........................ 52 Vice President, Human Resources and
Administration
J. James Magill.......................... 50 Vice President and General Manager, Data
Communications Division
</TABLE>
Curtis J. Crawford became President, Chief Executive Officer and a director
of the Issuer upon consummation of the Recapitalization. From 1997 to 1998, Mr.
Crawford was Group President of the Microelectronics Group and President of the
Intellectual Property division of Lucent (a successor to certain AT&T
businesses). From 1995 to 1997, he was the President of the Microelectronics
Group. From 1993 to 1995, Mr. Crawford was President of AT&T Microelectronics, a
business unit of AT&T Corporation. From 1991 to 1993, he held the position of
Vice President and Co-Chief Executive Officer of AT&T Microelectronics. From
1988 to 1991, he held the position of Vice President, Sales, Service and Support
for AT&T Computer Systems. Prior thereto, he served in various sales, marketing
and executive management positions at various divisions of IBM. Mr. Crawford
holds a B.A. degree in Business Administration and Computer Sciences and a
Master of Arts degree in Marketing from Governors State University. In addition,
he received an M.B.A. from the Charles H. Kellstadt Graduate School of Business
at DePaul University. He currently serves as Chairman of the Board of Directors
of the i-STAT Corporation, and as a member of the Board of Directors of ITT
Industries, Inc. and Lyondell Petrochemical Company. Mr. Crawford previously
served as a member of the Board of Directors of The Sisters of Mercy Hospital
Corporation and the SIA.
William S. Price III became a director of Zilog upon consummation of the
Recapitalization. Mr. Price was a founding partner of TPG in 1993. Prior to
forming TPG, Mr. Price was Vice President of Strategic Planning and Business
Development for GE Capital, and from 1985 to 1991 he was employed by the
management consulting firm of Bain & Company, attaining partnership status and
acting as co-head of the Financial Services Practice. Mr. Price is a graduate of
Stanford University and received a J.D. degree from the Boalt Hall School of Law
at the University of California, Berkeley. Mr. Price is Chairman of the Board of
Favorite Brands International, Inc. and Co-Chairman of the Board of Beringer
Wine Estates. He also serves on the Boards of Directors of Belden & Blake
Corporation, Continental Airlines, Inc., Continental Micronesia, Inc., Denbury
Resources, Inc. and Vivra Specialty Partners, Inc.
David M. Stanton became a director of Zilog upon consummation of the
Recapitalization. Mr. Stanton is a partner of TPG. From 1991 until he joined TPG
in 1994, Mr. Stanton was a venture capitalist with Trinity Ventures, where he
specialized in information technology, software and telecommunications
investing. Mr. Stanton holds a B.S. degree in Chemical Engineering from Stanford
University and an M.B.A. from the Stanford Graduate School of Business. Mr.
Stanton serves on the Boards of Directors of Belden & Blake
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<PAGE> 55
Corporation, Denbury Resources, Inc., GlobeSpan Semiconductor, Inc., Paradyne
Corporation and TPG Communications, Inc.
Carrie A. Wheeler became a director of Zilog upon consummation of the
Recapitalization. Ms. Wheeler has served as a Vice President of TPG since 1996.
Prior to joining TPG, Ms. Wheeler was a financial analyst in the Mergers and
Acquisitions Department and the Principal Investment Area of Goldman, Sachs &
Co. from 1993 to 1996. She graduated with distinction from Queen's University in
1993 where she earned a Bachelors of Commerce Honours degree.
Michael J. Bradshaw has served as Senior Vice President, Operations since
March 1992. Previously he served as Vice President, Operations since the
Issuer's inception in June 1989 and served as the head of the Operations Group
of the Issuer's predecessor since March 1985. Before joining Zilog, Mr. Bradshaw
was employed by Texas Instruments and Mostek Corporation, both semiconductor
manufacturers, where he served as Director of Worldwide Planning. Immediately
prior to his employment by the Issuer's predecessor, he was the Vice President,
Operations Planning and Control of General Instrument Microelectronics. He holds
a B.S. degree in Engineering Mathematics, with concentration in electrical
engineering, from the Missouri School of Mines, and Masters degrees in business
administration and science administration from the University of Houston.
Thomas C. Carson III became Senior Vice President, Worldwide Sales in
January 1993. From March 1992 to January 1993, he served as Vice President,
Sales, after having joined Zilog in 1987 as Director, Worldwide Sales. Mr.
Carson has been a sales and marketing executive for more than 25 years.
Previously, he held the positions of Vice President of Sales at Raytheon Data
Systems, Vice President of Marketing for Datastream Communications, and Vice
President of Sales and Marketing at Enhansys, Inc. Prior to that, Mr. Carson was
employed by IBM for more than 17 years, where he held several key sales and
marketing management positions. Mr. Carson holds a B.A. in economics and
mathematics from East Tennessee State University and pursued post graduate
studies in the M.B.A. program at the University of Tennessee.
Richard L. Moore has served as Senior Vice President, Technology since June
1996. From May 1995 to May 1996, he served as Vice President, Technology. Prior
to joining Zilog, Mr. Moore served as President and Chief Executive Officer of
Cromemco, Inc., a client/server computer manufacturer, from October 1988 to May
1995. Mr. Moore has worked in various other managerial and executive capacities
in the computer and semiconductor industries for the past 35 years. Mr. Moore
received a B.S. in Electrical Engineering from the University of Texas (El Paso)
and an M.B.A. from Saint Mary's College (Moraga, California).
Robert E. Collins has served as Vice President and Corporate Controller
since January 1996. He was promoted to Chief Financial Officer in June 1996.
Previously, he was employed as Senior Vice President and Chief Financial Officer
of Chem Trak, Inc., a medical device company. Prior to that, Mr. Collins spent
14 years with Syntex Corporation, a pharmaceutical company, where he held a
number of senior financial positions, including Vice President and Treasurer.
Mr. Collins holds a B.S. in Business Administration from Adelphi University, New
York and an M.B.A. in Finance from California State University Hayward.
Richard R. Pickard has served as Vice President, General Counsel and
Secretary since March 1992. From June 1989 to March 1992, he served as General
Counsel and Secretary. Mr. Pickard was General Counsel and Secretary of the
predecessor company from 1987 through June 1989. Before joining Zilog, he was
corporate counsel at NEC Electronics, Inc., a semiconductor company, and in
private practice. Mr. Pickard holds a B.A. in American Civilization from
Williams College and a J.D. from the College of William and Mary.
Sally M. Baumwell has served as Vice President, Human Resources and
Administration since June 1996. From March 1992 to June 1996, she served as Vice
President and from June 1989 to March 1992 served as Director of Human
Resources. Ms. Baumwell held various positions in the Human Resources Department
of the predecessor company from 1978 through June 1989. Ms. Baumwell holds a
B.A. in Sociology from U.C. Davis.
J. James Magill has served as Product Marketing Manager since February
1987. Since August 1993 he has been Vice President and General Manager of the
Zilog's Data Communications Division. Prior to joining
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<PAGE> 56
Zilog, Mr. Magill was employed by Signetics, Inc., a semiconductor company,
where he held several management positions in Operations and marketing. Mr.
Magill holds a Bsc. in Electrical Engineering from Queen's University in Belfast
and an Msc. in Operations from City University in London. He is also a Member of
the Institute of Electrical Engineers and a Chartered Engineer in the United
Kingdom.
The aggregate cash and non-cash compensation paid by Zilog during 1997 to
its five most highly compensated executive officers was approximately $2.2
million.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Issuer entered into an employment agreement with Mr. Crawford, which
provides that, for a period of five years commencing on the consummation date of
the Recapitalization, Mr. Crawford will serve as President and CEO of Zilog and
as a member of its Board of Directors. The employment agreement provides for an
annual base salary of $800,000, and an annual target bonus of at least $600,000
provided the Issuer achieves certain performance objectives to be determined
each year, except that, with respect to calendar year 1998, a minimum bonus of
$600,000 will be paid in January 1999.
Upon commencement of his employment with the Issuer, Mr. Crawford received
a $1.0 million bonus and the Issuer established a deferred compensation account
of $8.0 million, which will earn interest of 8% per annum, compounded annually.
The $8.0 million plus earnings will be paid to Mr. Crawford on January 2, 2002
or earlier, if Mr. Crawford elects, upon the occurrence of (i) a change in
control of the Issuer (as defined in the employment agreement), (ii) a public
offering (as defined in the employment agreement) of any class of stock of the
Issuer or (iii) the termination of Mr. Crawford's employment with the Issuer,
provided that, if Mr. Crawford voluntarily resigns his employment with the
Issuer prior to January 1, 1999, he shall forfeit all rights to the $8.0 million
payment. If Mr. Crawford voluntarily resigns his employment with the Issuer
prior to January 5, 1999 and returns to his former employer without Zilog's
consent, he shall forfeit all rights to the $1.0 million bonus.
The Issuer will also grant Mr. Crawford 50,000 shares of Common Stock on
each of May 1, 1998, 1999, 2000 and 2001 (all share and share price information
in this paragraph give effect to a 4-for-1 stock split declared after
consummation of the Recapitalization). Such shares shall become fully
deliverable prior to such dates on the earlier to occur of a change in control,
a public offering or if Mr. Crawford ceases to be employed with the Issuer for
any reason, provided that, if Mr. Crawford voluntarily resigns his employment
prior to January 5, 1999 and returns to his former employer without Zilog's
consent, he shall return any shares granted and shall forfeit any shares that
have not yet been granted. Finally, the employment agreement provides that the
Issuer will grant Mr. Crawford the option to purchase 500,000 shares of Common
Stock at an exercise price of $5.00 per share (the "$5 Option") and 500,000
shares of Common Stock at an exercise price of $10.00 per share (the "$10
Option"). The $5 Option and the $10 Option will each become exercisable as
follows: (i) 62,500 shares on the date the Recapitalization is consummated, (ii)
62,500 shares on December 31, 1998 and (iii) 31,250 shares at the end of each
calendar quarter in each of calendar years 1999, 2000 and 2001. The options will
also become immediately exercisable in full upon the occurrence of any of the
following events: (i) change in control of the Issuer, (ii) a public offering or
(iii) the termination of Mr. Crawford's employment by the Issuer without cause
(as defined in the employment agreement), by Mr. Crawford for good reason (as
defined in the employment agreement) or on account of Mr. Crawford's death or
permanent disability. If Mr. Crawford voluntarily resigns his employment with
the Issuer for any reason, he shall forfeit any unvested options. Mr. Crawford
will have the right to require the Issuer to register his shares of Common Stock
acquired pursuant to such option on May 1, 2001, or, at the Issuer's option in
lieu of registering such shares, to purchase such shares from Mr. Crawford at an
appraised fair market value on such date.
Dr. Sack stepped down as CEO following consummation of the Merger. Pursuant
to Dr. Sack's employment agreement, upon such resignation, Dr. Sack became
entitled to receive the following payments in a cash lump sum: (a) the current
base salary for the period remaining under his employment agreement, (b) payouts
under Zilog's Employee Performance Incentive Plan for awards granted prior to
the effective date of termination of employment, and (c) payouts under Zilog's
Executive Bonus Plan for awards granted prior
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<PAGE> 57
to the effective date of termination of employment. In addition, Dr. Sack is
entitled to continue his participation in group insurance plans, including basic
and supplemental life insurance and disability insurance and health insurance
and the flexible spending plan for the health insurance and dependent care
coverage, maintained by Zilog for an additional 24 months. In addition, upon
consummation of the Merger, all of Dr. Sack's outstanding stock options became
fully vested, were canceled and Dr. Sack received cash for the difference, if
any, between the exercise price and $20.00. See "The Recapitalization."
Pursuant to the employment agreements between Zilog and each of Michael J.
Bradshaw, Richard L. Moore, Robert E. Collins, Richard R. Pickard, Sally M.
Baumwell, J. James Magill, Alan Secor and Thomas C. Carson, upon consummation of
the Merger, the term of each such executive officer's employment were
automatically extended for 24 months from the earlier of the Effective Time or
the expiration date of each respective employment agreement. If any of such
executive officers terminates employment with Zilog after the Effective Time,
either voluntarily for Good Reason (as defined in each respective employment
agreement) or involuntarily for reasons other than for Cause or Detrimental
Activity (as defined in each respective employment agreement): (i) the executive
officer will be entitled to receive the following payments in a cash lump sum:
(a) the then current base salary for the period remaining under the employment
agreement, (b) payouts under Zilog's Employee Performance Incentive Plan for
awards granted prior to the effective date of termination of employment, and (c)
payouts under Zilog's Executive Bonus Plan for awards granted prior to the
effective date of termination of employment; (ii) the executive officer's
unvested stock options granted after the Effective Time and outstanding as of
the date of such termination will continue to vest for the period of time
remaining under the employment agreement; and (iii) the executive officer will
be entitled to continue participation in group insurance plans, including basic
and supplemental life insurance and disability insurance and health insurance
and the flexible spending plan for the health insurance and dependent care
coverage, maintained by Zilog through the expiration of the term of the
employment agreement. In addition, upon consummation of the Merger, all of the
above executives' outstanding stock options became fully vested, were canceled
and they received cash for the difference, if any, between the exercise price
and $20.00. See "The Recapitalization."
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EXECUTIVE COMPENSATION
The following table sets forth the annual compensation, long-term
compensation and other compensation paid to each individual serving as its chief
executive officer during 1997 and to each of the four other most highly
compensated executive officers of Zilog during the years ended December 31,
1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
---------------
AWARDS
---------------
SECURITIES
ANNUAL COMPENSATION(1) UNDERLYING ALL OTHER
NAME AND ----------------------- OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SAR(#)(2) ($)(3)
------------------ ---- ---------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
E.A. Sack(4)..................... 1997 $526,435 $306,276 115,350 $17,538
President and CEO 1996 511,750 491,376 60,700 16,869
1995 467,866 445,050 75,000 16,557
M.J. Bradshaw.................... 1997 220,823 62,331 20,350 17,538
Senior Vice President, Operations 1996 212,116 87,588 83,275(5) 16,869
1995 206,157 94,650 25,100 16,557
R.L. Moore....................... 1997 215,004 69,834 20,350 17,538
Senior Vice President, Technology 1996 195,185 75,120 116,400(6) 15,008
1995(7) 99,692 54,000 45,000 5,641
A. Secor......................... 1997 218,369 54,448 20,350 17,538
Vice President and General
Manager, 1996 215,615 79,358 52,150(8) 16,869
Consumer Products Division 1995 214,854 85,913 20,000 16,557
T.C. Carson...................... 1997 217,390 42,468 35,100 17,538
Senior Vice President Sales and 1996 169,995 45,948 82,100(9) 16,869
Strategic Marketing 1995 198,585 121,650 25,000 16,557
</TABLE>
- ---------------
(1) No "Other Annual Compensation," "Restricted Stock Award(s)" or "LTIP
Payouts" were made to the Executive Officers during 1995, 1996 or 1997.
(2) Securities underlying Option/SAR share numbers reflect the effect of a
3-for-2 stock split to shareholders of record on February 1, 1993, paid on
February 15, 1993.
(3) Amounts represent the Issuer's matching and discretionary contributions to
the Zilog, Inc. Tax-Deferred 401(k) Investment Plan, and the Issuer's
contribution to the Non-Qualified Deferred Compensation Plan.
(4) Dr. Sack resigned from Zilog effective upon the consummation of the Merger
on February 27, 1998.
(5) Includes options granted on November 6, 1996 for 11,250 shares upon
cancellation of a previous option granted on June 1, 1994, 525 shares upon
cancellation of a previous option granted on December 15, 1994, 100 shares
upon cancellation of a previous option granted on March 23, 1995, 25,000
shares upon cancellation of a previous option granted on April 6, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996,
and 20,000 shares upon cancellation of a previous option granted on February
21, 1996.
(6) Includes options granted on November 6, 1996 for 40,000 shares upon
cancellation of a previous option granted on June 14, 1995, 5,000 shares
upon cancellation of a previous option granted on November 16, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996,
20,000 shares upon cancellation of a previous option granted on February 21,
1996, 10,000 shares upon cancellation of a previous option granted on May
16, 1996, and 5,000 shares upon cancellation of a previous option granted on
July 16, 1996.
(7) Mr. Moore joined Zilog in May 1995.
(8) Includes options granted on November 6, 1996 for 10,000 shares upon
cancellation of a previous option granted on June 1, 1994, 700 shares upon
cancellation of a previous option granted on December 15,
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<PAGE> 59
1994, 20,000 shares upon cancellation of a previous option granted on April
6, 1995, 700 shares upon cancellation of a previous option granted on
January 17, 1996, and 20,000 shares upon cancellation of a previous option
granted on July 16, 1996.
(9) Includes options granted on November 6, 1996 for 15,000 shares upon
cancellation of a previous option granted on June 1, 1994, 700 shares upon
cancellation of a previous option granted on December 15, 1994, 25,000
shares upon cancellation of a previous option granted on April 6, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996
and 20,000 shares upon cancellation of a previous option granted on February
21, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information with respect to the aggregate
option exercises and fiscal year-end option values for each of Zilog's Named
Executive Officers for the year ended December 31, 1997.
<TABLE>
<CAPTION>
VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FISCAL
AT FISCAL YEAR-END(#) YEAR-END($)
--------------------- ----------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- ----------- --------------------- ----------------
<S> <C> <C> <C> <C>
E. A. Sack(2).................... 0 $0 408,325/206,250 $ 2,002,726/0
M. J. Bradshaw................... 0 $0 148,313/56,275 43,250/0
R. L. Moore...................... 0 $0 31,425/69,625 0/0
A. Secor......................... 0 $0 96,538/41,262 127,649/69
T. C. Carson..................... 0 $0 117,275/67,225 145,000/0
</TABLE>
- ---------------
(1) These amounts represent the difference between the exercise price of the
stock options and the closing price of the Issuer's Common Stock on December
31, 1997, for options held by each Named Executive Officer.
(2) Dr. Sack resigned from Zilog effective upon the consummation of the Merger
on February 27, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Merger, Zilog paid TPG II and certain affiliates
financial advisory and other fees and reimbursed certain expenses, in an
aggregate amount of approximately [$8] million.
In connection with the Merger, TPG II and certain other investors received
3,375,000 new shares of common stock, 1,250,000 shares of non-voting common
stock and 250,000 shares of preferred stock of Zilog, the surviving corporation.
The preferred stock has initial liquidation value of $100 per share. The
preferred stock will accumulate dividends at the rate of 13.5% per annum payable
quarterly for periods ending on or prior to February 26, 2008. Dividends will
compound to the extent not paid in cash. On February 27, 2008, Zilog will be
required to pay in cash all accumulated but unpaid dividends on the preferred
stock. Thereafter, the preferred stock will accumulate dividends at the rate of
15.5% per annum. Subject to restrictions imposed by certain indebtedness of
Zilog, Zilog will be able (but not required) to redeem shares of the preferred
stock at any time at redemption prices ranging from 105% of liquidation value
plus accumulated and unpaid dividends at February 27, 1998 to 100% of
liquidation value plus accumulated and unpaid dividends at February 27, 2003 and
thereafter. In certain circumstances involving a change of control of Zilog,
subject to restrictions imposed by certain indebtedness of Zilog, holders of
preferred stock will be able (but not required) to require Zilog to repurchase
shares of preferred stock at liquidation value plus accumulated and unpaid
dividends.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Zilog consists of 35,000,000 shares of
Common Stock, par value $0.01 per share, 15,000,000 shares of Class A Non-Voting
Common Stock, par value $0.01 per share and 5,000,000 shares of Preferred Stock,
par value $100.00 per share.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders. Approval of matters brought before the
stockholders will require the affirmative vote of a majority of the holders of
the outstanding shares of Common Stock, except as otherwise required by the
General Corporation Law of the State of Delaware (the "DGCL"). Holders of Class
A Non-Voting Common Stock do not have any voting rights, except the right to
vote as a class to the extent required by DGCL.
Except for differences in voting rights described above, the rights,
powers, preferences and limitations of the Common Stock and Class A Non-Voting
Common Stock are identical. Subject to the rights of holders of Preferred Stock
and other classes and/or series of preferred stock, if any, all shares of Common
Stock and Class A Non-Voting Common Stock are entitled to share in such
dividends as the Board of Directors may from time to time declare from sources
legally available therefor. Subject to the rights of creditors and holders of
Preferred Stock and other classes and/or series of preferred stock, if any,
holders of Common Stock and Class A Non-Voting Common Stock are entitled to
share ratably in a distribution of assets of the Surviving Corporation upon any
liquidation, dissolution or winding up of the Surviving Corporation.
PREFERRED STOCK
There are currently 250,000 shares of Preferred Stock outstanding. Under
the Issuer's Restated Certificate of Incorporation, the Board of Directors has
the authority to issue, from time to time, by resolution and without any action
by stockholders, up to 5,000,000 shares of preferred stock, par value $100.00
per share, in one or more classes and/or series and may establish the powers,
designations, preferences, rights and qualifications, limitations or
restrictions (which may differ with respect to each such class and/or series) of
such class and/or series. Upon consummation of the Recapitalization, the Board
of Directors adopted a resolution providing for the creation of a Series of
Preferred Stock into which the shares of capital stock of Merger Sub were
converted in the Merger. The Preferred Stock is a non-voting, 13.5% pay-in-kind
preferred stock with a stated value of $100.00 per share (the "Series A
Cumulative Preferred Stock").
The Series A Cumulative Preferred Stock accumulates dividends at the rate
of 13.5% per annum (payable quarterly) for periods ending on or prior to the
anniversary of the Effective Time in 2008, and 15.5% per annum thereafter.
Dividends will be payable, at the election of the Board of Directors but subject
to availability of funds and the terms of the Revolving Credit Facility, in cash
or in kind through a corresponding increase in the liquidation preference (as
described below) of the Series A Cumulative Preferred Stock. The Series A
Cumulative Preferred Stock has an initial liquidation preference of $100.00 per
share.
To the extent that a quarterly dividend payment in respect of a share of
Series A Cumulative Preferred Stock is not made in cash when due, the amount of
such unpaid dividend will accumulate (whether or not declared by the Board of
Directors) through an increase in the liquidation preference of such share of
Series A Cumulative Preferred Stock equal to the amount of such unpaid dividend,
and compounding dividends will accumulate on all such accumulated and unpaid
dividends. The liquidation preference will be reduced to the extent that
previously accumulated dividends are thereafter paid in cash. The Issuer is
required on the anniversary of the Effective Time in 2008 to pay in cash all
accumulated dividends that have been applied to increase the liquidation
preference (the "Clean-Down").
Shares of Series A Cumulative Preferred Stock may be redeemed at the option
of the Issuer, in whole or in part, at the redemption prices ranging from 105%,
if redeemed prior to the six-month anniversary of the Effective Time in 1998, to
100%, if redeemed after the six-month anniversary of the Effective Time in 2003,
in
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each case of the sum of (i) the liquidation preference thereof, increased to the
extent that accumulated dividends thereon shall not have been paid in cash, plus
(ii) accrued and unpaid dividends thereon to the date of redemption. Optional
redemption of the Series A Cumulative Preferred Stock will be subject to, and
expressly conditioned upon, certain limitations under the Revolving Credit
Facility.
In certain circumstances, including the occurrence of a change of control
of the Issuer, but again subject to certain limitations under the Revolving
Credit Facility, the Issuer may be required to repurchase shares of Series A
Cumulative Preferred Stock at 101% of the sum of the liquidation preference
thereof, increased to the extent that accumulated dividends thereon shall not
have been paid in cash, plus accumulated and unpaid dividends to the repurchase
date.
Holders of Series A Cumulative Preferred Stock do not have any voting
rights with respect thereto, except for (i) such rights as are provided under
the DGCL, (ii) the right to elect, as a class, one director of the Issuer in the
event that the Issuer fails to comply with its Clean-Down or repurchase
obligations and (iii) class voting rights with respect to transactions adversely
affecting the rights, preferences or powers of the Series A Cumulative Preferred
Stock and certain transactions involving stock that ranks junior in payment of
dividends, or upon liquidation, to the Series A Cumulative Preferred Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the consummation date of the Recapitalization, TPG II and certain
related investors owned 3,375,000 shares of Common Stock, 1,250,000 shares of
Class A Non-Voting Common Stock and 250,000 shares of Series A Cumulative
Preferred Stock, representing in the aggregate, approximately 94% of total
equity capital and 90% of the voting interests of Zilog.
DESCRIPTION OF REVOLVING CREDIT FACILITY
On the closing date of the Recapitalization, Merger Sub and Zilog entered
into the Revolving Credit Facility with the several lenders from time to time
parties thereto (the "Lenders"), Goldman Sachs Credit Partners L.P. as arranger
and syndication agent and BankBoston, N.A. as administrative agent for the
Lenders. The following is a summary description of the principal terms of the
Revolving Credit Facility and the other loan documents. The description set
forth below does not purport to be complete and is qualified in its entirety by
reference to certain agreements setting forth the principal terms and conditions
of the Revolving Credit Facility, which are available upon request from Zilog.
STRUCTURE
The Lenders have committed, subject to compliance with certain conditions,
to provide Zilog with a five-year senior secured Revolving Credit Facility of up
to $25.0 million. To date, no amounts have been borrowed under the Revolving
Credit Facility. The Revolving Credit Facility may be utilized to fund Zilog's
working capital requirements, including issuance of standby letters of credit,
and for other general corporate purposes. Loans and letters of credit under the
Revolving Credit Facility will be available at any time during its five-year
term subject to a borrowing base consisting of 80% of eligible accounts
receivable and 25% of eligible inventory and the fulfillment of customary
conditions precedent including the absence of any default under the Revolving
Credit Facility.
SECURITY; GUARANTY
Zilog's obligations under the Revolving Credit Facility are guaranteed by
each of Zilog's direct and indirect domestic and, to the extent no adverse tax
consequences would result, foreign subsidiaries. The Revolving Credit Facility
and the guarantees thereof are secured by a perfected first priority security
interest in all of the accounts receivable and inventory and proceeds thereof of
Zilog and its direct and indirect domestic and, to the extent no adverse tax
consequences would result, foreign subsidiaries.
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INTEREST
Borrowings under the Revolving Credit Facility bear interest at a rate per
annum equal (at Zilog's option) to: (i) the "Eurodollar Rate" (as defined below)
plus an applicable margin or (ii) a base rate equal to the higher of the
Administrative Agent's base rate or the Federal Funds Effective Rate plus 1/2 of
1% plus, in each case, an applicable margin. Initially, the applicable margin is
expected to be 2.50% for Eurodollar rate loans and 1.50% for base rate loans.
"Eurodollar Rate" means the Eurodollar rate appearing on the Telerate Page 3750.
FEES
Zilog is required to pay the Lenders, on a quarterly basis, a commitment
fee on the undrawn portion of the Revolving Credit Facility at a rate initially
equal to 1/2 of 1% per annum. Zilog is also obligated to pay (i) a per annum
letter of credit fee on the aggregate amount of outstanding letters of credit;
(ii) a fronting bank fee for the letter of credit issuing bank; and (iii)
customary agent, arrangement and other similar fees.
COVENANTS
The Revolving Credit Facility contains a number of covenants that, among
other things, restrict the ability of Zilog and its subsidiaries to dispose of
assets; incur additional indebtedness; prepay other indebtedness or amend
certain debt instruments (including the Indenture); pay dividends; create liens
on assets; enter into sale and leaseback transactions; make capital
expenditures; make investments, loans or advances; make acquisitions; engage in
mergers or consolidations; change the business conducted by Zilog or its
subsidiaries; or engage in certain transactions with affiliates and otherwise
restrict certain corporate activities. In addition, under the Revolving Credit
Facility, Zilog is required to maintain specified financial ratios and tests,
including minimum interest coverage ratios, minimum fixed charge coverage ratios
and leverage ratios below a specified maximum.
EVENTS OF DEFAULT
The Revolving Credit Facility contains customary events of default,
including nonpayment of principal, interest or fees, violation of covenants,
cross default and cross-acceleration to certain other indebtedness, certain
events of bankruptcy and insolvency, material judgments against Zilog,
invalidity of any guaranty or security interest and a change of control of Zilog
in certain circumstances as set forth therein. Notwithstanding the foregoing,
for the first year following the closing date of the Merger, Zilog's failure to
be in compliance with the covenants contained in the Revolving Credit Facility
shall not, with certain specified exceptions, constitute an event of default so
long as no loans or letters of credit are outstanding thereunder.
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued, and the New Notes will be, issued pursuant to
the Indenture which is dated as of February 27, 1998 and is between the Issuer
and State Street Bank and Trust Company, as trustee (the "Trustee"). The terms
of the New Notes will include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The New Notes will be subject to all such terms, and
prospective holders of New Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of the material
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. Copies of the proposed form of Indenture and
Registration Rights Agreement are available as set forth below under
"-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions."
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RANKING
The New Notes will rank senior in right of payment to all subordinated
Indebtedness of the Issuer and pari passu in right of payment with all
unsubordinated borrowings.
The New Notes will be effectively subordinated to all indebtedness and
other liabilities and commitments (including trade payables and capital lease
obligations) of the Issuer's foreign subsidiaries. Any right of the Issuer to
receive assets of any of its foreign subsidiaries upon the latter's liquidation
or reorganization (and the consequent right of the Holders of the New Notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that the Issuer is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Issuer would still be subordinated to any security in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Issuer. As of April 5, 1998, the aggregate amount of indebtedness (including
trade payables and capital lease obligations) of the Issuer's foreign
subsidiaries was $1.9 million.
SECURITY
The New Notes will be secured by a first priority security interest,
subject to Permitted Liens, in the Collateral. The Collateral will consist of
substantially all of the Issuer's and its domestic Subsidiaries' real property
and personal property, including all plant and equipment at operating facilities
(including its Nampa, Idaho facilities, its headquarters in Campbell, California
and its research and development facilities in Austin, Texas), subject to
Permitted Liens, and excluding, among other things, (i) inventory, accounts
receivable and proceeds of inventory and accounts receivable and (ii) assets of
foreign subsidiaries (collectively, with the Pledged Shares (as defined below)
the "Collateral"). That portion of the Collateral consisting of interest in real
property and improvements thereon to be pledged to the Collateral Agent will be
pledged by means of one or more deeds of trust (the "Deeds of Trust"). The
remaining Collateral will be pledged pursuant to one or more security
agreements, which may be incorporated in the Deeds of Trust (the "Security
Agreements"). The Collateral will also include insurance and condemnation
proceeds from any Event of Loss or Collateral Asset Sale (each as defined
herein). Pursuant to the Indenture, all such proceeds not expended by the Issuer
as provided in the Indenture must be used by the Issuer to make an offer to
repurchase all or a portion of the New Notes. The preceding description of the
Collateral Documents does not purport to be complete and is qualified in it is
entirety by reference to the Collateral Documents. Copies of the Collateral
Documents will be filed with the Commission and will be available as set forth
under "Available Information." See "Business -- Properties."
In connection with the closing of the offering of the Old Notes, the Issuer
was required to provide a mortgagee's title insurance policy (the "Mortgagee
Title Policy") in favor of the Collateral Agent, covering the liens on certain
real estate portions of the Collateral (the "Parcels"). Because a survey of the
Parcels may not be completed prior to the closing of the Offering, the Mortgagee
Title Policy may contain an exception to coverage for any title defects that
would be disclosed by a survey (the "Survey Exception"). The Issuer does not
believe that any such defects of a material nature exist.
The Issuer also entered into a pledge agreement (the "Issuer Pledge
Agreement") providing for the pledge by the Issuer to the Trustee, as collateral
agent (in such capacity, the "Collateral Agent") for the Holders of the Notes,
of the Capital Stock of all of its directly and indirectly owned domestic
Subsidiaries, 65% of the Capital Stock of its foreign subsidiaries and all
Subsidiary Intercompany Notes owed to the Issuer or any of its domestic
subsidiaries. The Issuer's directly owned Subsidiaries entered into pledge
agreements (each, a "Subsidiary Pledge Agreement" and, together with the Issuer
Pledge Agreement, the "Pledge Agreements") providing for the pledge by each such
Subsidiary to the Collateral Agent of all of the Capital Stock of its directly
owned domestic Subsidiaries and 65% of its directly owned foreign Subsidiaries
and all Subsidiary Intercompany Notes Indebtedness payable to such Subsidiary by
its direct Subsidiaries. Such pledges will secure the payment and performance
when due of all of the Obligations of the Issuer under the Indenture and the New
Notes as provided in the Pledge Agreements.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Indenture and the Collateral
Documents, the Issuer will be entitled to use the Collateral in a
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manner consistent with normal business practices. Upon the occurrence and during
the continuance of an Event of Default, the Collateral Agent may sell the
Collateral or any part thereof in accordance with the terms of the Collateral
Documents. All funds distributed under the Collateral Documents and received by
the Collateral Agent for the benefit of the Holders of the New Notes shall be
distributed by the Collateral Agent in accordance with the provisions of the
Collateral Documents.
Under the terms of the Collateral Documents, the Holders of the New Notes
will determine the circumstances and manner in which the Collateral shall be
disposed of, including, but not limited to, the determination of whether to
release all or any portion of the Collateral from the Liens created by the
Collateral Documents and whether to foreclose on the Collateral following an
Event of Default. Moreover, upon the full and final payment and performance of
all Obligations of the Issuer under the Indenture and the New Notes, and all
Obligations of the Issuer to the Collateral Agent, the Collateral Documents
shall terminate and the Collateral shall be released. In addition, in the event
that any of the Collateral is sold and the Net Proceeds are applied in
accordance with the terms of the covenant entitled "-- Repurchase at the Option
of Holders -- Asset Sales, Collateral Asset Sales and Events of Loss," the
Collateral Agent shall release the Liens in favor of the Collateral Agent in the
assets sold; provided that the Collateral Agent shall have received from the
Issuer an Officers' Certificate that such Net Proceeds have been or will be so
applied.
The Collateral Documents and the Indenture provide that the Net Proceeds of
all Collateral Asset Sales shall be promptly and without any commingling
deposited with the Collateral Agent subject to a charge in favor of the
Collateral Agent for the benefit of the Holders until applied as permitted under
the covenant described under "-- Repurchase at the Option of Holders -- Asset
Sales, Collateral Asset Sales and Events of Loss." Amounts so paid to the
Collateral Agent shall be invested or released in accordance with the provisions
of the Indenture and the Collateral Documents.
No appraisals of any of the Collateral have been prepared by or on behalf
of the Issuer in connection with the sale of the New Notes. The value of the
Collateral at any time will depend on market and other economic conditions,
including the availability of suitable buyers for the Collateral. See "Risk
Factors -- Risk of Not Realizing Collateral Value."
The release of any Collateral from the terms of the Collateral Documents
pursuant to the terms thereof will not be deemed to impair the security under
the Indenture in contravention of the provisions thereof and of the Collateral
Documents if and to the extent the Collateral is released pursuant to the terms
of the Indenture and the Collateral Documents. To the extent applicable, the
Issuer shall comply with Section 314(d) of the Trust Indenture Act. The
Subsidiary Pledge Agreements limit the proceeds from a sale of pledged
Collateral that can be distributed to Holders of New Notes to the maximum
distribution that would not be considered to be a fraudulent conveyance. As a
result, the Holders of New Notes may not recover the full value of the
Collateral pledged pursuant to the Subsidiary Pledge Agreement.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Collateral Agent to repossess and dispose of the
Collateral upon the occurrence of an Event of Default is likely to be impaired
by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by
or against the Issuer prior to or possibly even after the Collateral Agent has
repossessed and disposed of the Collateral. Under applicable federal bankruptcy
laws, secured creditors are prohibited from repossessing their security from a
debtor in a bankruptcy case, or from disposing of security repossessed from such
a debtor, without bankruptcy court approval. Moreover, applicable federal
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments; provided generally that the secured creditor is given "adequate
protection." The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include cash payments or the
granting of additional security, if and at such times as the court in its
discretion determines, for any diminution in the value of the collateral as a
result of the stay of repossession or disposition or any use of the collateral
by the debtor during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict if
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payments under the New Notes would be made following commencement of and during
a bankruptcy case, whether or when the Collateral Agent could repossess or
dispose of the Collateral or whether or to what extent Holders of the New Notes
would be compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection." Furthermore, in the event the
bankruptcy court determines the value of the Collateral is not sufficient to
repay all amounts due on the New Notes, the Holders of the New Notes would hold
"undersecured claims." Applicable federal bankruptcy laws do not permit the
payment and/or accrual of interest, costs and attorneys' fees for "undersecured
claims" during the debtor's bankruptcy case.
PRINCIPAL, MATURITY AND INTEREST
New Notes in an aggregate principal amount of $280.0 million will be issued
in the Exchange Offer. The New Notes will mature on March 1, 2005. Interest on
the New Notes will accrue at the rate of 9 1/2% per annum and will be payable
semi-annually in arrears on March 1 and September 1, commencing on September 1,
1998, to Holders of record on the immediately preceding February 15 and August
15, respectively. Interest on the New Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, premium and Liquidated
Damages, if any, and interest on the New Notes will be payable at the office or
agency of the Issuer maintained for such purpose within the City and State of
New York or, at the option of the Issuer, payment of interest may be made by
check mailed to the Holders of the New Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments of
principal, premium and interest with respect to New Notes represented by one or
more permanent global Notes (the "Global Notes") will be required to be made by
wire transfer of immediately available funds to the account of The Depository
Trust Issuer or any successor thereto. Until otherwise designated by the Issuer,
the Issuer's office or agency in New York will be the office of the Trustee
maintained for such purpose. The New Notes will be issued in denominations of
$1,000 and integral multiples thereof.
GUARANTEES
The Issuer's payment obligations under the New Notes will be jointly and
severally guaranteed (the "Subsidiary Guarantees") on a senior basis by the
Guarantors. The obligations of each Guarantor under its Subsidiary Guarantee
will be limited so as not to constitute a fraudulent conveyance under applicable
law. See, however, "Risk Factors -- Fraudulent Conveyances."
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Indenture and the Subsidiary Guarantees; and (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists.
The Indenture will provide that in the event of a sale or other disposition
of all of the assets of any Guarantor in accordance with the terms of the
Indenture, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee.
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OPTIONAL REDEMPTION
Except as otherwise described below, the New Notes will not be redeemable
at the Issuer's option prior to March 1, 2002. Thereafter, the New Notes will be
subject to redemption at any time at the option of the Issuer, in whole or in
part, upon not less than 30 nor more than 60 days notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on March 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002...................................................... 104.750%
2003...................................................... 102.375
2004 and thereafter....................................... 100.000
</TABLE>
Notwithstanding the foregoing, at any time and from time to time on or
prior to March 1, 2001, the Issuer may (but shall not have the obligation to)
redeem up to an aggregate of 35% of the aggregate principal amount of New Notes
issued under the Indenture at a redemption price equal to 109.50% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with all or a portion of the
net cash proceeds of one or more Public Equity Offerings; provided that at least
$100 million in aggregate principal amount of New Notes remain outstanding (and
held by Persons other than the Issuer and its Subsidiaries) immediately after
the occurrence of such redemption; and provided further, that such redemption
shall occur within 90 days of the date of the closing of such Public Equity
Offering.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Issuer is not required to make mandatory redemption or sinking fund payments
with respect to the New Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder
of New Notes will have the right to require the Issuer to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's New
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Issuer will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase New Notes on the date specified in such notice, which date shall
be no earlier than 30 days (or such shorter time period as may be permitted
under applicable laws, rules and regulations) and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by the Indenture and described in such notice. The
Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the New
Notes as a result of a Change of Control. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of the Indenture
relating to such Change of Control Offer, the Issuer will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in the Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (1) accept for payment all New Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all New
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the New Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of New Notes or portions thereof being
purchased by the Issuer. The Paying Agent will promptly mail to each Holder of
New Notes so tendered the Change of Control Payment for such New Notes, and the
Trustee will promptly authenticate and mail (or
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cause to be transferred by book entry) to each tendering Holder a new Note equal
in principal amount to any unpurchased portion of the New Notes surrendered, if
any; provided that each such new Note will be in a principal amount of $1,000 or
an integral multiple thereof. The Issuer will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the New Notes to require that the Issuer
repurchase or redeem the New Notes in the event of a takeover, recapitalization
or similar transaction.
Future agreements governing indebtedness may prohibit the Issuer from
purchasing any New Notes and provide that certain change of control events with
respect to the Issuer would constitute a default thereunder. In such case, the
Issuer's failure to purchase tendered New Notes would constitute an Event of
Default under the Indenture which could, in turn, constitute a default under any
such agreement. Finally, the Issuer's ability to pay cash to the Holders of New
Notes upon a repurchase may be limited by the Issuer's then existing financial
resources.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all New Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuer and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of New Notes to require the Issuer to
repurchase such New Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Issuer and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES, COLLATERAL ASSET SALES AND EVENTS OF LOSS. The Indenture
provides that the Issuer will not, and will not permit any of its Subsidiaries
to, consummate an Asset Sale unless (i) the Issuer (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% of the consideration therefor received by the Issuer or such
Subsidiary is in the form of (A) cash or Cash Equivalents or (B) Qualified
Proceeds, provided that the aggregate fair market value of Qualified Proceeds
(other than cash or Cash Equivalents), which may be received in consideration
for asset sales pursuant to this clause (ii)(B) shall not exceed $5.0 million
since the Issue Date; provided further that the amount of (x) any liabilities
(as shown on the Issuer's or such Subsidiary's most recent balance sheet), of
the Issuer or any Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the New Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Issuer or such Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Issuer or any such Subsidiary from such transferee that are converted by the
Issuer or such Subsidiary into cash (to the extent of the cash received) within
90 days, shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer or any Subsidiary may apply such Net Proceeds to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other property or assets, in each case which is used or
useable in the business of the Issuer or its Subsidiaries on the Issue Date or
businesses reasonably related thereto. Pending the final application of any such
Net Proceeds, the Issuer or such Subsidiary may temporarily reduce amounts
available under revolving credit facilities or invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $7.5 million, the Issuer will be required to
make an offer to all Holders of New Notes
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(an "Asset Sale Offer") to purchase the maximum principal amount of New Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of New Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Issuer or its Subsidiaries may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of New Notes surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the New Notes to be purchased on a
pro rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
The Indenture provides that the Issuer will not, and will not permit any of
its Subsidiaries to, engage in a Collateral Asset Sale unless (a) such
Collateral Asset Sale involves the Collateral in its entirety, or, if such
Collateral Asset Sale involves less than all of the Collateral (a "Partial
Collateral Asset Sale"), such Partial Collateral Asset Sale involves a single
Collateral Asset Sale with a fair market value at the time of consummation of
such Collateral Asset Sale not exceeding $50.0 million and is not part of a
series of Collateral Asset Sales in any eighteen month period with an aggregate
value (measured as of the time of consummation of such sales) exceeding $50.0
million in the aggregate; (b) the Issuer receives consideration in respect of
and concurrently with such Collateral Asset Sale at least equal to the fair
market value of such Collateral; (c) with respect to each such Collateral Asset
Sale, the Issuer delivers an Officers' Certificate to the Trustee dated no more
than 15 days prior to the date of consummation of the relevant Collateral Asset
Sale, certifying that (i) such sale complies with clauses (a) and (b) above and
(ii) if the fair market value of the Collateral being sold exceeds $10.0
million, the fair market value of such Collateral was determined in good faith
by the Board of Directors of the Issuer (whose determination, if the Collateral
Asset Sale involves Collateral with a fair market value in excess of $50.0
million, was based on the opinion of a nationally recognized qualified
independent appraiser prepared contemporaneously with such Collateral Asset Sale
and which opinion, in such case, will be attached to the Officers' Certificate)
as evidenced by copies of a resolution of the Board of Directors of the Issuer
adopted in respect of and concurrently with such Collateral Asset Sale; (d) 100%
of such consideration is in cash or Cash Equivalents; and (e) the Net Proceeds
therefrom shall be paid directly by the purchaser thereof to the Collateral
Agent, pursuant to the applicable security document, as additional Collateral.
In the case of a Partial Collateral Asset Sale, the Issuer, within 360 days from
the date of consummation of a Partial Collateral Asset Sale, may apply all of
the Net Proceeds therefrom to purchase or otherwise invest in Replacement
Collateral. Any such Net Proceeds not so applied shall constitute "Excess
Proceeds" and shall be applied to make an Asset Sale Offer, in accordance with
the terms of the second paragraph of this covenant. In the case of a Collateral
Asset Sale other than a Partial Collateral Asset Sale all of the Net Proceeds
therefrom shall constitute "Excess Proceeds" and shall be applied to make an
Asset Sale Offer in accordance with the terms described above.
The Indenture provides that if the Issuer suffers an Event of Loss, (a) the
Net Proceeds therefrom shall be paid directly by the party providing such Net
Proceeds to the Collateral Agent, pursuant to the applicable Collateral
Document, as additional Collateral and (b) the Issuer shall take such actions,
at its sole expense, as may be required to ensure that the Collateral Agent,
pursuant to the applicable security document, has from the date of such deposit
a first ranking Lien (subject to Permitted Liens) on such Net Proceeds pursuant
to the terms of the applicable Collateral Document. As any portion or all of the
Net Proceeds from any such Event of Loss are received by the Collateral Agent,
the Issuer may apply all of such amount or amounts, as received, together with
all interest earned thereon, individually or in combination, (i) to purchase or
otherwise invest in Replacement Collateral or (ii) to restore the relevant
Collateral. In the event that the Issuer elects to restore the relevant
Collateral pursuant to the foregoing clause (ii), within six months of receipt
of such Net Proceeds from an Event of Loss, the Issuer shall (x) give the
Trustee irrevocable written notice of such election and (y) enter into a binding
commitment to restore such Collateral, a copy of which shall be supplied to the
Trustee, and shall have 12 months (and up to an additional 6 months under
certain circumstances) from the date of such binding commitment to complete such
restoration, which shall be carried out with due diligence. Any such Net
Proceeds not so applied shall constitute "Excess Proceeds" and shall be applied
to make an Asset Sale Offer in accordance with the terms of the second paragraph
of this covenant.
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Under the terms of the Indenture, in the event that the Issuer decides
pursuant to the foregoing provisions to apply any portion of the Net Proceeds
from a Collateral Asset Sale or an Event of Loss to purchase or otherwise invest
in Replacement Collateral, (i) the Issuer shall deliver an Officers' Certificate
to the Trustee dated no more than 30 days prior to the date of consummation of
the relevant investment in Replacement Collateral, certifying that the purchase
price for the amount of the investment in Replacement Collateral does not exceed
the fair market value of such Replacement Collateral and, if the fair market
value of such Replacement Collateral exceeds $10.0 million, certifying that the
fair market value of such Replacement Collateral was determined in good faith by
the Board of Directors of the Issuer and, in the event the fair market value of
such Replacement Collateral exceeds $50.0 million, was based on the opinion of a
nationally recognized qualified independent appraiser attached to the Officers'
Certificate, as evidenced by copies of a resolution of the Board of Directors of
the Issuer adopted in respect of and concurrently with the investment in such
Replacement Collateral; (ii) the Trustee will instruct the Collateral Agent to
release such certified purchase price to the Issuer, free of the Lien of the
Collateral Documents; and (iii) the Issuer shall take such actions, at its sole
expense, as shall be required to permit the Collateral Agent, pursuant to the
applicable Collateral Document, to release such Net Proceeds, together with any
interest thereon, from the Lien of the applicable Collateral Document and to
ensure that the Collateral Agent has, from the date of such purchase or
investment, a first ranking Lien (subject to Permitted Liens on such Collateral)
on such Replacement Collateral under the applicable Collateral Document.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed or repurchased in an
offer to purchase at any time, selection of New Notes for redemption or
repurchase will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the New Notes are
listed, or, if the New Notes are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee deems fair and appropriate; provided that no
New Notes of $1,000 or less shall be redeemed or repurchased in part. Notices of
redemption may not be conditional. Notices of redemption or repurchase shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date or repurchase date to each Holder of New Notes to be redeemed or
repurchased at its registered address. If any Note is to be redeemed or
repurchased in part only, the notice of redemption or repurchase that relates to
such Note shall state the portion of the principal amount thereof to be redeemed
or repurchased. A new Note in principal amount equal to the unredeemed or
unrepurchased portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption or
repurchase date, interest will cease to accrue on New Notes or portions of them
called for redemption or repurchase.
CERTAIN COVENANTS
RESTRICTED PAYMENTS. The Indenture provides that the Issuer will not, and
will not permit any of its Subsidiaries to, directly or indirectly: (i) declare
or pay any dividend or make any other payment or distribution on account of the
Issuer's or any of its Subsidiaries' Equity Interests (including, without
limitation, any such dividend, distribution or other payment in connection with
any merger or consolidation involving the Issuer or any Subsidiary) or to the
direct or indirect holders of the Issuer's or any of its Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Issuer or
dividends or distributions payable to the Issuer or any Wholly Owned Subsidiary
of the Issuer); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, any such purchase, redemption, acquisition or
retirement for value in connection with any merger or consolidation involving
the Issuer) any Equity Interests of the Issuer (other than any such Equity
Interests owned by the Issuer or any Wholly Owned Subsidiary of the Issuer);
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the New Notes, except a payment of interest or a payment of principal at Stated
Maturity for such payment; or (iv) make any Restricted Investment (all such
payments
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and other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and immediately
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Issuer would, at the time of such Restricted Payment and after
giving pro forma effect thereto, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuer and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clauses
(ii), (iii), (iv) and (viii) of the next succeeding paragraph), is less
than the sum (without duplication) of (i) 50% of the Consolidated Net
Income of the Issuer for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Issuer's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate
Qualified Proceeds received by the Issuer from contributions to capital or
the issue or sale since the date of the Indenture of Equity Interests of
the Issuer (other than Disqualified Stock) or of Disqualified Stock or debt
securities of the Issuer that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Issuer and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for Qualified Proceeds or otherwise liquidated or repaid the lesser of (A)
the Qualified Proceeds with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) $5.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Issuer
or any Guarantor in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Issuer) of,
other Equity Interests of the Issuer (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase, retirement or other acquisition of
subordinated Indebtedness in exchange for, or with the net cash proceeds from,
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend (or the making of any similar distribution or redemption) by a
Subsidiary of the Issuer to the holders of its common Equity Interests on a pro
rata basis; (v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Issuer or any Subsidiary of the Issuer
held by any member of the Issuer's (or any of its Subsidiaries') management,
employees or consultants pursuant to any management, employee or consultant
equity subscription agreement or stock option agreement in effect as of the date
of the Indenture; provided that (x) the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed the
sum of (A) $5.0 million and (B) the aggregate cash proceeds received by the
Issuer from any reissuance of Equity Interests (other than Disqualified Stock)
by the Issuer to members of management of the Issuer and its Subsidiaries
(provided that the cash proceeds referred to in this clause (B) shall be
excluded from clause (c)(ii) of the preceding paragraph) and (y) no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; (vi) cash payments in lieu of fractional shares issuable as
dividends on preferred securities of the Issuer or any of its Subsidiaries;
provided that such cash payments shall not exceed $20,000 in the aggregate in
any twelve-month period and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction; (vii) the declaration and
payment of dividends to holders of any class or series of Disqualified Stock of
the Issuer or a Guarantor issued after the date of the Indenture in accordance
with the covenant
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described below under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock"; provided that no Default or Event of Default shall have
occurred and be continuing immediately after making such declaration or payment;
and (viii) from and after January 1, 1999 so long no Default or Event of Default
has occurred and is continuing, payments by the Issuer not exceeding $35.0
million in the aggregate since the Issue Date in respect of the redemption of
shares of Preferred Stock outstanding on the Issue Date (or shares of Preferred
Stock issued as dividends thereon) if both before and after giving effect to any
such payment, the Fixed Charge Coverage Ratio for the Issuer's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of such payment would be at least 2.5
to 1.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $10.0 million. Not later than the date of making any Restricted
Payment, the Issuer shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Indenture
provides that the Issuer will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Issuer will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Issuer may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and the Guarantors may incur Indebtedness or issue shares of
preferred stock if the Fixed Charge Coverage Ratio for the Issuer's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuer (and the guarantee thereof by the
Guarantors) of Indebtedness under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Issuer and the Guarantors thereunder) outstanding under
all Credit Facilities after giving effect to such incurrence, including all
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (i), does not exceed an amount equal to
$25.0 million;
(ii) the incurrence by the Issuer and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Issuer and the Guarantors of Indebtedness
represented by the New Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Issuer or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Issuer or such Subsidiary, in an aggregate principal amount not to exceed
$25.0 million at any time outstanding;
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(v) the incurrence by the Issuer or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to exist or
be incurred;
(vi) the incurrence by the Issuer or any of the Guarantors of
intercompany Indebtedness between or among the Issuer and any of the
Guarantors; provided, however, that (i) if the Issuer is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the New Notes
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Issuer or a Guarantor and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Issuer or a Guarantor shall
be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Issuer or such Guarantor, as the case may be;
(vii) the incurrence by the Issuer or any of the Guarantors of Hedging
Obligations that are incurred for the purpose of fixing or hedging (i)
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be outstanding or (ii) the value
of foreign currencies purchased or received by the Issuer in the ordinary
course of business;
(viii) Indebtedness incurred in respect of worker's compensation
claims, self-insurance obligations, performance, surety and similar bonds
and completion guarantees provided by the Issuer in the ordinary course of
business;
(ix) the guarantee by the Issuer or any of the Guarantors of
Indebtedness of the Issuer or a Guarantor that was permitted to be incurred
by another provision of this covenant;
(x) the incurrence by the Issuer or any of its Subsidiaries of
Acquired Debt in an aggregate principal amount at any time outstanding not
to exceed $5.0 million;
(xi) Indebtedness 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, however, that such
Indebtedness is extinguished within five business days of incurrence;
(xii) the incurrence by the Issuer or any of the Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant
to this clause (xii), not to exceed $25.0 million; and
(xiii) Indebtedness arising from guarantees of Indebtedness of the
Issuer or any Subsidiary or the agreements of the Issuer or a Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or Capital Stock of the Issuer or any
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of
the Issuer or any Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received
by the Issuer and its Subsidiaries in connection with such disposition.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuer shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIENS. The Indenture provides that the Issuer will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables
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on any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom for purposes of
security, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that the Issuer 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
Subsidiary to (i)(a) pay dividends or make any other distributions to the Issuer
or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Issuer or any of its Subsidiaries, (ii) make loans or
advances to the Issuer or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Issuer or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Revolving Credit
Facility as in effect as of the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Facility as in effect on the date of the Indenture, (c) the Indenture,
the New Notes and the Collateral Documents, (d) applicable law, rule, regulation
or order, (e) any agreement or instrument governing Indebtedness or Capital
Stock of a Person acquired by the Issuer or any of its Subsidiaries as in effect
at the time of such acquisition (except to the extent such agreement or
instrument was entered into in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) by reason of
customary non-assignment provisions in leases, licenses, encumbrances, contracts
or similar assets entered into or acquired in the ordinary course of business
and consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced or (i) contracts for the sale of assets containing customary
restrictions with respect to a Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
MERGER, CONSOLIDATION OR SALE OF ASSETS. The Indenture provides that the
Issuer may not consolidate or merge with or into (whether or not the Issuer is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person unless (i) the Issuer is the
surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation or limited liability company organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Issuer) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Issuer under the New Notes, the Indenture and the Collateral
Documents pursuant to a supplemental indenture or other documents or instruments
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists under the Indenture or the
Collateral Documents; and (iv) except in the case of a merger of the Issuer with
or into a Wholly Owned Subsidiary of the Issuer, the Issuer or the Person formed
by or surviving any such consolidation or merger (if other than the Issuer), or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock." The foregoing
clause (iv) will not prohibit (a) a merger between the Issuer and a Person that
owns all of the Capital Stock of the Issuer created for the purpose of
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holding the Capital Stock of the Issuer, (b) a merger between the Issuer and a
Wholly Owned Subsidiary of the Issuer or (c) a merger between the Issuer and an
Affiliate incorporated solely for the purpose of reincorporating the Issuer in
another State of the United States so long as, in the case of each of clause
(a), (b) and (c), the amount of Indebtedness of the Issuer and its Subsidiaries
is not increased thereby.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Issuer will
not, and will not permit any of its Subsidiaries to, make any payment to or
Investment in, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Issuer or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Issuer or such
Subsidiary with an unrelated Person and (ii) the Issuer delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (u) payments of fees and expenses (including any such
payments to TPG) in connection with the Recapitalization, (v) contracts,
agreements, understandings or other arrangements existing on the Issue Date, (w)
transactions with suppliers or other purchasers or sales of goods or services,
in each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in accordance with the terms
of the Indenture which are fair to the Issuer, in the good faith determination
of the Board of Directors of the Issuer or the senior management of the Issuer,
and are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party, (x) any employment agreements, stock
option or other compensation agreements or plans (and the payment of amounts or
the issuance of securities thereunder) and other reasonable fees, compensation,
benefits and indemnities paid or entered into by the Issuer or any of its
Subsidiaries with the officers, directors or employees of the Issuer or its
Subsidiaries in the ordinary course of business, (y) transactions between or
among the Issuer and/or its Subsidiaries and (z) Restricted Payments (other than
Restricted Investments) that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments," in each case, shall
not be deemed Affiliate Transactions.
SALE AND LEASEBACK TRANSACTIONS. The Indenture provides that the Issuer
will not, and will not permit any of its Subsidiaries to, enter into any sale
and leaseback transaction with respect to any property or asset of the Issuer or
any of its Subsidiaries; provided that the Issuer may enter into such a sale and
leaseback transaction if (i) the Issuer could have (a) incurred Indebtedness in
an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the covenant described above under the caption
"-- Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "-- Liens," (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is excluded from the definition of Asset
Sale pursuant to clause (v) or is permitted by, and the Issuer applies the
proceeds of such transaction in compliance with, the covenant described above
under the caption "-- Asset Sales, Collateral Asset Sales and Events of Loss."
LOANS TO SUBSIDIARIES. The Indenture provides that all loans to
Subsidiaries made by the Issuer from time to time after the date of the
Indenture will be evidenced by unsecured Subsidiary Intercompany New Notes in
favor of the Issuer that will be pledged to the Collateral Agent pursuant to the
Pledge Agreement as Collateral to secure the New Notes. The Indenture will also
provide that all loans by the Issuer to any Subsidiary outstanding on the date
of the Indenture will be evidenced by an unsecured Subsidiary Intercompany Note
that will be pledged to the Collateral Agent pursuant to the Pledge Agreement as
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Collateral for the New Notes. Each Subsidiary Intercompany Note will be payable
upon demand and will bear interest at a market rate. A form of Subsidiary
Intercompany Note will be attached as an annex to the Indenture. Repayments of
principal with respect to any Subsidiary Intercompany Note will be required to
be pledged to the Collateral Agent pursuant to the Pledge Agreement as
Collateral to secure the New Notes until such amounts are repaid.
ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED SUBSIDIARIES. The
Indenture provides that the Issuer (i) will not, and will not permit any Wholly
Owned Subsidiary of the Issuer to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Wholly Owned Subsidiary of the Issuer to any
Person (other than to the Issuer or to a Wholly Owned Subsidiary of the Issuer),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "-- Asset Sales,
Collateral Asset Sales and Events of Loss" and (ii) will not permit any Wholly
Owned Subsidiary of the Issuer to issue any of its Equity Interests (other than,
if necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Issuer or to a Wholly Owned Subsidiary.
PAYMENTS FOR CONSENT. The Indenture provides that neither the Issuer nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any New Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the New Notes unless such
consideration is offered to be paid or is paid to all Holders of the New Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
GUARANTEES OF CERTAIN INDEBTEDNESS. The Indenture provides that (i) the
Issuer will not permit any of its Subsidiaries that is not a Guarantor to incur,
guarantee or secure through the granting of Liens the payment of any
Indebtedness and (ii) the Issuer will not and will not permit any of its
Subsidiaries to pledge any intercompany notes representing obligations of any of
its Subsidiaries, to secure the payment of any Indebtedness, in each case unless
such Subsidiary, the Issuer and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional guarantee by such Subsidiary, on a senior basis, of the New
Notes).
REPORTS. The Indenture provides that, whether or not required by the rules
and regulations of the Commission, so long as any New Notes are outstanding, the
Issuer will furnish to the Holders of New Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuer were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Issuer and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Issuer's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Issuer were required to file
such reports, in each case within the time periods set forth in the Commission's
rules and regulations. In addition, whether or not required by the rules and
regulations of the Commission, following the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, the Issuer will file a copy
of all such information and reports with the Commission for public availability
within the time periods set forth in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Issuer and the Guarantors have agreed that, for so long as any New
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the New Notes; (ii) default in payment when
due of the principal of or premium, if any, on the New Notes; (iii) failure by
the Issuer or any
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of its Subsidiaries for 30 days after notice by the Trustee or by the Holders of
at least 25% of New Notes then outstanding to comply with any of its other
agreements in the Indenture or the New Notes; (iv) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Issuer or any of
its Subsidiaries (or the payment of which is guaranteed by the Issuer or any of
its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
after giving effect to any grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its stated maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $15.0 million or more; (v) failure
by the Issuer or any of its Subsidiaries to pay final judgments (net of any
amounts with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing) aggregating in excess of $15.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days; (vi)
except as permitted by the Indenture, any Subsidiary Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; (vii) material breach by the Issuer of any representation
or warranty set forth in the Collateral Documents, or a material default by the
Issuer in the performance of any covenant set forth in the Collateral Documents,
or repudiation by the Issuer of its obligations under the Collateral Documents
or the unenforceability of the Collateral Documents against the Issuer for any
reason, which in any such case materially impairs the Trustee's lien on or the
value of the Collateral, taken as a whole; and (viii) certain events of
bankruptcy or insolvency with respect to the Issuer or any of its Significant
Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding New Notes
may declare all the New Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuer or any Guarantor
constituting a Significant Subsidiary, all outstanding New Notes will become due
and payable without further action or notice. Holders of the New Notes may not
enforce the Indenture or the New Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding New Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the New Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. In the event of a declaration of
acceleration of the New Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (iv) of the preceding paragraph, the declaration of acceleration of the
New Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (iv) of the preceding paragraph have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (a) the annulment of the acceleration of
such New Notes would not conflict with any judgment or decree of a court of
competent jurisdiction and (b) all existing Events of Default, except nonpayment
of principal or interest on the New Notes that became due solely because of the
acceleration of the New Notes, have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the New Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the New Notes. If an Event of Default occurs prior to
March 1, 2002, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Issuer with the intention of avoiding the
prohibition on redemption of the New Notes prior to March 1, 2002, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the New Notes.
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The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the New Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the New Notes.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Collateral Documents, and the
Issuer is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Issuer,
as such, shall have any liability for any obligations of the Issuer under the
New Notes, the Collateral Documents, the Indenture or the Subsidiary Guarantees
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of New Notes by accepting a Note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the New Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have all of its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding New Notes ("Legal Defeasance") except for (i) the rights of Holders
of outstanding New Notes to receive payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages on such New Notes when such
payments are due from the trust referred to below, (ii) the Issuer's obligations
with respect to the New Notes concerning issuing temporary New Notes,
registration of New Notes, mutilated, destroyed, lost or stolen New Notes and
the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Issuer's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Issuer may,
at its option and at any time, elect to have the obligations of the Issuer
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the New Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the New Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the New Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding New Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuer must specify whether the New Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (a) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling or (b) since the date of the 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 counsel shall confirm that,
subject to customary assumptions and exclusions, the Holders of the outstanding
New Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal 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 Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that, subject to customary assumptions and exclusions, the Holders of
the outstanding New Notes 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
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at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the financing of amounts to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of deposit; (v)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument
(other than the Indenture) to which the Issuer or any of its Subsidiaries is a
party or by which the Issuer or any of its Subsidiaries is bound; (vi) the
Issuer must have delivered to the Trustee an opinion of counsel to the effect
that, subject to customary assumptions and exclusions (which assumptions and
exclusions shall not relate to the operation of Section 547 of the United States
Bankruptcy Code or any analogous New York State law provision), after the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Issuer must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuer with
the intent of preferring the Holders of New Notes over the other creditors of
the Issuer with the intent of defeating, hindering, delaying or defrauding
creditors of the Issuer or others; and (viii) the Issuer must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any Note selected for redemption. Also, the Issuer is not required to transfer
or exchange any New Notes for a period of 15 days before a selection of New
Notes to be redeemed.
The registered Holder of a New Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Subsidiary Guarantees, the New Notes or the Collateral Documents may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the New Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, New Notes), and any existing default or compliance with
any provision of the Indenture, the Subsidiary Guarantees or the New Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding New Notes (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder): (i) reduce the
principal amount of New Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any New Note or alter the provisions with respect to the redemption of the
New Notes (other than provisions relating to the covenants described above under
the caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of
or change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the New Notes (except a rescission of acceleration of the New Notes by the
Holders of at least a majority in aggregate principal amount of the New Notes
and a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the New Notes, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of New Notes to receive payments of principal
of or premium, if any, or interest on the New Notes, (vii) waive a redemption
payment with respect to any Note (other than a payment required by one of the
covenants described above under the caption "-- Repurchase at the Option of
Holders"), (viii) except as otherwise permitted by the Indenture, release any
Guarantor from any of its obligations under its Subsidiary Guarantee or the
Indenture, or amend the
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provisions of the Indenture relating to the release of Guarantors, (ix) release
the Lien of the Collateral Agent in any of the Collateral other than pursuant to
the terms of the Indenture or the Collateral Documents or (x) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of New
Notes, the Issuer, the Guarantors and the Trustee may amend or supplement the
Indenture, the Subsidiary Guarantees, the New Notes or the Collateral Documents
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
New Notes in addition to or in place of certificated New Notes, to provide for
the assumption of the Issuer's or a Guarantor's obligations to Holders of New
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of New Notes or that
does not adversely affect the legal rights under the Indenture or the Collateral
Documents of any such Holder, to comply with requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act or to allow any Guarantor to guarantee the New Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding New
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 in case an Event of Default
shall occur (which shall not be 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 will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of New Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). The Old Notes were also offered and
sold in offshore transactions in reliance on Regulation S ("Regulation S
Notes"). Except as set forth below, the New Notes will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof. New Notes will be issued at the closing of the Exchange Offer
(the "Closing") only against payment in immediately available funds.
The Global Notes will be deposited upon issuance with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for New
Notes in certificated form except in the limited circumstances described below.
See "-- Exchange of Book-Entry Notes for Certificated Notes." In addition,
transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and CEDEL), which may change from
time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The New
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
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DEPOSITORY PROCEDURES
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests and transfer of ownership interests of
each actual purchaser of each security held by or on behalf of DTC are recorded
on the records of the Participants and Indirect Participants.
DTC has also advised the Issuer that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants tendering Old Notes with portions of the applicable Global Notes
and (ii) ownership of such interests in the Global Notes will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interest
in the Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are participants in
such system. Investors in the Regulation S Global Notes must initially hold
their interests therein through Euroclear or CEDEL, if they are participants in
such systems, or indirectly through organizations which are participants in such
systems. Euroclear and CEDEL will hold interests in the Global Notes on behalf
of their participants through customers' securities accounts in their respective
names on the books of their respective depositaries, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of CEDEL. The depositaries, in turn, will hold such
interests in the Global Notes in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a Global Note,
including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC. Those interest held through Euroclear or
CEDEL may also be subject to the procedures and requirements of such systems.
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the New Notes, see "-- Exchange of Book-Entry New Notes for
Certificated New Notes," "-- Exchange of Certificated New Notes for Book-Entry
New Notes" and "-- Exchanges Between Regulation S New Notes and Rule 144A New
Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NEW NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NEW NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS
OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and interest on a
Global Note registered in the name of DTC or its nominee will be payable by the
Trustee to DTC in its capacity as the registered Holder under the Indenture.
Under the terms of the Indenture, the Issuer and the Trustee will treat the
persons in whose names the New Notes, including the Global Notes, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Issuer, the Trustee nor
any agent of the Issuer or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes, or for maintaining, supervising or
reviewing any
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of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Notes or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants. DTC has advised the Issuer that its current practice,
upon receipt of any payment in respect of securities such as the New Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Issuer. Neither the Issuer nor
the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the New Notes, and the Issuer and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and CEDEL participants, interest
in the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. See "-- Same-Day Settlement
and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the New
Notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or CEDEL participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
CEDEL, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or CEDEL, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and CEDEL participants may
not deliver instructions directly to the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
settlement date of DTC. DTC has advised the Issuer that cash received in
Euroclear or CEDEL as a result of sales of interests in a Global Note by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of New Notes only at the direction of one or more Participants
to whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the New Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the New Notes, DTC reserves the
right to exchange the Global Notes for legended New Notes in certificated form,
and to distribute such New Notes to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuer believes
to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
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Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among Participants in
DTC, Euroclear and CEDEL, they are under no obligation to perform or to continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuer nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NEW NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive New Notes in registered
certificated form if (i) DTC (x) notifies the Issuer that it is unwilling or
unable to continue as depositary for the Global Note and the Issuer thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Issuer, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the New
Notes in certificated form or (iii) there shall have occurred and be continuing
an Event of Default or any event which after notice or lapse of time or both
would be an Event of Default with respect to the New Notes. In addition,
beneficial interests in a Global Note may be exchanged for certificated New
Notes upon request but only upon at least 20 days prior written notice given to
the Trustee by or on behalf of DTC in accordance with its customary procedures.
In all cases, certificated New Notes delivered in exchange for any Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
EXCHANGE OF CERTIFICATED NEW NOTES FOR BOOK-ENTRY NEW NOTES
New Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such New Notes as described under "Notice to Investors." In the case of any
such exchange for an interest in the Regulation S Global Note, such transfer
must occur pursuant to Regulation S or Rule 144 (if available).
EXCHANGES BETWEEN REGULATION S NEW NOTES AND RULE 144A NEW NOTES
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if such exchange occurs in connection with a transfer
of the New Notes pursuant to Rule 144A and the transferor first delivers to the
Trustee a written certificate (in the form provided in the Indenture) to the
effect that the New Notes are being transferred to a person who the transferor
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A, purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule 144A and
in accordance with all applicable securities laws of the states of the United
States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and
that, if such transfer occurs prior to the expiration of the Restricted Period,
the interest transferred will be held immediately thereafter through Euroclear
or CEDEL.
Transfers involving an exchange of a beneficial interest in the Regulation
S Global Note for a beneficial interest in a Rule 144A Global Note or vice versa
will be effected in DTC by means of an instruction originated by the Trustee
through the DTC Deposit/Withdraw at Custodian system. Accordingly, in connection
with any such transfer, appropriate adjustments will be made to reflect a
decrease in the principal amount of the Regulation S Global Note and a
corresponding increase in the principal amount of the Rule 144A Global Note or
vice versa, as applicable. Any beneficial interest in one of the Global Notes
that is transferred to a person who takes delivery in the form of an interest in
the other Global Note will, upon transfer, cease to be an interest in such
Global Note and will become an interest in the other Global Note and,
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accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interest in such other Global Note for so
long as it remains such an interest.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the New Notes
represented by the Global Notes (including principal, premium, if any, and
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to New Notes in certificated form, the Issuer will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, 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. The New Notes represented by the Global Notes are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such New Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Issuer expects that
secondary trading in any certificated New Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
settlement date of DTC. DTC has advised the Issuer that cash received in
Euroclear or CEDEL as a result of sales of interests in a Global Note by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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 purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease (other than an operating lease),
conveyance or other disposition of any assets or rights (including, without
limitation, by way of a sale and leaseback) other than in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Issuer and its Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "-- Change of Control" and/or
the provisions described above under the caption "-- Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii)
the sale by the Issuer and the issue or sale by any of its Subsidiaries of
Equity Interests of any of the Issuer's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions that have a fair market value (as determined in good faith by the
Board of Directors) in excess of $1.0 million or for net cash proceeds in excess
of $1.0 million. Notwithstand-
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ing the foregoing: (i) a transfer of assets by the Issuer to a Guarantor or by a
Guarantor to the Issuer or to another Guarantor, (ii) an issuance of Equity
Interests by a Guarantor to the Issuer or to another Guarantor, (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "-- Restricted Payments," (iv) a Collateral Asset Sale and (v) the sale
and leaseback of any assets within 90 days of the acquisition of such assets,
will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) securities issued or unconditionally and fully
guaranteed or insured by the full faith and credit of the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (ii) obligations issued or
unconditionally and fully guaranteed by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to the Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $250.0 million, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (i)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having one
of the two highest ratings obtainable from either Moody's or S&P and in each
case maturing within one year after the date of acquisition and (vi) investments
in funds investing exclusively in investments of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principal and its Affiliates, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Issuer, (iii) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that (A) any "person" (as defined above), other than the
Principal and its Affiliates, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of 40% or more of the Voting Stock of the Issuer (measured by voting
power rather than number of shares) and (B) the Principal and its Affiliates
beneficially own, directly or indirectly, in the aggregate a lesser percentage
of the Voting Stock of the Issuer than such other "person," (iv) the first day
on which a majority of the members of the Board of Directors of the Issuer are
not Continuing Directors or (v) the Issuer consolidates with, or merges with or
into, any Person, or any Person consolidates with, or merges with or into, the
Issuer, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Issuer is converted into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
Voting Stock of the Issuer outstanding immediately prior to such transaction is
converted into
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or exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee Person and (B) either (1) the "beneficial owners" (as defined
above) of the Voting Stock of the Issuer immediately prior to such transaction
own, directly or indirectly through one or more subsidiaries, not less than a
majority of the total Voting Stock of the surviving or transferee corporation
immediately after such transaction or (2) if, immediately prior to such
transaction the Issuer is a direct or indirect subsidiary of any other Person
(such other Person, the "Holding Company"), then the "beneficial owners" (as
defined above) of the Voting Stock of such Holding Company immediately prior to
such transaction own, directly or indirectly through one or more subsidiaries,
not less than a majority of the Voting Stock of the surviving or transferee
corporation immediately after such transaction.
"Collateral" means all property and assets, tangible and intangible, that
from time to time secure the New Notes pursuant to the applicable Collateral
Documents, including any Replacement Collateral.
"Collateral Asset Sale" means the sale, lease (other than an operating
lease), conveyance or other disposition of any Collateral (including, without
limitation, by means of an amalgamation, merger, consolidation or similar
transaction (each, a "Disposition") (provided that the sale, lease, conveyance
or other disposition of all or substantially all of the assets of the Issuer and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Change of Control" and/or the
provisions described above under the caption "-- Merger, Consolidation or Sale
of Assets" and not by the provisions of the Collateral Asset Sale covenant), or
a series of related Dispositions by the Issuer or any of its Subsidiaries
involving the Collateral, other than (i) the sale for fair market value of
machinery, equipment, furniture, apparatus, tools or implements or other similar
property that may be defective or may have become worn out or obsolete or no
longer used or useful in the operations of the Issuer or (ii) the sale or
exchange of equipment at the Issuer's operating facilities with an aggregate
value not to exceed $5.0 million at any one time provided such equipment has
been replaced by equipment of equal or greater value within 180 days of such
sale or exchange. A Collateral Asset Sale shall not include the requisition of
title to or the seizure, condemnation, forfeiture or casualty of any Collateral.
"Collateral Documents" means, collectively, the Deeds of Trust, the
Security Agreements, the Pledge Agreements and any other agreements,
instruments, financing statements or other documents that evidence, set forth or
limit the Lien of the Collateral Agent in the Collateral.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation and amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) Recapitalization Related
Special Charges of such Person and its Subsidiaries for such period, to the
extent any such expense was deducted in computing Consolidated Net Income of
such Person for such period, plus (vi) deferred compensation expense of such
Person and its Subsidiaries for such period (provided, however, that any
payments actually made with respect to the liabilities for which such charges
were created shall be deducted from Consolidated Cash Flow in the period when
made), to the extent any such expense was
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deducted in computing Consolidated Net Income of such Person for such period,
plus (vii) the impact on Consolidated Cash Flow of such Person for such period,
an aggregate amount not to exceed $5.0 million since the Issue Date, of the
deferral of recognition of revenue by the Issuer until products are shipped by
the Issuer's distributors, minus (viii) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuer by such 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 that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded and (v) the amortization of
(A) any premiums, fees or expenses incurred in connection with the
Recapitalization and related financings, or (B) any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets, in each
case arising in connection with the Acquisition) and 17 (including non-cash
charges relating to intangibles and goodwill arising in connection with the
Acquisition) shall be excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Issuer who (i) was a member of such Board of
Directors immediately after consummation of the Acquisition or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election, or any successor Continuing Directors
appointed by such Continuing Directors (or their successors).
"Credit Facilities" means, with respect to the Issuer, one or more debt
facilities (including, without limitation, the Revolving Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which New Notes are first issued and authenticated
under the Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (i) of the definition of Permitted
Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date on which the New Notes mature;
provided, however, that a class of Capital Stock shall not be Disqualified Stock
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hereunder solely as the result of any maturity or redemption that is conditioned
upon, and subject to, compliance with the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments; and provided further, that
Capital Stock issued to any plan for the benefit of employees of the Issuer or
its subsidiaries or by any such plan to such employees shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Issuer in order to satisfy applicable statutory or regulatory obligations.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means (i) the loss or destruction of or damage to any
Collateral, (ii) the condemnation, seizure, confiscation, requisition of the use
or taking by exercise of the power of eminent domain or otherwise of any
Collateral or (iii) any consensual settlement in lieu of any event listed in
clause (ii), in each case whether in a single event or a series of related
events, that results in Net Proceeds from all sources in excess of $5.0 million.
"Existing Indebtedness" means Indebtedness of the Issuer and its
Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in
existence on the date of the Indenture, until such Indebtedness is repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense (net of interest
income) of such Person and its Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations); provided, however, that
in no event shall any amortization of deferred financing costs incurred in
connection with the Recapitalization be included in Fixed Charges, (ii) the
consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, (iii) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Subsidiaries or
secured by a Lien on assets of such Person or one of its Subsidiaries (whether
or not such Guarantee or Lien is called upon) and (iv) the product of (a)
(without duplication) (1) all dividends paid or accrued in respect of
Disqualified Stock which are not treated as interest for tax purposes and (2)
all cash dividend payments, on any series of preferred stock of such Person or
any of its Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests (other than Disqualified Stock) of the
Issuer, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Issuer or any of its
Subsidiaries incurs, assumes, Guarantees, repays or redeems any Indebtedness
(other than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee, repayment or redemption of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Issuer or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income and shall reflect any pro forma expense and cost reductions attributable
to such
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acquisitions, (to the extent such expense and cost reduction would be permitted
by the Commission to be reflected in pro forma financial statements included in
a registration statement filed with the Commission) and (ii) the Consolidated
Cash Flow attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture; provided, however,
that all reports and other financial information provided by the Issuer to the
Holders, the Trustee and/or the Commission shall be prepared in accordance with
GAAP, as in effect on the date of such report or other financial information.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each direct and indirect domestic Subsidiary of the
Issuer existing on the Issue Date and each of the Subsidiaries of the Issuer
that executes a Subsidiary Guarantee in accordance with the provisions of the
Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or the value of foreign currencies.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, notes or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Issuer such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Issuer, the Issuer shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "-- Restricted Payments."
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"Issue Date" means February 27, 1998.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any option or other agreement to give a security
interest).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale or Collateral Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any of
its Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Subsidiaries in respect of any Asset Sale or Collateral Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale or
Collateral Asset Sale), net of the direct costs relating to such Asset Sale or
Collateral Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale or Collateral Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other liabilities payable under the documentation governing such
Indebtedness.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Subsidiary; (b) any Investment in cash and Cash Equivalents; (c) any Investment
by the Issuer or any Subsidiary in a Person, if as a result of such Investment
(i) such Person becomes a Subsidiary or (ii) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a Subsidiary; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales" or a transaction not constituting an Asset Sale by
reason of the $1 million threshold contained in the definition thereof; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Issuer; (f) Hedging Obligations entered
into in the ordinary course of business by the Issuer or its Subsidiaries and
otherwise in accordance with the Indenture; (g) loans and advances to employees
and officers of the Issuer and its Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $5.0 million at any
one time outstanding; (h) Investments in securities of trade creditors or
customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and (i) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed $25.0 million.
"Permitted Liens" means (i) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (ii) Liens
on Collateral securing the New Notes, the Exchange New Notes and the Subsidiary
Guarantees; (iii) Liens of the Issuer or a Guarantor on assets of any Subsidiary
of the Issuer; (iv) Liens securing Permitted Refinancing Indebtedness which is
incurred to refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens (A) are not
materially
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less favorable to the Holders and are not materially more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (B) do not extend to or cover any property or
assets of the Issuer or any of its Subsidiaries not securing the Indebtedness so
refinanced; (v) Liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and as to which the Issuer or its Subsidiaries shall have set aside
on its books such reserves as may be required pursuant to GAAP; (vi) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent for a period of more than 60 days
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in respect
thereof; (vii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security or similar obligations, including any Lien
securing letters of credit issued in the ordinary course of business consistent
with past practice in connection therewith, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money); (viii)
judgment Liens not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceedings may be initiated shall not have
expired; (ix) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Issuer or any
of its Subsidiaries; (x) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating; provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease; (xi) Liens securing Capital Lease Obligations and purchase money
Indebtedness incurred in accordance with clause (iv) of the definition of
Permitted Debt; provided, however that in the case of purchase money
Indebtedness (A) the Indebtedness shall not exceed the cost of such property or
assets being acquired or constructed and shall not be secured by any property or
assets of the Issuer or any Subsidiary of the Issuer other than the property and
assets being acquired or constructed and (B) the Lien securing such Indebtedness
shall be created within 90 days of such acquisition or construction; (xii) Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers' acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods; (xiii) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds thereof;
(xiv) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Issuer or
any of its Subsidiaries, including rights of offset and set-off; (xv) Liens
securing Hedging Obligations which Hedging Obligations relate to Indebtedness
that is otherwise permitted under the Indenture; (xvi) Liens securing Acquired
Debt incurred in accordance with clause (x) of the definition of Permitted Debt;
provided that (A) such Liens secured such Acquired Debt at the time of and prior
to the incurrence of such Acquired Debt by the Issuer or a Subsidiary of the
Issuer and were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Debt by the Issuer or a Subsidiary of the Issuer and
(B) such Liens do not extend to or cover any property or assets of the Issuer or
of any of its Subsidiaries other than the property or assets that secured the
Acquired Debt prior to the time such Indebtedness became Acquired Debt of the
Issuer or a Subsidiary of the Issuer and are no more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Issuer or a Subsidiary of the Issuer; (xvii) leases or
subleases granted to others not interfering in any material respect with the
business of the Issuer or its Subsidiaries; (xviii) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Issuer or any Subsidiary in the ordinary course of business; (xix) Liens
incurred in the ordinary course of business of the Issuer or any Subsidiary of
the Issuer with respect to obligations that do not exceed $5.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Issuer or such Subsidiary and (xx)
Liens on inventory, accounts receivable and the proceeds thereof securing
working capital Indebtedness of the Issuer
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and liens on cash collateral constituting proceeds of accounts receivable or
inventory securing letters of credit or mandatory prepayments of working capital
Indebtedness secured thereby, which Indebtedness is, in each case, incurred in
compliance with the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuer
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, prepay, retire, renew, replace, defease or refund
Indebtedness of the Issuer or any of its Subsidiaries (other than such
Indebtedness described in clauses (i), (vi), (vii), (viii), (ix), (xi), (xii) or
(xiii) of the covenant described above under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock;"
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, prepaid, retired, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith including premiums paid, if any, to the holders thereof); (ii) such
Permitted Refinancing Indebtedness has a final maturity date at or later than
the final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, prepaid, retired, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced, prepaid, retired, renewed,
replaced, defeased or refunded is subordinated in right of payment to the New
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
New Notes on terms at least as favorable to the Holders of New Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, prepaid, retired, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by the Issuer or by the Subsidiary who is
the obligor on the Indebtedness being extended, refinanced, prepaid, retired,
renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Principal" means TPG Partners II, L.P.
"Public Equity Offering" means an underwritten public offering of common
stock (other than Disqualified Stock) of the Issuer, pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act, other than an offering pursuant to Form S-8 (or any successor
thereto).
"Qualified Proceeds" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are used
or useful in the business of the Issuer or its subsidiaries on the Issue Date or
businesses reasonably related thereto (the "Permitted Business"), (iv) the
Capital Stock of any Person engaged primarily in a Permitted Business if, in
connection with the receipt by the Issuer or any Restricted Subsidiary of the
Issuer of such Capital Stock, (a) such Person becomes a Wholly Owned Subsidiary
and a Guarantor or (b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or any Wholly Owned Subsidiary of the Issuer that is
a Guarantor.
"Recapitalization Related Special Charges" means (i) up to $10.0 million of
retention bonuses paid to employees of the Issuer within six months following
the Issue Date, (ii) up to $5.0 million of (x) severance costs paid by the
Issuer within six months following the Issue Date and (y) bonuses paid by the
Issuer to members of management of the Issuer retained effective on or after
January 1, 1998 and paid within six months following the Issue Date, (iii)
expense incurred by the Issuer as a result of (x) payments made by the Issuer on
the Issue Date in respect of options to purchase common stock of the Issuer
outstanding on the Issue Date and (y) the grant by the Issuer on the Issue Date
of options to purchase common stock of the Issuer and (iv) consulting fees, not
exceeding $1.5 million, paid by the Issuer within six months following the Issue
Date.
"Replacement Collateral" means, at any relevant date in connection with a
Collateral Asset Sale or Event of Loss, assets used in the Issuer's business
other than the Collateral, which on such date (i) constitute similar assets to
Collateral disposed of or destroyed and do not constitute Capital Stock of any
Person, (ii) are acquired by the Issuer at a purchase price which does not
exceed the fair market value of such Replacement
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Collateral (as determined in the case of each of (i) and (ii), in good faith by
the Board of Directors of the Issuer,) and made available to the Collateral
Agent, (iii) are free and clear of all Liens other than Permitted Liens, and
(iv) are subject to the Collateral Documents.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means that certain revolving credit facility,
dated as of February 27, 1998, by and among the Issuer, Goldman Sachs Credit
Partners L.P. and BankBoston, N.A., as agents and lenders, providing for up to
$25.0 million of revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, extended, modified, renewed,
refunded, replaced or refinanced from time to time.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Voting Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or a
combination thereof.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
IN GENERAL
The following summary describes the principal United States federal income
tax consequences of the exchange of Old Notes for New Notes (the "Exchange") and
the principal U.S. federal tax consequences of the purchase, ownership and
disposition of Notes, but does not purport to be a comprehensive description of
all the tax considerations that may be relevant to a decision to exchange Old
Notes. In particular, special tax considerations that may apply to certain types
of taxpayers, including securities dealers, banks, tax-exempt investors and
insurance companies, are not addressed. In addition, this summary does not
describe any tax consequences arising under the laws of any state, locality or
taxing jurisdiction other than the United States federal government. In general,
this summary assumes that a holder holds Notes as capital assets under the U.S.
Internal Revenue Code of 1986 (the "Code") and not as part of a "hedge,"
"straddle," "conversion transaction," "synthetic security" or other integrated
investment.
This summary is based on the U.S. federal tax laws, regulations, rulings
and judicial and administrative decisions in effect or available on the date
hereof. All of the foregoing are subject to change, which change may apply
retroactively and could affect the continued validity of this summary.
As used in this section, the term "U.S. Holder" means a holder of a Note
who is a citizen or resident of the United States, which is a corporation,
partnership or other entity created or organized under the laws of the U.S. or
any state or political subdivision thereof, which is an estate that is subject
to U.S. federal income taxation without regard to the source of its income, or
which is a trust the administration of which is subject to the primary
supervision of a U.S. court and which has one or more U.S. persons who have the
authority to control all substantial decisions of the trust and the term
"Non-U.S. Holder" means any holder of Notes other than a U.S. Holder.
ALL HOLDERS OF OLD NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE EXCHANGE OF
OLD NOTES FOR NEW NOTES AND OF THE OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING
NEW NOTES RECEIVED IN THE EXCHANGE OFFER, IN VIEW OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The Exchange pursuant to the Exchange Offer will not be a taxable event for
U.S. federal income tax purposes. As a result, a holder of an Old Note whose Old
Note is accepted in the Exchange Offer will not recognize gain on the Exchange.
A tendering holder's tax basis in the New Notes will be the same as such
holder's tax basis in its Old Notes. A tendering holder's holding period for the
New Notes received pursuant to the Exchange Offer will include its holding
period for the Old Notes surrendered therefor.
OTHER U.S. FEDERAL INCOME TAX CONSEQUENCES FOR U.S. HOLDERS OF NOTES
Original Issue Discount and Stated Interest. The Old Notes were issued and
the New Notes will be issued without original issue discount. Stated interest on
the Notes will be includable in a U.S. Holder's income in accordance with such
holder's method of accounting for U.S. federal income tax purposes.
Sale, Exchange and Retirement of Notes. Upon the sale, exchange,
redemption, retirement or other taxable disposition of a Note, a U.S. Holder
generally will recognize gain or loss equal to the difference between the amount
realized on such disposition and the U.S. Holder's tax basis in the Note. Except
as discussed below under " --Market Discount," gain or loss recognized by a U.S.
Holder on such disposition of a Note will be capital gain or loss and will, in
the case of individuals, be long-term capital gain or loss subject to a maximum
federal income tax rate of 20% if the Note has been held for more than 18 months
at the time of such disposition. Net capital gain recognized by a U.S. Holder on
such a disposition of Notes held for more than 12 months but for not more than
18 months will be subject to tax at a federal income tax rate not to exceed 28%
and capital gain recognized from such a disposition of Notes held for 12 months
or less will be
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subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a U.S. corporate taxpayer will be subject to tax at the ordinary
income tax rates applicable to corporations.
Market Discount. If a Note is acquired by a subsequent purchaser at a
"market discount," some or all of any gain realized upon a disposition
(including a sale or a taxable exchange) or payment at maturity of such Note may
be treated as ordinary income. "Market discount" with respect to a Note is,
subject to a de minimis exception, the excess of (i) the issue price of the Old
Note exchanged therefor plus all previously accrued original issue discount, if
any, over (ii) such U.S. Holder's tax basis in the Note. The amount of market
discount treated as having accrued will be determined either on a ratable basis,
or, if the U.S. Holder so elects, using a constant-yield method. Upon any
subsequent disposition (including a gift or payment at maturity) of such Note
(other than in connection with certain nonrecognition transactions), the lesser
of any gain on such disposition (or appreciation, in the case of a gift) or the
portion of the market discount that accrued while the Note was held by such U.S.
Holder will be treated as ordinary interest income at the time of the
disposition. In lieu of including accrued market discount in income at the time
of disposition, a U.S. Holder may elect to include market discount in income
currently. Unless a U.S. Holder so elects, such U.S. Holder may be required to
defer a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such Note until the
U.S. Holder disposes of the Note.
Bond Premium. If New Notes are purchased or Old Notes were purchased for an
amount in excess of all remaining payments on the Notes other than qualified
stated interest (such excess generally being "bond premium"), the U.S. Holder
may elect to amortize the bond premium over the period from the date of
acquisition to the maturity date of the Notes and reduce the amount of interest
included in income in respect of the Notes by such amortized amount. Bond
premium may be offset against interest realized in respect of the taxable year
of the U.S. Holder in an amount that is based upon the U.S. Holder's yield to
maturity determined by using the U.S. Holder's tax basis in the Notes and
compounding at the close of each accrual period. A U.S. Holder who elects to
amortize bond premium must reduce its adjusted tax basis for the Notes by the
amount of such allowable amortization. Under certain circumstances, the amount
of bond premium and the amortization period may be determined with reference to
the optional redemption price and date of the Notes. The election to amortize
bond premium is revocable only with the consent of the U.S. Internal Revenue
Service and applies to all obligations owned or subsequently acquired by the
electing U.S. Holder.
OTHER U.S. FEDERAL TAX CONSEQUENCES FOR NON-U.S. HOLDERS
Interest. Interest paid by the Company to a Non-U.S. Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-U.S. Holder and such Non-U.S. Holder (i) does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company, (ii) is not a controlled foreign
corporation with respect to which the Company is a "related person" within the
meaning of the Code and (iii) certifies, under penalties of perjury, that such
holder is not a United States person and provides such holder's name and
address.
Gain on Disposition. A Non-U.S. Holder will generally not be subject to
United States federal income tax on gain recognized on a sale, redemption or
other disposition of a Note unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the Non-U.S.
Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident alien
individual and holds the Note as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year and certain other
requirements are met.
Federal Estate Taxes. If interest on the Notes is exempt from withholding
of United States federal income tax under the rules described above under
"-- Interest," the Notes will not be included in the estate of a deceased
Non-U.S. Holder for United States federal estate tax purposes.
92
<PAGE> 95
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the holders of Notes and the
U.S. Internal Revenue Service the amount of any interest paid on the Notes in
each calendar year and the amounts of tax withheld, if any, with respect to such
payments.
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain payments made to, and to the proceeds of
sales before maturity by, certain U.S. persons if such persons (i) fail to
furnish their taxpayer identification numbers which, for an individual, would be
such individual's Social Security Number or (ii) in certain circumstances, fail
to certify, under penalties of perjury, that they have both furnished a correct
taxpayer identification number and not been notified by the U.S. Internal
Revenue Service that they are subject to backup withholding for failure to
report interest and dividend payments.
In the case of payments of interest to Non-U.S. Holders, temporary U.S.
Treasury Department regulations provide that the 31% backup withholding tax and
certain information reporting requirements will not apply to such payments with
respect to which either the requisite certification, as described above under
"-- Other U.S. Federal Tax Considerations for Non-U.S. Holders-Interest," has
been received or an exemption has otherwise been established, as long as neither
the Company nor its payment agent has actual knowledge that the holder is a
United States person or that the conditions of any other exemption are not in
fact satisfied. Under temporary U.S. Treasury Department regulations, these
information reporting and backup withholding requirements will apply, however,
to the gross proceeds paid to a Non-U.S. Holder on the disposition of Notes by
or through a United States office of a United States or foreign broker, unless
the holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding, will
also apply to a payment of the proceeds of a disposition of Notes by or through
a foreign office of either a United States broker or a foreign broker with
certain types of relationships to the United States, unless such broker has
documentary evidence in its file that the holder of the Notes is not a United
States person, and such broker has no actual knowledge to the contrary, or the
holder establishes an exception. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of Notes by or through a foreign office of a foreign broker not having any of
the requisite relationships to the United States.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-U.S.
Holder's United States federal income tax liability, provided that the required
information is furnished to the U.S. Internal Revenue Service.
The U.S. Treasury Department recently promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards. As originally
promulgated, the final regulations were to be generally effective for payments
made after December 31, 1998, subject to certain transition rules; however the
U.S. Treasury Department and Internal Revenue Service subsequently announced
that the December 31, 1998 date would be extended to December 31, 1999. Non-U.S.
Holders should consult their own tax advisors with respect to the impact, if
any, of the new final regulations.
93
<PAGE> 96
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
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 New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Issuer and the
Guarantors have agreed that they will make this Prospectus available to any
Participating Broker-Dealer for a period of time not to exceed one year after
the date on which the Exchange Offer is consummated for use in connection with
any such resale. In addition, until such date, all broker-dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
Neither the Issuer nor the Guarantors will receive any proceeds from any
sale of New Notes by broker-dealers. New 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 New 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 and/or the purchasers of any such New Notes. Any
broker-dealer that resells New 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 New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions 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.
Starting on the Expiration Date, the Issuer and the Guarantors 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 Issuer has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the holders of
the Old Notes) other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the exchange offer are being
passed upon for Zilog by Pillsbury Madison & Sutro LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of Zilog, Inc. and its subsidiaries
at December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, appearing in this Prospectus and in the Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
94
<PAGE> 97
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst and Young LLP, Independent Auditors......... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Cash Flows....................... F-5
Consolidated Statements of Shareholders' Equity............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 98
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders of Zilog, Inc.
We have audited the accompanying consolidated balance sheets of Zilog, Inc.
as of December 31, 1996 and 1997, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Zilog, Inc. at
December 31, 1996 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Jose, California
February 6, 1998, except for Note 2,
as to which the date is February 27, 1998
F-2
<PAGE> 99
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- APRIL 5,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 15,511 $ 92,184 $ 66,890
Short-term investments.................................... 53,412 14,127 --
Accounts receivable, less allowance for doubtful accounts
of $250 in 1996, 1997 and 1998......................... 29,395 31,633 28,107
Inventories............................................... 34,469 32,968 32,511
Prepaid expenses, deferred income taxes and other current
assets................................................. 15,516 19,769 20,114
--------- --------- ---------
Total current assets.............................. 148,303 190,681 147,622
Property, plant and equipment, at cost:
Land, buildings and leasehold improvements................ 34,061 34,314 34,316
Machinery and equipment................................... 345,867 381,144 388,402
--------- --------- ---------
379,928 415,458 422,718
Less accumulated depreciation and amortization............ (131,217) (191,881) (207,756)
--------- --------- ---------
Net property, plant and equipment................. 248,711 223,577 214,962
Other assets................................................ 4,052 1,381 10,521
--------- --------- ---------
$ 401,066 $ 415,639 $ 373,105
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 28,786 $ 24,733 $ 23,993
Accrued compensation and employee benefits................ 17,545 18,284 19,453
Other accrued liabilities................................. 5,116 5,287 8,084
Income taxes payable...................................... 8,289 10,783 2,301
--------- --------- ---------
Total current liabilities......................... 59,736 59,087 53,831
Notes payable............................................... -- -- 280,000
Deferred income taxes....................................... 16,050 16,070 16,070
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, $0.01 par value; 190,000 shares
authorized, no shares issued and outstanding at
December 31, 1996 and 1997. (At April 5, 1998:
Preferred Stock, $100 par value; 5,000,000 shares
authorized; 1,500,000 shares designated as Series A
Cumulative Preferred Stock; 250,000 shares of Series A
Cumulative Preferred issued and outstanding; aggregate
liquidation preference $25,000)........................ -- -- 25,000
Common Stock, $.01 par value; 75,000,000 shares
authorized, 20,127,976 shares issued and outstanding at
December 31, 1996 and 20,333,742 shares at December 31,
1997. (At April 5, 1998: Common Stock, $.01 par value;
35,000,000 shares authorized; 14,999,368 shares issued
and outstanding; Class A Non-Voting Common Stock, $.01
par value; 15,000,000 shares authorized; 5,000,000
shares issued and outstanding)......................... 201 203 200
Additional paid-in capital................................ 161,599 164,950 --
Retained earnings (deficit)............................... 163,375 175,236 (1,996)
Net unrealized gains on securities (Net of tax effect) 105 93 --
--------- --------- ---------
Total shareholders' equity........................ 325,280 340,482 23,204
--------- --------- ---------
$ 401,066 $ 415,639 $ 373,105
========= ========= =========
</TABLE>
See Accompanying Notes.
F-3
<PAGE> 100
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-------------------------------- ------------------------------
1995 1996 1997 MARCH 30, 1997 APRIL 5, 1998
-------- -------- -------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales............................ $265,122 $298,425 $261,097 $70,136 $ 49,539
Costs and expenses:
Cost of sales.................. 135,066 175,319 171,722 44,028 40,767
Research and development....... 24,546 30,548 30,467 6,632 8,104
Selling, general and
administrative.............. 41,943 47,934 47,806 12,052 13,941
Recapitalization............... -- -- -- -- 13,304
-------- -------- -------- ------- --------
201,555 253,801 249,995 62,712 76,116
Operating income (loss).......... 63,567 44,624 11,102 7,424 (26,577)
Other income (expense):
Interest income, net........... 2,676 2,443 2,892 595 1,159
Interest expense............... -- -- -- -- (2,978)
Other, net, including license
and royalty income and
expense..................... (360) (911) 832 (880) (88)
-------- -------- -------- ------- --------
Income (loss) before income
taxes.......................... 65,883 46,156 14,826 7,139 (28,484)
Provision (benefit) for income
taxes.......................... 23,418 16,155 2,965 2,356 (8,545)
-------- -------- -------- ------- --------
Net income (loss)................ 42,465 30,001 11,861 4,783 (19,939)
======== ======== ======== ======= ========
Other comprehensive income
(loss), net of tax............. 1,003 (72) (12) 58 (93)
-------- -------- -------- ------- --------
Comprehensive income............. $ 43,468 $ 29,929 $ 11,849 $ 4,841 $(20,032)
======== ======== ======== ======= ========
</TABLE>
See Accompanying Notes.
F-4
<PAGE> 101
CONSOLIDATED STATEMENTS OF CASH FLOWS
(INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
--------------------------------- ------------------------------
1995 1996 1997 MARCH 30, 1997 APRIL 5, 1998
--------- --------- --------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................... $ 42,465 $ 30,001 $ 11,861 $ 4,783 $ (19,939)
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation...................... 27,214 48,315 63,750 15,150 16,015
Loss from disposition of
equipment...................... 386 100 50 3 --
Deferred income taxes............. 4,794 3,811 (2,229) -- --
Changes in assets and liabilities:
Accounts receivable............ (5,640) 13,666 (2,238) (3,381) 3,526
Inventories.................... (7,171) (6,317) 1,501 2,456 457
Prepaid expenses, and other
assets....................... (9,956) 5,000 201 26 (452)
Accounts payable............... (2,620) (7,421) (4,053) (6,991) (740)
Accrued compensation and
employee benefits............ 2,068 2,798 739 (2,363) 1,173
Other accrued liabilities and
income taxes payable......... 3,322 1,683 3,062 1,550 (5,966)
--------- --------- --------- -------- ---------
Cash provided by (used
for) operating
activities.............. 54,862 91,636 72,644 11,233 (5,926)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................ (79,346) (117,065) (38,437) (11,991) (7,260)
Short-term investments:
Purchases......................... (112,240) (55,006) (229,730) (10,755) --
Proceeds from sales............... 87,121 45,035 141,936 7,156 14,127
Proceeds from maturities.......... 33,076 30,095 127,304 -- --
--------- --------- --------- -------- ---------
Cash provided by (used
for) investing
activities.............. (71,389) (96,941) 1,073 (15,590) 6,867
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock..... 16,276 13,032 2,956 442 208
Purchase of outstanding shares...... -- -- -- -- (399,475)
Merger expenses charged to retained
earnings.......................... -- -- -- -- (15,202)
Proceeds of Notes payable........... -- -- -- -- 270,734
Investment by TPG................... -- -- -- -- 117,500
--------- --------- --------- -------- ---------
Cash provided (used) by financing
activities..................... 16,276 13,032 2,956 442 (26,235)
--------- --------- --------- -------- ---------
Increase (decrease) in cash and cash
equivalents....................... (251) 7,727 76,673 (3,915) (25,294)
Cash and cash
equivalents -- beginning of
period............................ 8,035 7,784 15,511 15,511 92,184
--------- --------- --------- -------- ---------
Cash and cash equivalents -- end of
period............................ $ 7,784 $ 15,511 $ 92,184 $ 11,596 $ 66,890
========= ========= ========= ======== =========
Supplemental disclosures of cash
flow information --
Cash paid for:
Income taxes...................... $ 12,754 $ 9,249 $ 1,905 $ 311 $ 53
========= ========= ========= ======== =========
</TABLE>
See Accompanying Notes.
F-5
<PAGE> 102
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
PREFERRED STOCK COMMON STOCK CLASS A NON-VOTING NET
----------------- -------------------- ------------------ UNREALIZED
ADDITIONAL GAIN
PAID-IN RETAINED (LOSS) ON
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SECURITIES
------- ------- ----------- ------ --------- ------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995... -- $ -- 18,499,965 $ 185 $ -- $ -- $122,327 $ 90,909 $ (826)
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$6,525..................... -- -- 955,662 10 -- -- 22,791 -- --
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... -- -- -- -- -- -- -- -- 1,003
Net income................... -- -- -- -- -- -- -- 42,465 --
------- ------- ----------- ----- --------- ---- -------- --------- ------
BALANCE AT DECEMBER 31,
1995....................... -- -- 19,455,627 195 -- -- 145,118 133,374 177
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$3,455..................... -- -- 672,349 6 -- -- 16,481 -- --
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... -- -- -- -- -- -- -- -- (72)
Net income................... -- -- -- -- -- -- -- 30,001 --
------- ------- ----------- ----- --------- ---- -------- --------- ------
BALANCE AT DECEMBER 31,
1996....................... -- -- 20,127,976 201 -- -- 161,599 163,375 105
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$397....................... -- -- 205,766 2 -- -- 3,351 -- --
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... -- -- -- -- -- -- -- -- (12)
Net income................... -- -- -- -- -- -- -- 11,861 --
------- ------- ----------- ----- --------- ---- -------- --------- ------
BALANCE AT DECEMBER 31,
1997....................... -- -- 20,333,742 203 -- -- 164,950 175,236 93
Issuance of Common Stock
under stock option plans
plus tax benefit
(unaudited)................ -- -- 14,852 -- -- -- 212 -- --
Adjustment to unrealized gain
on sale of
available-for-sale
securities, net of tax
(unaudited)................ -- -- -- -- -- -- -- -- (93)
Purchase of outstanding
shares (unaudited)......... (20,348,594) (203) -- -- (165,162) (234,110) --
TPG investment, new stock
issued (unaudited)......... 250,000 25,000 14,999,368 150 5,000,000 50 -- 92,300 --
Preferred dividends accrued
(unaudited)................ -- -- -- -- -- -- -- (281) --
One time merger charges
(unaudited)................ -- -- -- -- -- -- -- (15,202) --
Net loss (unaudited)......... -- -- -- -- -- -- -- (19,939) --
------- ------- ----------- ----- --------- ---- -------- --------- ------
BALANCE AT APRIL 5, 1998
(UNAUDITED)................ 250,000 $25,000 14,999,368 $ 150 5,000,000 $ 50 $ -- $ (1,996) $ --
======= ======= =========== ===== ========= ==== ======== ========= ======
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE AT JANUARY 1, 1995... $ 212,595
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$6,525..................... 22,801
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... 1,003
Net income................... 42,465
---------
BALANCE AT DECEMBER 31,
1995....................... 278,864
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$3,455..................... 16,487
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... (72)
Net income................... 30,001
---------
BALANCE AT DECEMBER 31,
1996....................... 325,280
Issuance of Common Stock
under stock option and
stock purchase plans,
including tax benefit of
$397....................... 3,353
Adjustments to unrealized
gains (losses) on
available-for-sale
securities, net of tax..... (12)
Net income................... 11,861
---------
BALANCE AT DECEMBER 31,
1997....................... 340,482
Issuance of Common Stock
under stock option plans
plus tax benefit
(unaudited)................ 212
Adjustment to unrealized gain
on sale of
available-for-sale
securities, net of tax
(unaudited)................ (93)
Purchase of outstanding
shares (unaudited)......... (399,475)
TPG investment, new stock
issued (unaudited)......... 117,500
Preferred dividends accrued
(unaudited)................ (281)
One time merger charges
(unaudited)................ (15,202)
Net loss (unaudited)......... (19,939)
---------
BALANCE AT APRIL 5, 1998
(UNAUDITED)................ $ 23,204
=========
</TABLE>
See Accompanying Notes.
F-6
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business: Zilog designs, develops, manufactures and markets
application specific standard products (ASSPs) for the data communications,
consumer product controller and intelligent peripheral controller markets.
Principles of consolidation: The consolidated financial statements include
the accounts of Zilog, Inc. and its subsidiaries. All significant transactions
and accounts between the Company and these subsidiaries have been eliminated in
consolidation.
Interim Financial Information: The interim financial information for the
three month periods ended March 30, 1997 and April 5, 1998 is unaudited;
however, in the opinion of the Company's management, all adjustments (including
normal recurring adjustments), necessary for a fair statement of interim results
have been included. The results for the three months ended April 5, 1998 are not
necessarily indicative of results to be expected for the entire year.
Revenue recognition: Certain of the Company's sales are made through
distributors under agreements allowing limited right of return and price
protection on merchandise unsold by the distributors. Revenue is recognized at
the time of shipment with appropriate reserves provided for returns and price
allowances. Royalty income is recognized on a quarterly basis when the income is
earned and received from the licensees.
Foreign currency translation: All of the Company's subsidiaries use the
U.S. dollar as the functional currency. Accordingly, monetary accounts and
transactions are remeasured at current exchange rates, and nonmonetary accounts
are remeasured at historical rates. Revenues and expenses are remeasured at the
average exchange rates for each period, except for depreciation expense which is
remeasured at historical rates. Foreign currency exchange gains and (losses)
were included in determining results of operations and aggregated $(508,000),
$(540,000), and $940,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
Fair values of financial instruments: The Company's short-term investments
consist primarily of various State and Municipal bonds. Cash and cash
equivalents consist primarily of cash in bank accounts and overnight investments
in commercial paper. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount (at cost), in the balance
sheet for cash and cash equivalents at December 31, 1996 and 1997 were
$15,511,000 and $92,184,000 respectively, which approximates fair value, due to
their short maturities.
Short-term investments: The fair values for marketable debt securities are
based on quoted market prices. Investments consist primarily of marketable debt
securities which are classified as available-for-sale and are carried at fair
value. Unrealized gains and losses, net of tax, are reported in shareholders'
equity. The cost basis of investments is adjusted for amortization of premiums
and accretion of discounts to maturity, which is included in interest income.
Realized gains and losses are included in other income. The cost of securities
sold is based on the specific identification method.
F-7
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
The following is a summary of available-for-sale securities as of December
31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
MUNICIPAL MUNICIPAL
BONDS BONDS
--------- ---------
<S> <C> <C>
Cost.................................................... $53,250 $14,011
Gross Unrealized Gains.................................. 173 116
Gross Unrealized (Losses)............................... (11) --
------- -------
Estimated Fair Value.................................... $53,412 $14,127
======= =======
</TABLE>
The gross realized gains and losses on sales for the year ended December
31, 1995, 1996 and 1997 were not significant.
The maturities for the marketable debt securities at December 31, 1996 and
1997 are shown below (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
ESTIMATED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Due in 1 year or less.............. $30,831 $30,921 $14,011 $14,127
Due after 1 year through 3 years... 22,419 22,491 -- --
------- ------- ------- -------
$53,250 $53,412 $14,011 $14,127
======= ======= ======= =======
</TABLE>
Inventories: Inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market and consist
of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, APRIL 5,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials.............................. $ 5,385 $ 4,171 $ 4,081
Work-in-process............................ 23,412 23,543 23,199
Finished goods............................. 5,672 5,254 5,231
------- ------- -------
$34,469 $32,968 $32,511
======= ======= =======
</TABLE>
Property, plant and equipment: Depreciation is computed using the
straight-line method over the estimated economic lives of the assets which are
generally five years for machinery and equipment and thirty years for buildings.
Amortization of leasehold improvements is computed using the shorter of the
remaining terms of the leases or the estimated economic lives of the
improvements.
Use of estimates: 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 assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk: Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments and trade accounts receivable. By policy,
the Company places its investments only with high credit quality financial
institutions. Almost all of the Company's trade accounts receivable are derived
from sales to electronics distributors and to manufacturers of consumer
products, intelligent computer peripherals and products which network computers
and peripherals. The Company performs ongoing credit evaluations of its
customers' financial condition and
F-8
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
limits its exposure to accounting losses by limiting the amount of credit
extended whenever deemed necessary and generally does not require collateral.
Stock Awards: The Company accounts for employee stock awards in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees. As stock
option grants are issued with an exercise price equal to the fair value of the
stock, the Company recognizes no compensation expense for stock option grants.
Additionally, as the Stock Purchase Plan qualifies as an "Employee Stock
Purchase Plan" under Section 423 of the Code, no compensation expense is
recorded. Pro forma information required by FASB Statement No. 123, Accounting
for Stock Based Compensation is presented in Note 5, below.
New Accounting Pronouncements: In June 1997, the Financial Accounting
Standards Board issued Statement No. 130, Reporting Comprehensive Income (FAS
No. 130) and Statement No. 131. Disclosures About Segments of An Enterprise and
Related Information (FAS No. 131). FAS No. 130 establishes rules for reporting
and displaying comprehensive income. FAS No. 131 will require the Company to use
the "management approach" in disclosing segment information. Both statements are
effective for the Company during 1998. FAS No. 130 was adopted on January 1,
1998.
NOTE 2. THE MERGER
Pursuant to the Agreement and Plan of Merger by and among TPG Partners II,
L.P. (TPG II), TPG Zeus Acquisition Corporation ("Merger Sub") and Zilog dated
as of July 20, 1997, as amended (the "Merger Agreement"), Merger Sub merged with
and into Zilog on February 27, 1998, and Zilog continues as the surviving
corporation (the "Merger"). By virtue of the Merger, 374,842 shares of Zilog
common stock held by certain of Zilog's stockholders prior to the Merger remain
outstanding. All other shares of outstanding common stock were canceled and
converted into the right to receive cash consideration. By virtue of the Merger,
the common stock of Merger Sub was converted into new shares of common stock,
non-voting common stock and preferred stock of Zilog. Also in connection with
the Merger, stock options to purchase shares of common stock issued under
Zilog's stock plans outstanding immediately prior to the consummation of the
Merger were canceled and, in certain instances, were converted into the right to
receive an amount in cash, as set forth in the Merger Agreement. The transaction
was accounted for as a recapitalization which resulted in TPG II owning 90% of
the voting shares and pre-Merger shareholders owning 10% of the voting shares.
Because TPG II acquired less than substantially all of the Common Stock the
basis of the Company's assets and liabilities were not impacted by the
transaction.
In connection with the Merger, Zilog amended its articles of incorporation
with respect to the Company's authorized share capital. Authorized shares are as
follows: (i) 5,000,000 shares of $100 par value preferred stock, (ii) 15,000,000
of $0.01 par value Class A Non-Voting common stock and (iii) 35,000,000 shares
of $0.01 par value common stock. Immediately after consummation of the Merger,
the Board of Directors declared a 4-for-1 stock split in the form of a dividend
for each share of Common Stock and Class A Non-voting Common Stock and
designated 1,500,000 shares of Series A Cumulative Preferred Stock.
The Company estimates that approximately $433.6 million will be used to
complete the Merger and consists of the following: (i) $399.5 million for the
purchase of the pre-Merger outstanding common stock; (ii) $4.1 million for the
cancellation of existing stock options; and (iii) an estimated $30.0 million in
fees and expenses of which $28.1 million has been paid as of April 5, 1998.
The cash funding requirements for the Merger were satisfied through the
following: (i) an equity investment by TPG II and certain other investors of
$117.5 million; (ii) use of approximately $36.1 million of Zilog's cash and cash
equivalents; and (iii) $280 million of gross proceeds from the sale of senior
secured notes through a private placement. As a result of the Merger (on a
post-split basis), the Company has
F-9
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
1,500,000 shares of Series A Cumulative Preferred Stock, 15,000,000 shares of
common stock and 5,000,000 shares of Class A Non-Voting common stock issued and
outstanding.
Upon consummation of the Merger, Zilog obtained a revolving credit
facility, under which $25 million may be borrowed, secured by certain
inventories and accounts receivable. The revolving credit facility and the
indenture governing the senior secured notes contain covenants that, among other
things, limit the ability of the Company and its Subsidiaries to incur
additional indebtedness, issue disqualified stock, pay dividends or
distributions, make investments or certain other restricted payments, enter into
certain transactions with affiliates, dispose of certain assets, incur liens and
engage in mergers and consolidations. In addition, under the revolving credit
facility, Zilog is required to maintain specified financial ratios and tests,
including minimum interest coverage ratios, minimum fixed charge coverage ratios
and leverage ratios below a specified maximum.
The revolving credit facility contains customary events of default,
including nonpayment of principal, interest or fees, violation of covenants,
cross default and cross-acceleration to certain other indebtedness, certain
events of bankruptcy and insolvency, material judgments against Zilog,
invalidity or any guaranty or security interest and a change of control of Zilog
in certain circumstances as set forth therein. Notwithstanding the foregoing,
for the first year following the closing date of the Merger, Zilog's failure to
be in compliance with the covenants contained in the revolving credit facility
shall not, with certain specified exceptions, constitute an event of default so
long as no loans or letters of credit are outstanding thereunder.
The Company has issued $280.0 million 9 1/2% Senior Secured Notes, which
mature on February 27, 2005. Interest is payable to note holders on each quarter
end from the date of issuance. Expenses associated with the offering of
approximately $10.9 million are deferred. Such expenses are being amortized to
interest expense over the term of the notes.
Interest on the revolving credit facility will be calculated as the sum of
the Adjusted Eurodollar Rate plus the Applicable Margin in effect during the
time of the applicable Interest Period selected by the Company. There have been
no borrowings on the revolving credit facility as of April 5, 1998.
Recapitalization expenses consist of charges directly related to the change
in control of the Company as a result of the Merger. The basic components are as
follows (in thousands of dollars):
<TABLE>
<S> <C>
Stock option buy out........................................ $ 4,195
Bridge loan fees............................................ 3,360
Employee retention bonus.................................... 3,333
Executives severance and bonus.............................. 2,361
Other....................................................... 55
-------
Recapitalization expenses......................... $13,304
=======
</TABLE>
NOTE 3. STATE OF INCORPORATION
The Company changed the state of incorporation from California to Delaware
in May 1997. As a result of that change, no par Common Stock became $.01 par
Common Stock under the State of Delaware Corporation laws. All share information
was retroactively adjusted to reflect the $.01 par value.
NOTE 4. EMPLOYEE BENEFIT PLANS
Employee Performance Incentive Plan: Under the amended 1987 Employee
Performance Incentive Plan (the Incentive Plan), domestic exempt employees not
included in any other Company incentive program are eligible to participate in
incentive awards. The Incentive Plan provided for awards of up to 7.5% of pretax
F-10
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
profit (as defined) for the periods 1995, 1996 and 1997 dependent upon the
attainment of certain operating results. Results of operations were charged
approximately $3,893,000, $2,141,000, and $2,421,000 in the years ended December
31, 1997, 1996 and 1995, respectively, under this plan. The Incentive Plan may
be continued, discontinued or amended by the Company's Board of Directors.
Savings Plan: The Company has an employee savings plan that qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating U.S. employees may defer a portion of their pretax
earnings, up to the Internal Revenue Service annual contribution limit ($9,500
for calendar year 1997). The Company may make matching contributions on behalf
of each participating employee in an amount equal to 100% of the participant's
deferral contribution, up to 1 1/2% of the participant's compensation on a
quarterly basis. The Company may also make additional discretionary
contributions to the 401(k) Plan up to a limit set by federal tax law. Matching
contributions to the savings plan were approximately $549,000, $589,000, and
$583,000 in 1995, 1996 and 1997, respectively. The discretionary contributions
for 1995, 1996 and 1997 were approximately $1,308,000, $2,354,000, and
$1,820,000, respectively.
NOTE 5. SHAREHOLDERS' EQUITY
Common Stock: Holders of Common Stock will be entitled to one vote per
share on all matters submitted to a vote of stockholders. Approval of matters
brought before the stockholders will require the affirmative vote of a majority
of the holders of the outstanding shares of Common Stock, except as otherwise
required by the General Corporation Law of the State of Delaware (the "DGCL").
Holders of Class A Non-Voting Common Stock will not have any voting rights,
except the right to vote as a class to the extent required by DGCL.
Except for differences in voting rights described above, the rights,
powers, preferences and limitations of the Common Stock and Class A Non-Voting
Common Stock are identical. Subject to the rights of holders of Series A
Cumulative Preferred Stock and other classes and/or series of preferred stock,
if any, all shares of Common Stock and Class A Non-Voting Common Stock are
entitled to share in such dividends as the Board of Directors may from time to
time declare from sources legally available therefor. Subject to the rights of
creditors and holders of Series A Cumulative Preferred Stock and other classes
and/or series of preferred stock, if any, holders of Common Stock and Class A
Non-Voting Common Stock are entitled to share ratably in a distribution of
assets of the Surviving Corporation upon any liquidation, dissolution or winding
up of the Surviving Corporation.
Preferred Stock: The Board of Directors has the authority to issue, from
time to time, by resolution and without any action by stockholders, up to
5,000,000 shares of preferred stock, par value $100.00 per share, in one or more
classes and/or series and may establish the powers, designations, preferences,
rights and qualifications, limitations or restrictions (which may differ with
respect to each such class and/or series) of such class and/or series. Upon
consummation of the Recapitalization, the Board of Directors adopted a
resolution providing for the creation of Series A Cumulative Preferred Stock
into which the shares of capital stock of Merger Sub were converted in the
Merger. The Series A Cumulative Preferred Stock is a non-voting 13.5% preferred
stock with a stated value of $100.00 per share.
The Series A Cumulative Preferred Stock will accumulate dividends at the
rate of 13.5% per annum (payable quarterly) for periods ending on or prior to
the anniversary of the Effective Time in 2008, and 15.5% per annum thereafter.
Dividends will be payable, at the election of the Board of Directors but subject
to availability of funds and the terms of the Senior Secured Notes and Revolving
Credit Facility, in cash or in kind through a corresponding increase in the
liquidation preference (as described below) of the Series A Cumulative Preferred
Stock. The Series A Cumulative Preferred Stock has an initial liquidation
preference of $100.00 per share.
F-11
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
To the extent that a quarterly dividend payment in respect of a share of
Series A Cumulative Preferred Stock is not made in cash when due, the amount of
such unpaid dividend will accumulate (whether or not declared by the Board of
Directors) through an increase in the liquidation preference of such share of
Series A Cumulative Preferred Stock equal to the amount of such unpaid dividend,
and compounding dividends will accumulate on all such accumulated and unpaid
dividends. The liquidation preference will be reduced to the extent that
previously accumulated dividends are thereafter paid in cash. The Issuer is
required on the anniversary of the Effective Time in 2008 to pay in cash all
accumulated dividends that have been applied to increase the liquidation
preference (the "Clean-Down").
Shares of Series A Cumulative Preferred Stock may be redeemed at the option
of the Issuer, in whole or in part, at the redemption prices ranging from 105%,
if redeemed prior to the six-month anniversary of the Effective Time in 1998, to
100%, if redeemed after the six-month anniversary of the Effective Time in 2003,
in each case of the sum of (i) the liquidation preference thereof, increased to
the extent that accumulated dividends thereon shall not have been paid in cash,
plus (ii) accrued and unpaid dividends thereon to the date of redemption.
Optional redemption of the Series A Cumulative Preferred Stock will be subject
to, and expressly conditioned upon, certain limitations under the Senior Secured
Notes and Revolving Credit Facility.
In certain circumstances, including the occurrence of a change of control
of the Issuer, but again subject to certain limitations under the Senior Secured
Notes and Revolving Credit Facility, the Issuer may be required to repurchase
shares of Series A Cumulative Preferred Stock at 101% of the sum of the
liquidation preference thereof, increased to the extent that accumulated
dividends thereon shall not have been paid in cash, plus accumulated and unpaid
dividends to the repurchase date.
Holders of Series A Cumulative Preferred Stock will not have any voting
rights with respect thereto, except for (i) such rights as are provided under
the DGCL, (ii) the right to elect, as a class, one director of the Issuer in the
event that the Issuer fails to comply with its Clean-Down or repurchase
obligations and (iii) class voting rights with respect to transactions adversely
affecting the rights, preferences or powers of the Series A Cumulative Preferred
Stock and certain transactions involving stock that ranks junior in payment of
dividends, or upon liquidation, to the Series A Cumulative Preferred Stock.
Stock Purchase Plan: During 1990, the Company adopted an employee stock
purchase plan (the "Stock Purchase Plan") allowing eligible employees to
purchase shares of the Company's Common Stock. The total number of shares of
Common Stock authorized for issuance under the plan is 600,000. All full-time
employees of the Company are eligible to participate, subject to certain limited
exceptions. The Stock Purchase Plan provides a means for the Company's employees
to purchase stock through payroll deductions of up to 10% of their gross
compensation. The purchase price for shares offered under the Stock Purchase
Plan is equal to 85% of the lower of the closing price of the Common Stock on
the first day of the six month offer period, or the last day of the six month
offer period. Shares purchased under the Plan were 47,875, 65,087 and 92,898 in
1995, 1996 and 1997, respectively. Subscriptions of the Stock Purchase Plan were
suspended after the expiration in October, 1997 of the six month offer period.
Upon completion of the Merger, the Plan was terminated.
Stock Option Plans: The Zilog New Employee and Employee Promotion Common
Share Option Plan (the "1989 Option Plan") and The Zilog Employee Common Share
Option Plan (the "1990 Option Plan") expired during 1995, and no further stock
options may be granted under these plans. In April 1994, the 1994 Long-Term
Stock Incentive Plan (the "1994 Option Plan") was adopted, effective January 1,
1994.
Under the 1994 Option Plan, the Company may grant to eligible employees:
restricted shares, stock units, incentive stock options, nonqualified stock
options or stock appreciation rights, to purchase up to a total of 3,542,208
shares as of December 31, 1997. The exercise price for incentive stock options,
nonqualified stock options and stock appreciation rights will be determined by
the Board of Directors. Under the terms of the
F-12
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
plan, restricted shares and stock units may be awarded to eligible employees at
no cost. No options have been granted since July 1997. Upon completion of the
Merger, the 1994 Option Plan was terminated.
Options under the plans generally vested 25% at the end of one year from
the date of grant and 25% on each anniversary of the grant date thereafter.
Eligible employees under the option plans are new employees and employees at
certain position classification levels within the Company. Effective January 1,
1995 and on each January 1 thereafter for the remaining term of the Plan, an
additional 1,000,000 Common Shares shall be reserved for award as Restricted
Shares, Stock Units, Options and SARs. Any Common Shares that have been reserved
but not awarded as Restricted Shares, Stock Units, Options and SARs during any
calendar year shall not remain available for award in any subsequent calendar
year. All options granted had 10 year terms.
Shares granted and canceled for 1996, include a Stock Option Replacement
offered by the Company to existing grant holders of unexercised shares of the
1994 plan which were granted prior to October 18, 1996. Under the terms of the
Stock Option Replacement offer, 2,494,352 shares were canceled and re-granted at
the market value of the common stock, at the election of the grant holder. These
new grants are not otherwise exercisable for one year from the date of the stock
option replacement on November 6, 1996, but with the same vesting schedule and
expiration date of the original grants.
The following table summarizes activity under the 1989, 1990 and 1994
Option Plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES --------------------------
AVAILABLE PRICE PER
FOR GRANT SHARES SHARE
---------- --------- -------------
<S> <C> <C> <C>
Balance at December 31, 1994......... 433,182 4,662,860 $ 0.13-$35.25
Shares reserved...................... 1,000,000 -- --
Granted.............................. (1,644,600) 1,644,600 $29.75-$47.75
Exercised............................ -- (907,787) $ 0.13-$35.25
Canceled............................. 248,913 (549,149) $ 2.67-$47.75
---------
Balance at December 31, 1995......... 37,495 4,850,524 $ 0.13-$47.75
========== =========
</TABLE>
A summary of the Company's stock option activity, and related information
for the year ended December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
SHARES OPTIONS
AVAILABLE SHARES WEIGHTED-AVERAGE
FOR GRANT OUTSTANDING EXERCISE PRICE
---------- ----------- ----------------
<S> <C> <C> <C>
Balance at January 1, 1996......... 37,495 4,850,524 $27.12
Shares reserved.................... 1,000,000 -- --
Granted............................ (3,598,502) 3,598,502 $25.56
Exercised.......................... -- (607,262) $19.12
Canceled........................... 2,561,007 (3,171,491) $33.16
---------- ---------- ------
Balance at December 31, 1996....... -- 4,670,273 $20.67
Shares reserved.................... 1,000,000 -- --
Granted............................ (916,800) 916,800 $22.84
Exercised.......................... -- (112,868) $12.89
Canceled........................... (83,200) (330,872) $21.79
---------- ---------- ------
Balance at December 31, 1997....... -- 5,143,333 $21.11
========== ========== ======
</TABLE>
F-13
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE ----------------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
At December, 1997:
$ 0.13 -- $10.00............... 180,543 2.93 years $ 5.68 180,543 $ 5.68
$10.66 -- $20.00............... 2,531,803 7.80 years $19.36 1,359,443 $18.83
$20.16 -- $30.00............... 2,163,289 7.26 years $22.91 1,092,026 $22.44
$30.12 -- $47.75............... 267,698 7.42 years $33.53 168,609 $32.55
--------- ------ --------- ------
$ 0.13 -- $47.75............... 5,143,333 7.38 years $21.11 2,800,621 $20.22
========= ====== ========= ======
</TABLE>
The weighted average fair value of options granted in 1997, 1996 and 1995
were $8.52, $9.23 and $12.26 per share, respectively.
Pro Forma Stock Based Compensation: Pro forma information regarding net
income and earnings per share is required by FASB Statement 123, which also
requires that the information be determined as if the Company has accounted for
its employee options granted subsequent to December 31,1994 under the fair value
method of that statement. The fair value for these options was estimated at the
date of grant utilizing a Black-Scholes option pricing model with a multiple
option approach. The following weighted-average assumptions for 1995, 1996, and
1997, respectively, were used: risk-free interest rates (annual average) of
6.4%, 5.5%, and 6.1%; dividend yields of zero; volatility factors of the
expected market price of the Company's common stock of .40, .67, and .47; and a
weighted-average expected life of the option of 4.5 years.
To comply with the pro forma reporting requirements of FAS No. 123 for
stock awards granted under the employee stock purchase plan, compensation cost
is estimated for the fair value of the employees' purchase rights using the
Black-Scholes model with the following assumptions for those rights granted in
1995, 1996, and 1997; dividend yield of 0.0%; an expected life ranging up to .5
years; expected volatility factor of .42, .61, and .48; and a risk free interest
rate of 6.1%, 5.4%, and 6.0%. The weighted average fair value of those purchase
rights granted in March 1995, September 1995, March 1996, September 1996 and
March 1997 were $3.75, $3.59, $3.54, $5.62 and $5.93, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable,
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosure, the expense amortization of the
options' fair value is allocated over the options' vesting period (4 years). The
Company's pro forma information follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------- ------- ------
<S> <C> <C> <C>
Pro forma net income........................... $36,957 $10,413 $2,012
</TABLE>
For pro forma disclosure in accordance with FAS No. 123, the 1996 Stock
Option Replacement offer options were treated as a modification of an award. Any
additional compensation arising from the modification is recognized over the
remaining vesting period of the new grant. FAS No. 123 is effective for options
granted by the Company commencing January 1, 1995. All options granted before
January 1, 1995 have not been
F-14
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
valued and no pro forma compensation expense has been recognized. However any
option granted before January 1, 1995 that was repriced in 1996 is treated as a
new grant within 1996 and valued accordingly. In addition, as compensation
expense is recognized over the vesting period of the option, which is typically
four years, and pro forma disclosure is only required commencing with 1995, the
initial impact on pro forma income may not be representative of pro forma
compensation expense in future years. However, upon completion of the Merger,
all options were canceled and all existing option plans terminated.
NOTE 6. INCOME TAXES
The provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------- ------- ------
<S> <C> <C> <C>
Federal:
Current...................................... $15,998 $10,076 $3,036
Deferred..................................... 4,074 3,360 (1,949)
------- ------- ------
20,072 13,436 1,087
State:
Current...................................... 1,478 966 565
Deferred..................................... 684 636 55
------- ------- ------
2,162 1,602 620
Foreign:
Current...................................... 1,148 1,302 1,593
Deferred..................................... 36 (185) (335)
------- ------- ------
1,184 1,117 1,258
------- ------- ------
Provision for income taxes................... $23,418 $16,155 $2,965
======= ======= ======
</TABLE>
The tax benefits associated with the exercise of stock options reduce taxes
currently payable as shown above by $6,525,000, $3,455,000, and $397,000 in
1995, 1996 and 1997 respectively. Such benefits are credited to additional
paid-in-capital when realized.
Pretax income from foreign operations was $3,901,000, $4,678,000, and
$5,309,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
Unremitted foreign earnings to be indefinitely reinvested outside the United
States and on which no deferred taxes have been provided, amounted to
approximately $17,500,000 at December 31, 1997. If such amounts were remitted,
the residual U.S. tax liability (net of foreign tax credits), would be
approximately $3,000,000.
F-15
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before taxes. The sources and
tax effects of the differences are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------- ------- ------
<S> <C> <C> <C>
Computed expected provision.................... $23,059 $16,155 $5,189
State tax, net of federal benefit.............. 1,405 1,042 403
Tax exempt interest income..................... (710) (745) (721)
Foreign rates less than the federal rate....... (206) (791) (838)
Research and development credits............... (682) (572) (921)
Other.......................................... 552 1,066 (147)
------- ------- ------
$23,418 $16,155 $2,965
======= ======= ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation........................... $(16,046) $(18,599)
Valuation of investment portfolio.................... (57) (59)
-------- --------
(16,103) (18,658)
Deferred tax assets:
Inventory valuation adjustment and reserves.......... 4,106 4,105
Accruals not currently deductible.................... 2,297 1,975
Alternative minimum tax credits...................... -- 3,186
Prepaid expenses and other........................... 537 2,183
-------- --------
6,940 11,449
-------- --------
Net deferred tax liabilities......................... $ (9,163) $ (7,209)
======== ========
</TABLE>
At December 31, 1997 the Company had alternative minimum tax credit
carryforwards of approximately $3,186,000 which may be carried forward
indefinitely.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under noncancelable operating
leases which expire in 1998 through 2004. The Company is currently negotiating a
new office lease which will start May 1, 1998 for Campbell headquarters and
expects to have the lease signed by the end of February, 1998. The facilities
lease agreements generally provide for base rental rates which increase at
various times during the terms of the leases and also provide for renewal
options at fair market rental value.
F-16
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
Minimum future payments under these noncancelable operating leases at
December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,390
1999........................................................ 534
2000........................................................ 418
2001........................................................ 340
2002........................................................ 280
Thereafter.................................................. 296
------
$3,258
======
</TABLE>
Total rental expense, including month-to-month rentals, was $2,732,000,
$2,778,000, and $2,875,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
The Company has been named as a defendant in a purported class action
lawsuit which was filed on January 23, 1998 in the United States District Court
for the Northern District of California. Certain executive officers of the
Company are also named as defendants. The plaintiff purports to represent a
class of all persons who purchased the Company's Common Stock between June 30,
1997 and November 20, 1997 (the "Class Period"). The complaint alleges that the
Company and certain of its executive officers made false and misleading
statements regarding the Company that caused the market price of its Common
Stock to be "artificially inflated" during the Class Period. The complaint does
not specify the amount of damages sought. The Company believes the lawsuit lacks
merit and intends to defend it vigorously. There can be no assurance that the
Company will prevail in its defense of the lawsuit or that any judgment against
the Company will not be material.
The Company is participating in other litigation and responding to claims
arising in the ordinary course of business. The Company intends to defend itself
vigorously. The Company believes that it is unlikely that the outcome of these
matters will have a material adverse effect on the Company, although there can
be no assurance in this regard.
NOTE 8. GEOGRAPHIC INFORMATION
The Company operates in one industry segment and is primarily engaged in
the design, development, manufacturing and marketing of application specific
standard semiconductor products. The Company sells its products to system
manufacturers in a broad range of industries. During the period ending December
31, 1996 one customer, Lucent Technologies, represented 12.8% of sales or
approximately $38,000,000. No single customer accounted for more than 8.5% of
sales during the years ended December 31, 1997 and 1995.
Export sales to unaffiliated customers located outside the United States,
expressed as a percentage of consolidated sales, consist of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Far East................................................ 40% 42% 42%
Europe.................................................. 10 9 10
Other................................................... 7 5 7
-- -- --
57% 56% 59%
== == ==
</TABLE>
The Company's operating results are subject to the risks inherent in
international sales and purchases, including, but not limited to various
regulatory requirements, political and economic changes and disruptions,
transportation delays, foreign currency fluctuations, export/import controls,
tariff regulations, higher freight rates, difficulties in staffing and managing
foreign sales operations, greater difficulty in accounts receivable
F-17
<PAGE> 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF APRIL 5, 1998 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 30, 1997 AND APRIL 5, 1998 IS UNAUDITED)
collection, and potentially adverse tax consequences. Duty, tariff and freight
costs can materially increase the cost of crucial components for the Company's
products. Foreign exchange fluctuations may render the Company's products less
competitive relative to locally manufactured product offerings, or could result
in foreign exchange losses. The Company remains subject to the transaction
exposures that arise from foreign exchange movements between the dates foreign
currency export sales or purchase transactions are recorded and the dates cash
is received or payments are made in foreign currencies. There can be no
assurance that the Company's current or any future currency exchange strategy
will be successful in avoiding exchange related losses or that any of the
factors listed above will not have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's operations outside the United States consist of two assembly
plants in the Philippines and sales offices in certain foreign countries.
Domestic operations are responsible for the design, development and wafer
fabrication of all products, as well as the coordination of production planning
and shipping to meet world-wide customer commitments. The Philippine assembly
plants are reimbursed in relation to value added during assembly, and the
foreign sales offices receive a commission on export sales within their
territory. Accordingly, for financial statement purposes, it is not meaningful
to segregate revenues or operating profits for the assembly and foreign sales
operations. Identifiable assets by geographic area are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
United States (including corporate assets)............. $329,304 $353,224
Philippines............................................ 70,388 60,061
Other.................................................. 1,374 2,354
-------- --------
Total assets................................. $401,066 $415,639
======== ========
</TABLE>
F-18
<PAGE> 115
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER OR THE EXCHANGE AGENT. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER
SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................... 2
Disclosure Regarding Forward-Looking
Statements.............................. 3
Incorporation of Certain Documents by
Reference............................... 3
Prospectus Summary........................ 4
Risk Factors.............................. 16
The Exchange Offer........................ 25
The Recapitalization...................... 32
New Chief Executive Officer............... 33
Texas Pacific Group....................... 33
Use of Proceeds........................... 33
Capitalization............................ 34
Unaudited Pro Forma Consolidated Financial
Information............................. 35
Selected Consolidated Financial Data...... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 38
Business.................................. 43
Management................................ 52
Description of Capital Stock.............. 58
Description of Revolving Credit
Facility................................ 59
Description of the New Notes.............. 60
Certain United States Federal Tax
Considerations.......................... 91
Plan of Distribution...................... 94
Legal Matters............................. 94
Experts................................... 94
Consolidated Financial Statements......... F-1
</TABLE>
======================================================
======================================================
ZILOG, INC.
OFFER TO EXCHANGE
Series B 9 1/2% Senior Secured Notes due 2005,
which have been registered under the Securities
Act of 1933, as amended,
for
any and all outstanding
Series A 9 1/2% Senior Secured Notes due 2005
PROSPECTUS
, 1998
======================================================
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL permits Zilog's board of directors to indemnify any
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his or her being or having
been a director, officer, employee or agent of Zilog, in terms sufficiently
broad to permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities Act
of 1933, as amended (the "Act"). The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
Article IX of Zilog's Certificate of Incorporation provides for
indemnification of its directors, officers, employees and other agents to the
fullest extent permitted by law.
As permitted by sections 102 and 145 of the DGCL, Zilog's Certificate of
Incorporation eliminates a director's personal liability for monetary damages to
Zilog and its stockholders arising from a breach or alleged breach of a
director's fiduciary duty except for liability under section 174 of the DGCL or
liability for any breach of the director's duty of loyalty to Zilog or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or for any transaction from
which the director derived an improper personal benefit.
In addition, Zilog maintains officers' and directors' insurance covering
certain labilities that may be incurred by officers and directors in the
performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. A list of exhibits included as part of this Registration
Statement is set forth in the Exhibit Index which immediately precedes such
exhibits and is hereby incorporated by reference herein.
(b) Financial Statement Schedules. Other than Schedule II, schedules have
been omitted since the required information is not present, or not present in
amounts sufficient to require submission of the schedule, or because the
information is included in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plans annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant 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
II-1
<PAGE> 117
of whether or not such indemnification is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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.
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-2
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf,
"hereunto duly authorized, in the City of Campbell, State of California, on
April 28, 1998.
ZILOG, INC.
By: /s/ CURTIS J. CRAWFORD
------------------------------------
Curtis J. Crawford
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Curtis J. Crawford and Robert E. Collins, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (unless
revoked in writing) to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement to which this power of
attorney is attached, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as full to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated, on April 28, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ CURTIS J. CRAWFORD President and Chief Executive Officer;
- ----------------------------------------------------- Director
Curtis J. Crawford
/s/ ROBERT E. COLLINS Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Accounting Officer)
Robert E. Collins
/s/ WILLIAM S. PRICE III Director
- -----------------------------------------------------
William S. Price III
/s/ DAVID M. STANTON Director
- -----------------------------------------------------
David M. Stanton
/s/ CARRIE A. WHEELER Director
- -----------------------------------------------------
Carrie A. Wheeler
</TABLE>
II-3
<PAGE> 119
SCHEDULE II
ZILOG, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO COSTS BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES DEDUCTIONS(1) END OF PERIOD
- --------------------------------------------- ---------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts............ $250 $314 $(314) $250
==== ==== ===== ====
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts............ $250 $107 $(107) $250
==== ==== ===== ====
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts............ $250 $189 $(189) $250
==== ==== ===== ====
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries.
II-4
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of July 20, 1997,
between TPG Partners II, L.P. and Zilog, Inc. (the
"Recapitalization Agreement").
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
Schedule to the Recapitalization Agreement.
2.2 Amendment Number One to the Recapitalization Agreement,
dated as of November 18, 1997, by and between TPG Partners
II, L.P., TPG Zeus Acquisition Corporation and Zilog, Inc.
2.3 Amendment Number Two to the Recapitalization Agreement,
dated as of December 10, 1997, by and between TPG Partners
II, L.P., TPG Zeus Acquisition Corporation and Zilog, Inc.
2.4 Amendment Number Three to the Recapitalization Agreement,
dated as of January 26, 1997, by and among TPG Partners II,
L.P., TPG Zeus Acquisition Corporation and Zilog, Inc.
3.1 Certificate of Incorporation of Zilog, Inc.
3.2 Certificate of Merger of TPG Zeus Acquisition Corporation
into Zilog, Inc. filed with the Delaware Secretary of State
on February 27, 1998.
3.3 Bylaws of Zilog, Inc.
3.4 Certificate of Designations of Series A Cumulative Preferred
Stock of Zilog, Inc.
4.1 Stockholders' Voting Agreement, dated as of July 20, 1997,
by and among TPG Partners II, L.P., on the one hand, and
Warburg, Pincus Capital Company, L.P. and Warburg, Pincus &
Co., on the other hand.
4.2 Stockholders' Agreement, dated as of February 27, 1998, by
and among Zilog, Inc., TPG Partners II, L.P., TPG Investors
II, L.P., TPG Parallel II, L.P. and certain other
stockholders of Zilog, Inc.
4.3 Letter Agreement, dated as of November 18, 1997, by and
among TPG Partners II, L.P., Warburg, Pincus Capital
Company, L.P., Warburg, Pincus & Co. and Zilog, Inc.
4.4 Form of 9 1/2% Senior Secured Notes due 2005 of Zilog, Inc.
4.5 Indenture, dated as of February 27, 1998, by and among
Zilog, Inc., Zilog Europe, Zilog TOA Company and State
Street Bank and Trust Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Indenture.
4.6 Purchase Agreement, dated as of February 23, 1998, by and
among Zilog, Inc., Zilog Europe, Zilog TOA Company, Goldman,
Sachs & Co., BancBoston Securities Inc. and Citicorp
Securities, Inc.
4.7 Registration Rights Agreement, dated as of February 27,
1998, by and among Zilog, Inc., Zilog Europe, Zilog TOA
Company, Goldman, Sachs & Co., BancBoston Securities Inc.
and Citicorp Securities, Inc.
4.8 Company Security Agreement, dated as of February 27, 1998,
by and between Zilog, Inc. and State Street Bank and Trust
Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Company Security Agreement.
4.9 Subsidiary Security Agreement, dated as of February 27, 1998
by and among each of the direct and indirect Zilog, Inc.
Subsidiary signatories thereto and State Street Bank and
Trust Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Subsidiary Security Agreement.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
4.10 Company Pledge Agreement, dated as of February 27, 1998 by
and between Zilog, Inc. and State Street Bank and Trust
Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Company Pledge Agreement.
4.11 Subsidiary Pledge Agreement, dated as of February 27, 1998
by each of the direct and indirect Zilog, Inc. Subsidiary
signatories thereto and State Street Bank and Trust Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Subsidiary Pledge Agreement.
4.12 Company and Subsidiary Patent and Trademark Security
Agreement, dated as of February 27, 1998 by and among Zilog,
Inc., each of the direct and indirect domestic Zilog, Inc.
Subsidiary signatories thereto and State Street Bank and
Trust Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Company and Subsidiary Patent and Trademark
Security Agreement.
4.13 Copyright Security Agreement, dated as of February 27, 1998
by Zilog, Inc., each of the direct and indirect Zilog, Inc.
Subsidiary signatories thereto and State Street Bank and
Trust Company.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Copyright Security Agreement.
4.14 Stockholders' Agreement, dated as of March 26, 1998, by and
among Zilog, Inc., TPG Partners II, L.P., TPG Investors II,
L.P., TPG Parallel II, L.P. and certain other stockholders
of Zilog.
5.1 Opinion of Pillsbury Madison & Sutro LLP regarding legality
of the New Notes.
10.1 Contract of Lease, dated March 22, 1979, by and between
Zilog Philippines, Inc. and Fruehauf Electronics Phils.
Corporation.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Contract of Lease.
10.2 Industrial Lease Agreement, dated as of March 3, 1981, by
and between M.J.H.M. Partnership II and ADDA Corporation,
and addenda 1-5 thereto, as assigned to Zilog, Inc. on
August 25, 1981 and addendum 1 thereto.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Industrial Lease Agreement.
10.3 Form of 1997 Employee Performance Incentive Plan.
10.4 1997 Zilog Employee Performance Incentive Plan
Administrative Guide.
10.5 1997 Zilog Employee Performance Incentive Plan Executive
Bonus Administrative Guide.
10.6 Employment Agreement, dated May 22, 1997, by and between
Michael J. Bradshaw and Zilog, Inc.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the 1997 Zilog Employee Performance Incentive
Plan Executive Bonus Administrative Guide.
10.7 Employment Agreement, dated as of May 22, 1997, by and
between Alan Secor and Zilog, Inc.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the 1997 Zilog Employee Performance Incentive
Plan Executive Bonus Administrative Guide.
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.8 Employment Agreement, dated as of May 22, 1997, by and
between Richard L. Moore and Zilog, Inc.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the 1997 Zilog Employee Performance Incentive
Plan Executive Bonus Administrative Guide.
10.9 Employment Agreement, dated as of May 22, 1997, by and
between Thomas C. Carson and Zilog, Inc.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the 1997 Zilog Employee Performance Incentive
Plan Executive Bonus Administrative Guide.
10.10 Credit Agreement, dated as of February 27, 1998, among
Zilog, Inc., Goldman Sachs Credit Partners L.P., as arranger
and syndication agent, BankBoston, N.A., as administrative
agent and the financial institutions listed therein.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Credit Agreement.
10.11 Subsidiary Guaranty, dated as of February 27, 1998, by each
of the direct and indirect Zilog, Inc. Subsidiary
signatories thereto, BankBoston, N.A. and the financial
institutions named therein.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Subsidiary Guaranty.
10.12 Collateral Account Agreement, dated as of February 27, 1998,
by and between Zilog, Inc. and BankBoston, N.A. and the
financial institutions named therein.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Collateral Account Agreement.
10.13 Company Security Agreement, dated as of February 27, 1998,
by and between Zilog, Inc. and BankBoston, N.A. as
administrative agent and representative.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Company Security Agreement.
10.14 Subsidiary Security Agreement, dated as of February 27,
1998, by and among each of the direct and indirect Zilog,
Inc. Subsidiary signatories thereto and BankBoston, N.A. as
administrative agent.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Subsidiary Security Agreement.
10.15 Employment Agreement, dated as of January 5, 1998, by and
between Curtis J. Crawford and TPG Partners II, L.P.
10.16 Lease, dated as of February 18, 1998, between Zilog, Inc.
and Carramerica Realty Corporation.
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Lease.
21.1 Subsidiaries of Zilog, Inc.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1).
25.1 Form T-1 with respect to the eligibility of State Street
Bank and Trust Company with respect to the Indenture.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
TPG PARTNERS II, L.P.
AND
ZILOG, INC.
DATED AS OF JULY 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER.............................................................. 2
SECTION 1.1 The Merger............................................................ 2
SECTION 1.2 Closing............................................................... 2
SECTION 1.3 Effective Time........................................................ 2
SECTION 1.4 Effects of the Merger................................................. 2
SECTION 1.5 Certificate of Incorporation and By-laws; Officers and Directors...... 2
ARTICLE II EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES................... 3
SECTION 2.1 Effect on Stock....................................................... 3
SECTION 2.2 Options............................................................... 7
SECTION 2.3 Surrender of Certificates............................................. 8
SECTION 2.4 Adjustments to Prevent Dilution....................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................................... 11
SECTION 3.1 Organization.......................................................... 11
SECTION 3.2 Subsidiaries.......................................................... 11
SECTION 3.3 Capital Structure..................................................... 11
SECTION 3.4 Authority............................................................. 12
SECTION 3.5 Consent and Approvals; No Violations.................................. 12
SECTION 3.6 SEC Documents and Other Reports....................................... 13
SECTION 3.7 Absence of Material Adverse Change.................................... 14
SECTION 3.8 Information Supplied.................................................. 15
SECTION 3.9 Compliance with Laws.................................................. 15
SECTION 3.10 Tax Matters.......................................................... 15
SECTION 3.11 Liabilities.......................................................... 18
SECTION 3.12 Benefit Plans; Employees and Employment Practices.................... 18
SECTION 3.13 Litigation........................................................... 21
SECTION 3.14 Environmental Matters................................................ 21
SECTION 3.15 Intellectual Property................................................ 22
SECTION 3.16 State Takeover Statutes; Charter Provisions.......................... 24
SECTION 3.17 Brokers.............................................................. 24
SECTION 3.18 Required Vote of Stockholders........................................ 24
SECTION 3.19 Title to Property.................................................... 24
SECTION 3.20 Real Property........................................................ 25
SECTION 3.21 Outstanding Commitments.............................................. 26
SECTION 3.22 Insurance............................................................ 27
SECTION 3.23 Affiliate Transactions............................................... 27
SECTION 3.24 Management Payments.................................................. 27
SECTION 3.25 Accuracy of Information.............................................. 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
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AND SUB............................................................... 28
SECTION 4.1 Organization.......................................................... 28
SECTION 4.2 Authority............................................................. 28
SECTION 4.3 Consents and Approvals; No Violations................................. 28
SECTION 4.4 Information Supplied.................................................. 29
SECTION 4.5 Interim Operations of Sub............................................. 29
SECTION 4.6 Brokers............................................................... 30
SECTION 4.7 Financing............................................................. 30
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS............................... 30
SECTION 5.1 Conduct of Business by the Company Pending the Merger................. 30
SECTION 5.2 No Solicitation....................................................... 33
SECTION 5.3 Third Party Standstill Agreements..................................... 35
ARTICLE VI ADDITIONAL AGREEMENTS.................................................. 35
SECTION 6.1 Stockholder Meeting................................................... 35
SECTION 6.2 Filings; Other Actions; Notification; Access to Information........... 35
SECTION 6.3 Fees and Expenses..................................................... 37
SECTION 6.4 Awards................................................................ 37
SECTION 6.5 Public Announcements.................................................. 38
SECTION 6.6 Real Estate Transfer Tax.............................................. 38
SECTION 6.7 State Takeover Laws................................................... 38
SECTION 6.8 Indemnification; Directors and Officers Insurance..................... 38
SECTION 6.9 Notification of Certain Matters....................................... 39
SECTION 6.10 Reasonable Best Efforts.............................................. 40
SECTION 6.11 Employee Benefits.................................................... 40
SECTION 6.12 Severance Policy and Other Agreements................................ 41
SECTION 6.13 1997 Bonus........................................................... 42
SECTION 6.14 401(k)/Profit Sharing Contributions for 1997......................... 42
SECTION 6.15 Certification........................................................ 42
SECTION 6.16 Recapitalization Accounting.......................................... 42
SECTION 6.17 NYSE Delisting....................................................... 43
SECTION 6.18 Formation of Sub..................................................... 43
SECTION 6.19 Stockholders Agreement............................................... 43
ARTICLE VII CONDITIONS PRECEDENT.................................................. 43
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger............ 43
SECTION 7.2 Conditions to Obligations of Parent and Sub........................... 44
ARTICLE VIII TERMINATION AND AMENDMENT............................................ 45
SECTION 8.1 Termination........................................................... 45
SECTION 8.2 Effect of Termination................................................. 47
SECTION 8.3 Amendment............................................................. 47
SECTION 8.4 Extension; Waiver..................................................... 47
ARTICLE IX GENERAL PROVISIONS..................................................... 48
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SECTION 9.1 Non-Survival of Representations and Warranties and
Agreements........................................................... 48
SECTION 9.2 Notices............................................................... 48
SECTION 9.3 Interpretation........................................................ 48
SECTION 9.4 Counterparts.......................................................... 49
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries........................ 49
SECTION 9.6 Governing Law......................................................... 50
SECTION 9.7 Assignment............................................................ 50
SECTION 9.8 Severability.......................................................... 50
SECTION 9.9 Enforcement of This Agreement......................................... 50
SECTION 9.10 Obligations of Subsidiaries.......................................... 50
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 20, 1997 (this
"Agreement"), between TPG PARTNERS II, L.P., a Delaware limited partnership
("Parent"), and ZILOG, INC., a Delaware corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, Parent will cause a wholly owned Delaware corporation to be
formed as soon as practicable following the date hereof ("Sub") (Sub and the
Company being hereinafter collectively referred to as the "Constituent
Corporations"); and
WHEREAS, the Board of Directors of the Company has determined that the
merger of Sub with and into the Company, upon the terms and subject to the
conditions set forth in this Agreement, would be fair to and in the best
interests of the stockholders of the Company, and such Board of Directors and
the general partner of Parent have approved such merger (the "Merger"), pursuant
to which each share of Common Stock, par value $.01 per share, of the Company
(individually a "Share" and collectively the "Shares"), issued and outstanding
immediately prior to the Effective Time (as defined in Section 1.3) will be
converted into either (A) the right to retain, at the election of the holder
thereof and subject to the terms hereof, a Share or (B) the right to receive
cash, other than for (i) Shares owned, directly or indirectly, by the Company or
any Subsidiary (as defined in Section 9.3) of the Company or by Parent, Sub or
any subsidiary of Parent and (ii) Dissenting Shares (as defined in Section
2.1(g)); and
WHEREAS, the Merger and this Agreement require the vote of a majority of
the Shares for the approval thereof (the "Company Stockholder Approval"); and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's and Sub's willingness to enter
into this Agreement, each of Warburg, Pincus Capital Company, L.P. and Warburg,
Pincus & Co. (collectively, "Warburg Pincus") are entering into a Stockholders
Voting Agreement with Parent in substantially the form attached hereto as
Exhibit A (the "Stockholders Voting Agreement") which, among other things, (i)
requires them to vote all Shares owned by them in accordance with the
Stockholders Voting Agreement and (ii) requires them to make a Non-Cash Election
(as defined in Section 2.1(c)) with respect to a number (subject to adjustment
as provided in Section 2.4) of their Shares equal to the Non-Cash Election
Number (as defined in Section 2.1(d)) on the terms and subject to the conditions
specified therein; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes:
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, the parties hereto hereby
agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 1.3). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub and the Company in accordance with
the DGCL. At the election of Parent, any direct or indirect wholly owned
Subsidiary of Parent may be substituted for Sub as a constituent corporation in
the Merger. In such event, the parties agree to execute an appropriate amendment
to this Agreement in order to reflect the foregoing.
SECTION 1.2 Closing. Upon the terms and subject to the conditions of
this Agreement, the closing (the "Closing") of the Merger will take place at
10:00 a.m. on a date to be specified by Parent or Sub, which shall be no later
than the third business day after satisfaction or waiver of the conditions set
forth in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions at Closing), at the offices of Pillsbury Madison & Sutro LLP, unless
another date, time or place is agreed to in writing by the parties hereto (the
"Closing Date").
SECTION 1.3 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware, or at such other time as Sub and the Company shall
have agreed upon and specified in the Certificate of Merger. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
at which the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made as soon as
practicable after the satisfaction or waiver in accordance herewith of the
conditions to the Merger set forth in Article VII, provided that this Agreement
shall not have been terminated as provided in Section 8.1.
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws; Officers and
Directors.
(a) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that Article IV of such Certificate of Incorporation is amended to read
in its entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 10,000,000. There shall
be two classes of stock of the Corporation. The first class of stock of
the Corporation
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shall have a par value of $0.01 and shall be designated "Common Stock"
and the number of shares constituting such class shall be 4,000,000. The
second class of stock of the Corporation shall have a par value of $0.01
and shall be designated "Class A Non-Voting Common Stock" and the number
of shares constituting such class shall be 6,000,000. Holders of shares
of Common Stock shall be entitled to one vote for each share of such
stock held on all matters as to which stockholders may be entitled to
vote pursuant to the Delaware General Corporation Law. Holders of shares
of Class A Non-Voting Common Stock shall not have any voting rights,
except that the holders of shares of Class A Non-Voting Common Stock
shall have the right to vote as a class to the extent required by the
Delaware General Corporation Law. In all other respects the rights,
powers, preferences and limitations of the Common Stock and Class A
Non-Voting Common Stock shall be identical.
As so amended, such Certificate of Incorporation shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The By-Laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein, by the Certificate of
Incorporation of the Surviving Corporation or by applicable law.
(c) The directors of Sub immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the next annual meeting of
stockholders (or the earlier of their resignation or removal) and until their
respective successors are duly elected and qualified, as the case may be.
(d) The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation until the earlier of their
resignation or removal and until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
SECTION 2.1 Effect on Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any securities of
the Constituent Corporations:
(a) Conversion (or Retention) of Shares. Except as otherwise provided
herein and subject to Section 2.1(d), each Share issued and outstanding
immediately prior to the Effective Time, other than Shares to be canceled
pursuant to Section 2.1(b) ("Excluded
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Shares") and any Dissenting Shares, shall be converted into the following (the
"Merger Consideration"):
(i) for each Share with respect to which an election to retain
pursuant to Section 2.1(c) has been effectively made, and not revoked or
lost ("Electing Shares"), the right to retain one fully paid and
nonassessable Share (a "Non-Cash Election Share"); and
(ii) for each Share (other than Electing Shares), the right to
receive in cash from the Company following the Merger an amount equal to
$25.00 (the "Cash Election Price").
(b) Treasury Stock and Parent Owned Stock. Each Share issued and held in
the Company's treasury or owned by the Company, any Subsidiary of the Company,
Parent, Sub or any other Subsidiary of Parent shall automatically be canceled
and retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c) Share Elections. (i) Each person who, on or prior to the Election
Date referred to in (iii) below, is a record holder of Shares will be entitled,
with respect to all or any portion of such holder's Shares, to make an
unconditional election (a "Non-Cash Election") on or prior to such Election Date
to retain Non-Cash Election Shares, on the basis hereinafter set forth.
(ii) Sub shall prepare and mail a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election"), with
the Prospectus/Proxy Statement (as defined in Section 3.8) to the record holders
of Shares as of the record date for the Stockholder Meeting (as defined in
Section 6.1), which Form of Election shall be used by each record holder of
Shares that wishes to elect to retain Non-Cash Election Shares for any or all
Shares held by such holder. The Company will use its reasonable efforts to make
the Form of Election and the Prospectus/Proxy Statement available to all persons
who become holders of Shares during the period between such record date and the
Election Date referred to below. Any such holder's election to retain Non-Cash
Election Shares shall have been properly made only if the Exchange Agent (as
defined in Section 2.3(a)) shall have received at its designated office by 5:00
p.m., New York City time on the second trading day (the "Election Date") next
preceding the date of the Stockholder Meeting, a Form of Election properly
completed and signed and accompanied by certificates for the Shares to which
such Form of Election relates, duly endorsed in blank or otherwise in form
acceptable for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of Election
from a firm which is a member 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, provided
such certificates are in fact delivered to the Exchange Agent within three New
York Stock Exchange trading days after the date of execution of such guarantee
of delivery).
(iii) Any Form of Election may be revoked by the holder submitting it to
the Exchange Agent only by written notice received by the Exchange Agent prior
to 5:00 p.m.,
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New York City time, on the Election Date (unless Sub and the Company determine
not less than two business days prior to the Election Date that the Effective
Time is not likely to occur within five business days following the date of the
Stockholder Meeting, in which case the Form of Election will remain revocable
until a subsequent date which shall be a date prior to the Effective Time
determined by Sub and the Company). In addition, all Forms of Election shall
automatically be revoked if the Exchange Agent is notified in writing by Sub and
the Company that the Merger has been abandoned. If a Form of Election is
revoked, the certificate or certificates (or guarantees of delivery, as
appropriate) for the Shares to which such Form of Election relates shall be
promptly returned to the holder submitting the same to the Exchange Agent.
(iv) The determination of the Exchange Agent shall be binding as to
whether or not elections to retain Non-Cash Election Shares have been properly
made or revoked pursuant to this Section 2.1 with respect to Shares and when
elections and revocations were received by it. If the Exchange Agent determines
that any election to retain Non-Cash Election Shares was not properly made with
respect to Shares, such Shares shall be treated by the Exchange Agent as Shares
which were not Electing Shares at the Effective Time. The Exchange Agent shall
also make all computations as to the allocation and the proration contemplated
by Section 2.1(d), and any such computation shall be conclusive and binding on
the holders of Shares. The Exchange Agent may, with the mutual agreement of Sub
and the Company, make such rules as are consistent with this Section 2.1 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
(d) Proration.
(i) Notwithstanding anything in this Agreement to the contrary (but
subject to the provisions of Section 2.4), the aggregate number of Shares to be
converted into the right to retain Shares at the Effective Time (the "Non-Cash
Election Number") shall equal 400,000 Shares.
(ii) If the number of Electing Shares exceeds the Non-Cash Election
Number, then the Electing Shares covered by each Non-Cash Election shall be
converted into the right to retain Non-Cash Election Shares or receive cash in
accordance with the terms of Section 2.1(a) in the following manner:
(A) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Non-Cash Election Number by the total number
of Electing Shares.
(B) The number of Electing Shares covered by each Non-Cash
Election to be converted into the right to retain Non-Cash Election
Shares shall be determined by multiplying the Non-Cash Proration Factor
by the total number of Electing Shares covered by such Non-Cash
Election.
(C) All Electing Shares, other than that number of shares
converted into the right to receive Non-Cash Election Shares in
accordance with Section
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2.1(d)(ii)(B), shall be converted into cash (on a consistent basis among
holders who made the election referred to in Section 2.1(a)(i), pro rata
to the number of Shares as to which they made such election) as if such
Shares were not Electing Shares in accordance with the terms of Section
2.1(a)(ii).
(iii) If the number of Electing Shares is less than the Non-Cash
Election Number, then:
(A) all Electing Shares shall be converted into the right to
retain Shares in accordance with the terms of Section 2.1(a)(i);
(B) additional Shares other than Electing Shares, Excluded Shares
and Dissenting Shares shall be converted into the right to retain
Non-Cash Election Shares in accordance with the terms of 2.1(a)(i) in
the following manner:
(1) a proration factor (the "Cash Proration Factor") shall
be determined by dividing (x) the difference between the Non-Cash
Election Number and the number of Electing Shares, by (y) the
total number of Shares other than Electing Shares, Excluded
Shares and Dissenting Shares; and
(2) the number of Shares in addition to Electing Shares to
be converted into the right to retain Non-Cash Election Shares
shall be determined by multiplying the Cash Proration Factor by
the total number of Shares other than Electing Shares, Excluded
Shares and Dissenting Shares; and
(C) subject to Sections 2.1(e) and (g), Shares subject to clause
(B) of this paragraph 2.1(d)(iii) shall be converted into the right to
retain Non-Cash Election Shares in accordance with Section 2.1(a)(i) (on
a consistent basis among holders who held Shares as to which they did
not make the election referred to in Section 2.1(a)(i), pro rata to the
number of Shares as to which they did not make such election).
(e) As of the Effective Time, all Shares (other than Shares referred to
in Sections 2.1(a)(i), Excluded Shares and Dissenting Shares) issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall, to
the extent such certificate represents such Shares, cease to have any rights
with respect thereto, except the right to receive cash upon surrender of such
certificate in accordance with Section 2.3.
(f) Capital Stock of Sub. The shares of capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become in
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the aggregate 3,600,000 shares of Common Stock of the Surviving Corporation and
2,000,000 shares of Class A Non-Voting Common Stock of the Surviving
Corporation.
(g) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person (a
"Dissenting Stockholder") who has not voted in favor of or consented to the
Merger and complies with all the provisions of Delaware law concerning the right
of holders of Shares to require appraisal of their Shares pursuant to Section
262 of the DGCL ("Dissenting Shares") shall not be converted as described in
Section 2.1(a), but shall become the right to receive such consideration as may
be determined to be due to such Dissenting Stockholder pursuant to Delaware law.
If, after the Effective Time, such Dissenting Stockholder withdraws his demand
for appraisal or fails to perfect or otherwise loses his right of appraisal, in
any case pursuant to the DGCL, his Shares shall be deemed to be canceled as of
the Effective Time and to have become the right to receive the Merger
Consideration as provided in Section 2.1(a). The Company shall give Parent (i)
prompt notice of any demands for appraisal of Shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
(h) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional retained Share will be issued and any holder entitled
to receive a fractional retained Share but for this Section 2.1(h) shall be
entitled to receive a cash payment in lieu thereof, which payment shall
represent such holder's proportionate interest in the Cash Election Price for
such Share.
SECTION 2.2 Options.
(a) Each Company Stock Option (as defined in Section 3.3) which is
outstanding immediately prior to the Effective Time (an "Option"), whether or
not otherwise exercisable, shall become fully vested and exercisable. At the
Effective Time each Option shall be canceled by the Company in return for the
payment hereinafter provided, which the holder thereof shall thereupon be
entitled to receive. Each such holder shall receive promptly (but in no event
later than five days) after the Effective Time, a cash payment in respect of
such cancellation from the Company in an amount (if any) equal to (i) the
product of (x) the number of Shares subject or related to such Option and (y)
the excess, if any, of the Cash Election Price over the exercise or purchase
price per Share subject or related to such Option, minus (ii) all applicable
federal, state and local taxes required to be withheld by the Company as a
result of the cancellation and cash payment (the "Option Consideration"). No
interest shall accrue or be paid on the Option Consideration payable upon the
surrender of an Option to the Company. In the event that the Option
Consideration determined pursuant to this paragraph is equal to or less than
zero with respect to an Option, such Option shall be canceled by the Company at
the Effective Time without the payment of any consideration. The Company shall
use its reasonable best efforts to ensure that, after giving effect to the
foregoing, no Option shall be exercisable for Common Stock of the Surviving
Corporation following the Effective Time. With respect to employee contributions
pursuant to the
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Company's Employee Stock Purchase Plan, amounts held by the Company at the
Effective Time shall be disposed of in accordance with the terms of such Plan.
(b) The cancellation of an Option by the Company in accordance with
Section 2.2(a) shall be a release of any and all rights the holder had or may
have had in respect of such Option. The provisions in any plan, program or
arrangement providing for the issuance or grant of any interest in respect of
the capital stock of the Company or any Subsidiary thereof (the "Company Stock
Plans") shall be canceled as of the Effective Time. Prior to the Effective Time,
the Company shall use its best efforts to take all action necessary including
causing the Board of Directors (or any committee thereof) to take such actions
as are allowed by the Company Stock Plans to (i) ensure that, following the
Effective Time, no participant in the Company Stock Plans or any other plans,
programs or arrangements shall have any right thereunder to acquire equity
securities of the Company, the Surviving Corporation or any Subsidiary thereof
and (ii) terminate all such plans, programs and arrangements as of the Effective
Time.
(c) The Company shall use its best efforts to obtain, within 30 days
from the date of this Agreement, from each beneficial and record holder of
Company Stock Options, a release as contemplated by Section 2.2(b), duly
executed and delivered by each such holder.
SECTION 2.3 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall designate
a bank or trust company who shall be reasonably satisfactory to the Company to
act as paying agent in the Merger (the "Exchange Agent"), and as soon as
reasonably practicable as of or after the Effective Time, the Surviving
Corporation shall make available to the Exchange Agent cash in an amount
necessary for the payment of the cash portion of the Merger Consideration as
provided in Section 2.1 upon surrender of Certificates representing Shares as
part of the Merger. Funds made available to the Exchange Agent shall be invested
by the Exchange Agent as directed by the Surviving Corporation, provided that
such investments shall only be in obligations of or guaranteed by the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks whose commercial paper is rated A-1 or P-1 (it
being understood that any and all interest or income earned on funds made
available to the Exchange Agent pursuant to this Agreement shall be turned over
to the Surviving Corporation).
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of record, as of the Effective Time, of a certificate or
certificates that immediately prior to the Effective Time represented Shares
(the "Certificates") (other than to holders of Excluded Shares), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in
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exchange for a certificate or certificates representing the number of whole
retained Shares, if any, to be retained by the holder of such Certificates (and
cash in lieu of any fractional retained Shares) pursuant to this Agreement and
the amount of cash, if any, into which the number of Shares previously
represented by such Certificates shall have been converted pursuant to this
Agreement. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration into which the Shares
theretofore represented by such Certificate shall have been canceled and become
the right to receive pursuant to Section 2.1, less any required withholding tax
described below, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.3, each Certificate (other than Certificates
representing Dissenting Shares or Excluded Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.1. No interest will be paid or will accrue on the Merger
Consideration payable upon the surrender of any Certificate. The Exchange Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of a Certificate such amounts
as the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code (as hereinafter defined) or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by the Exchange Agent.
(c) No Further Ownership Rights in Shares Exchanged for Cash. All cash
paid upon the surrender of Certificates in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates.
(d) Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
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(e) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to retained Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
representing the right to retained Shares (and no cash payment in lieu of
fractional retained Shares shall be paid to any such holder pursuant to Section
2.1(h)) until the surrender of such Certificate in accordance with this Article
II. Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the Certificate representing
whole retained Shares issued in connection therewith, without interest, at the
time of such surrender or as promptly thereafter as practicable, the amount of
any cash payable in lieu of a fractional retained Share to which such holder is
entitled pursuant to Section 2.1(h) and the proportionate amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole retained Shares, and at the appropriate payment date,
the proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole retained Shares.
(f) Termination of Payment Fund. Any portion of the funds made available
to Exchange Agent which remains undistributed to the holders of Shares for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holders of Shares who have not theretofore complied with
this Article II and the instructions set forth in the letter of transmittal
mailed to such holders after the Effective Time shall thereafter look only to
the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) and only as general creditors thereof for payment of their claim
for cash (without interest), if any, retained Shares, if any, any cash in lieu
of fractional retained Shares or any dividends or distributions with respect to
retained Shares, as applicable, to which such holders may be entitled.
(g) No Liability. None of Parent, Sub, the Company, the Exchange Agent
or any other person shall be liable to any person in respect of any retained
shares (or dividends or distribution with respect thereto) or cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Lost Certificates. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Company, the posting by such person of a bond in such reasonable
amount as the Company may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the amount to which such
person is entitled pursuant to this Agreement.
(i) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.2(e)) of the Company shall not be exchanged until the Company has
received a written agreement from such person as provided in Section 6.2(e)
hereof.
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SECTION 2.4 Adjustments to Prevent Dilution. In the event that prior to
the Effective Time there is a change in the number of Shares issued and
outstanding as a result of a reclassification, stock split (including a reverse
split), stock dividend or distribution, or other similar transaction, the Cash
Election Price and Non-Cash Election Number shall be equitably adjusted to
eliminate the effects of such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as of the date
hereof as follows:
SECTION 3.1 Organization. The Company and each of its Subsidiaries (as
defined in Section 9.3) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
reasonably be expected to have a Material Adverse Effect (as defined in Section
9.3) on the Company or prevent or result in a third party materially delaying
the consummation of the Merger and except as set forth in item 3.1 of the letter
from the Company to Parent dated the date hereof, which letter relates to this
Agreement and is designated therein as the Company Letter (the "Company
Letter"). The Company has delivered to Parent complete and correct copies of its
Certificate of Incorporation and By-laws and has made available to Parent
complete and correct copies of the Certificate of Incorporation and By-laws (or
similar organizational documents) of each of its Subsidiaries.
SECTION 3.2 Subsidiaries. Item 3.2 of the Company Letter lists each
Subsidiary of the Company as of the date hereof. Except as set forth in item 3.2
of the Company Letter, all of the outstanding shares of capital stock of each
such Subsidiary are owned by the Company, by another wholly owned subsidiary of
the Company or by the Company and another wholly owned subsidiary of the
Company, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens"), and
are duly authorized, validly issued, fully paid and nonassessable. Except as set
forth in item 3.2 of the Company Letter and except for the capital stock of its
Subsidiaries, neither the Company nor any of its Subsidiaries owns, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, limited liability company or other entity.
SECTION 3.3 Capital Structure. The authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock and 190,000 shares of
Preferred Stock, par value $.01 per share (the "Company Preferred Stock"). As of
the close of business on
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July 18, 1997, (i) 20,229,412 shares of Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Common Stock were held by the
Company in its treasury and (iii) no shares of Company Preferred Stock were
issued and outstanding. As of the date of this Agreement, except for (i)
outstanding stock options covering not in excess of 5,366,341 shares of Common
Stock under the Company's 1990 Employee Stock Option Plan, 1994 Long Term
Incentive Plan and 1989 Stock Option Plan (collectively, the "Company Stock
Options") with an average exercise price of $21.0365, and up to 149,373 shares
of Common Stock subject to subscription or reserved for issuance under the
Company's Employee Stock Purchase Plan, there are no options, warrants, calls,
subscriptions, convertible securities or other rights or agreements to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of capital stock, or any
securities convertible into or exchangeable for shares of capital stock, of the
Company or any Subsidiary or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call, subscription or
other right or agreement, and there are no other obligations of any kind which
would require any person to sell, pledge, transfer or register any shares of
capital stock of the Company. Item 3.3 of the Company Letter sets forth a true
and complete list of the holders of the Company Stock Options as of July 14,
1997.
Except as set forth in the Company Filed SEC Documents (as
defined in Section 3.7) or the preceding paragraph, as of the date of this
Agreement, there are no outstanding contractual obligations of the Company or
any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any Subsidiary or (ii) to vote or to
dispose of any shares of the capital stock of any of the Company's Subsidiaries.
SECTION 3.4 Authority. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, and, subject to approval by the
stockholders of the Company of the Merger, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, and no other corporate action on the part of the
Company is necessary to authorize or execute this Agreement or to consummate the
transactions so contemplated, subject to approval by the stockholders of the
Company of this Agreement and the Merger (if required). This Agreement has been
duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub)
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity.
SECTION 3.5 Consent and Approvals; No Violations. Except as set forth in
item 3.5 and in item 3.15 of the Company Letter and subject to Section 3.16, the
execution and delivery by the Company of this Agreement do not, and the
consummation by the Company
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<PAGE> 17
of the transactions contemplated hereby and compliance by the Company with the
provisions hereof will not, conflict with, result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the loss
of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, (i) any
provision of the Certificate of Incorporation, By-laws or comparable
organization documents of the Company or any of the Subsidiaries of the Company,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement (other than, with respect to termination, agreements terminable
at will or upon 90 days' or less notice by the terminating party), instrument,
permit, concession, franchise or license applicable to the Company or any of its
Subsidiaries or (iii) assuming all the consents, filings and registrations
referred to in the next sentence are made and obtained, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such violations, defaults,
rights, losses or Liens, that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (without giving effect
to clause (iii) of the proviso to the definition thereof in Section 9.3) on the
Company or prevent or result in a third party materially delaying the
consummation of the Merger. No filing or registration with, or authorization,
consent or approval of, any domestic (federal and state) or foreign court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings, authorizations,
orders and approvals as may be required by state takeover laws (the "State
Takeover Approvals") or state securities or "blue sky" laws, (iv) such filings
as may be required in connection with the taxes described in Section 6.6, and
(v) such other consents, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
(without giving effect to clause (iii) of the proviso to the definition thereof
in Section 9.3) on the Company or prevent or result in a third party materially
delaying the consummation of the Merger.
SECTION 3.6 SEC Documents and Other Reports. The Company has filed all
required documents with the SEC since January 1, 1995 (the "Company SEC
Documents"). As of their respective filing dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), or the Exchange Act, as the case may be, each
as in effect on the date so filed, and at the time filed with SEC none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein,
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in light of the circumstances under which they were made, not misleading. The
financial statements (including the related notes and schedules) of the Company
included in or incorporated by reference into the Company SEC Documents comply
as of their respective dates as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles (except, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of the Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
SECTION 3.7 Absence of Material Adverse Change. Except as disclosed in
items 3.7 or 3.12(a) of the Company Letter or in the Company SEC Documents filed
and publicly available prior to the date of this Agreement (the "Company Filed
SEC Documents"), since December 31, 1996, the Company and its Subsidiaries have
conducted their respective businesses in all material respects only in the
ordinary course consistent with past practice, and there has not been (i) any
Material Adverse Change (as defined in Section 9.3), or any event that would
reasonably be expected to result in or give rise to a Material Adverse Change,
in either case with respect to the Company, (ii) any declaration, setting aside
or payment of any dividend or other distribution with respect to its capital
stock or any redemption, purchase or other acquisition of any of its capital
stock, (iii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (x) any granting by the Company or any of its Subsidiaries
to any officer of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business (including in connection
with promotions) consistent with past practice or as was required under
employment agreements in effect as of December 31, 1996, (y) any material change
to the Company's or any of its Subsidiaries' severance or termination plans,
agreements or arrangements with any of their employees, except as part of a
standard employment package to any person promoted or hired (but not including
the five most senior officers), or as was required under employment, severance
or termination agreements in effect as of December 31, 1996, or (z) except for
employment agreements in the ordinary course of business consistent with past
practice with employees other than any executive officer of the Company, any
entry by the Company or any of its Subsidiaries into any employment, consulting,
severance, termination or indemnification agreement with any such employee or
executive officer, (v) any damage, destruction or loss, whether or not covered
by insurance, that would reasonably be expected to have a Material Adverse
Effect on the Company, (vi) any revaluation by the Company of any of its
material assets, (vii) any material change in accounting methods, principles or
practices by the Company or (viii) any other action that occurred prior to the
date hereof that, if it occurred after the date of this Agreement and prior to
the Closing Date, would be prohibited by paragraphs (a), (b) (only with respect
to the Company's Subsidiaries), (c), (f), (g) or (p) of Section 5.1 of this
Agreement.
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<PAGE> 19
SECTION 3.8 Information Supplied. None of the information supplied or to
be supplied by the Company specifically for inclusion therein or incorporation
by reference in (i) the Registration Statement on Form S-4 to be filed with the
SEC by the Company in connection with the Merger (including the proxy statement
and prospectus (the "Prospectus/Proxy Statement") constituting a part thereof)
(the "S-4 Registration Statement") will, at the time the S-4 Registration
Statement becomes effective under the Securities Act, and (ii) the
Prospectus/Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to stockholders and at the time of the Stockholder Meeting,
contain any untrue statement of a material fact or omit to state any 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, except that no representation or warranty is made by the Company in
connection with any of the foregoing with respect to statements made based on
information supplied in writing by Parent or Sub or any of their respective
representatives specifically for inclusion therein. The S-4 Registration
Statement and the Proxy Statement will comply as to form in all material
respects with the requirements of the Securities Act and the Exchange Act, as
appropriate, except that no representation or warranty is made by the Company in
connection with any of the foregoing with respect to statements made based on
information supplied in writing by Parent or Sub or any of their respective
representatives specifically for inclusion therein.
SECTION 3.9 Compliance with Laws. Except as disclosed in the Company
Filed SEC Documents, the businesses of the Company and its Subsidiaries are not
being conducted in violation of any law, ordinance, rule or regulation
(collectively, "Laws") or order of any Governmental Entity, except for possible
violations that would not reasonably be expected to have a Material Adverse
Effect on the Company or prevent or result in a third party materially delaying
the Merger.
SECTION 3.10 Tax Matters. Except as set forth in item 3.10 of the
Company Letter:
(a) The Company and each of its Subsidiaries has filed all federal and
state income tax returns and all other material tax returns and reports required
to be filed by it. All such returns are complete and correct in all material
respects. The Company and each of its Subsidiaries has paid (or the Company has
paid on its Subsidiaries' behalf) all taxes shown as due on such returns and all
material taxes (as defined below) for which no return was required to be filed,
and the most recent financial statements contained in the Company Filed SEC
Documents reflect an adequate reserve for all material amounts of taxes payable
by the Company and its Subsidiaries for all taxable periods and portions thereof
through the date of such financial statements.
(b) The Company shall be responsible for the timely filing (taking into
account any extensions received from the relevant tax authorities) of all tax
returns required by law to be filed by the Company or any of its Subsidiaries on
or prior to the Closing Date, (ii) such tax returns shall be true, correct and
complete in all material respects and accurately set forth in all material
respects all items to the extent required to be reflected or included in such
tax returns by applicable Federal, state, local or foreign tax laws, regulations
or rules and (iii) all
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taxes indicated as due and payable on such tax returns shall be paid by the
Company as and when required by law.
(c) The Company and each of the Subsidiaries have, or by the Closing
Date shall have, paid in full or set up reserves in accordance with United
States generally accepted accounting principles, (i) any and all material taxes
in respect of the income, business, property or operations of the Company and
all of its Subsidiaries (including, without limitation, all material taxes that
the Company and the Subsidiaries are obligated to withhold from amounts paid or
payable to or benefits conferred upon employees, creditors and third parties) or
for which the Company or any of its Subsidiaries may otherwise be liable for any
period ending prior to or on the Closing Date.
(d) Set forth in item 3.10 of the Company Letter is a complete list of
income and other tax returns filed by the Company or any of the Subsidiaries
pursuant to the laws or regulations of any Federal, state, local or foreign tax
authority that have been examined or audited by the IRS or other appropriate
authority during the preceding three years, and a list of all adjustments
resulting from each such examination or audit. Except as set forth in item 3.10,
all deficiencies proposed as a result of such examinations or audits have been
paid or finally settled and no issue has been raised in any such examination or
audit that, by application of similar principles, reasonably can be expected to
result in the assertion of a material deficiency for any other year not so
examined or audited. No action, suit, investigation, audit, claim or assessment
is pending or proposed or threatened in writing with respect to a material
amount of taxes of the Company or any of its Subsidiaries. There are no grounds
for any tax liability beyond amounts accrued with respect to years that have not
been examined or audited, except to the extent that such tax liability would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(e) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any material
amount of taxes.
(f) No material liens for taxes exist with respect to any assets or
properties of the Company or any of its Subsidiaries, except for statutory liens
for taxes not yet due.
(g) None of the Company or any of its Subsidiaries is a party to or is
bound by any income tax allocation or sharing agreement with respect to a
material amount of taxes, and none of the Company or any Subsidiary has been a
member of any group of corporations filing federal tax returns on a consolidated
basis other than each such group of which it is currently a member.
(h) All material amounts of taxes which the Company or any Subsidiary is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued.
(i) No claim has ever been made by an authority in a jurisdiction where
any of the Company or its Subsidiaries does not file tax returns that it is or
may be subject to taxation
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by that jurisdiction, except to the extent that being so subject would not
reasonably be expected to have a Material Adverse Effect on the Company.
(j) Neither the Company nor any of its Subsidiaries are United States
Real Property Holding Corporations (a "USRPHC") within the meaning of Section
897 of the Code and were not USRPHC on any "determination date' (as defined in
Section 1.897-2(c) of the United States Treasury Regulations promulgated under
the Code (the "Treasury Regulations")) that occurred in the five-year period
preceding the Closing Date.
(k) Except as set forth in item 3.10 of the Company Letter, neither the
Company nor any of its Subsidiaries have executed any closing agreements
pursuant to Section 7121 of the Code or any predecessor provision thereof, or
any similar provision of state or local law.
(l) Neither the Company nor any of its Subsidiaries have filed consents
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or such
Subsidiary.
(m) None of the assets owned by the Company or any of the Subsidiaries
is property that is required to be treated as owned by any other person pursuant
to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, as in
effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code,
except to the extent that such treatment would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(n) Each of the Company and its Subsidiaries has disclosed on its
federal income tax returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of Code
section 6662, except to the extent that such treatment would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(o) Neither the Company nor any of the Subsidiaries has agreed to make
any adjustments pursuant to Section 481(a) of the Code or any similar provision
of state or local law by reason of a change in accounting method initiated by it
or any other relevant party and neither the Company nor any of the Subsidiaries
has any knowledge that the IRS has proposed any such adjustment or change in
accounting method, nor has any application pending with any governmental or
regulatory authority requesting permission for any changes in accounting methods
that relate to the business or assets of the Company or any of the Subsidiaries.
Neither the Company nor any of the Subsidiaries is required to make any
adjustments pursuant to the Section 481(a) of the Code or any similar provision
of state or local law by reason of a change in accounting method initiated by it
or any other relevant party, except to the extent that any such adjustment would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
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(p) Neither the Company nor any of the Subsidiaries have filed an
election under Rev. Proc. 91-11, 1991-1 C.B. 470, as modified by Rev. Proc.
91-39, 1991-2 C.B. 694, Treas. Reg. Section 1.1502-20(g) or Rev. Proc. 95-39,
1995-2 C.B. 399.
(q) As used in this Agreement, (i) "tax" and "taxes" shall include any
federal, state, local or foreign net income, gross income, gross receipts,
windfall profit, severance, real and personal property, production, sales, use,
transfer, stamp, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum or any other tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, or addition to tax imposed by any governmental entity and
(ii) "tax return" shall include any return, report or similar statement required
to be filed with respect to any tax including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
tax.
(r) "IRS" means the U.S. Internal Revenue Service.
(s) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
SECTION 3.11 Liabilities. Except (a) for liabilities incurred in the
ordinary course of business consistent with past practice, (b) for transaction
expenses payable to its accountants, legal and financial advisors incurred in
connection with this Agreement not in excess of $6,000,000, (c) for liabilities
which individually or in the aggregate would not reasonably be expected to
exceed $500,000, (d) for liabilities set forth on any balance sheet (including
the notes thereto) included in the Company's financial statements included in
the Company Filed SEC Documents filed with the SEC since December 31, 1996, or
(e) as set forth in item 3.11 of the Company Letter, during the period from
December 31, 1996 until the date hereof neither the Company nor any of its
Subsidiaries has incurred any liabilities that would be required to be reflected
or reserved against in a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with United States generally accepted
accounting principles as applied in preparing the consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 1996 contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
SECTION 3.12 Benefit Plans; Employees and Employment Practices.
(a) Except as disclosed in the Company Filed SEC Documents filed with
the SEC since December 31, 1996, and item 3.12(a) of the Company Letter, since
the date of the most recent audited financial statements included in the Company
Filed SEC Documents there has not been any adoption or amendment in any material
respect (including any increase or improvements in benefits or coverage) by the
Company or any of its Subsidiaries of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical, fringe
benefit, excess, supplemental executive compensation, employee stock purchase,
stock appreciation, restricted stock or other material employee benefit plan,
policy, arrangement or understanding (whether or not in writing) providing
benefits relating to the employment of
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any current or former employee, officer or director of the Company or any of its
Subsidiaries (collectively, the "Benefit Plans") or any Employee Agreement (as
hereinafter defined). Except as disclosed in item 3.12(a) of the Company Letter
or in the Company Filed SEC Documents, neither the Company nor any of its
Subsidiaries has any material obligations under any employment, consulting,
severance, termination or indemnification agreements between the Company or any
of its Subsidiaries and any current or former employee, officer, director or
consultant of the Company or any of its Subsidiaries ("Employee Agreements") or
any Benefit Plans.
(b) Item 3.12(a) of the Company Letter identifies all "employee pension
benefit plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (sometimes referred to herein as
"Pension Plans") and "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) maintained, sponsored or contributed to, by the Company or any of
its U.S. or foreign Subsidiaries for the benefit of any current or former
employees, officers or directors of the Company or any of such Subsidiaries
(collectively, the "ERISA Benefit Plans"). The Company has made available to
Parent true, complete and correct copies of (i) each ERISA Benefit Plan (or, in
the case of any unwritten ERISA Benefit Plans, descriptions thereof), (ii) the
most recent annual report on Form 5500 (and related schedules and financial
statements or opinions required in connection therewith) filed with the Internal
Revenue Service with respect to each ERISA Benefit Plan (if any such report was
required), (iii) the most recent actuarial report with respect to each ERISA
Benefit Plan, as applicable, (iv) the most recent summary plan description (and
a summary of material modifications, if applicable) for each ERISA Benefit Plan,
(v) each trust agreement and group annuity contract relating to any ERISA
Benefit Plan and (vi) each other Benefit Plan or Employee Agreement.
(c) Except as disclosed in item 3.12(c) of the Company Letter, all
Pension Plans which are intended to be tax-qualified have received determination
letters in respect of such Pension Plans from the Internal Revenue Service to
the effect that such Pension Plans are qualified and exempt from Federal income
taxes under Section 401(a) and 501(a), respectively, of the Code, and, to
knowledge of the Company, there is no basis for any such Pension Plan not
currently being so qualified.
(d) Except as disclosed in item 3.12(d) of the Company Letter, each
Benefit Plan has been administered in all material respects in conformity with
its terms and the applicable requirements of ERISA and the Code and other
applicable laws and all contributions required to be made have been made in
accordance with the provisions of each such Benefit Plan and with ERISA and the
Code and other applicable laws, except where the failure to comply or to make
the required contributions would not be reasonably expected to have a Material
Adverse Effect on the Company.
(e) None of the Company or any of its Subsidiaries, or any other person
or entity that, together with the Company, is treated as a single employer under
Section 414 of the Code (an "ERISA Affiliate"), currently maintains or
contributes to, or has maintained or contributed to during the six-year period
preceding the date hereof, or has had during such period the obligation to
maintain or contribute to, or may have any liability with respect to,
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any "multiemployer plan" (within the meaning of Section 3(37) of ERISA), or any
plan subject to Title IV of ERISA or Section 412 of the Code. To the Company's
knowledge, none of the Company, any of its Subsidiaries, any officer of the
Company or any of its Subsidiaries or any of the Benefit Plans which are subject
to ERISA, including the Pension Plans, any trusts created thereunder or, to the
knowledge of the Company, any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary responsibility that
could reasonably be expected to subject the Company, any of its Subsidiaries or
any officer of the Company or any of its Subsidiaries, directly or indirectly,
to any material tax or penalty on prohibited transactions imposed by such
Section 4975 or to any material liability under Section 502(i) or (l) of ERISA,
except where the liability that would be reasonably expected to occur would have
a Material Adverse Effect on the Company. With respect to each Pension Plan
subject to Title IV of ERISA (other than a multiemployer plan within the meaning
of Section 3(37) of ERISA) (i) no proceeding has been initiated to terminate
such plan, (ii) there has been no "reportable event" (as such term is defined in
Section 4043(b) of ERISA), (iii) no "accumulated funding deficiency" (within the
meaning of Section 412 of the Code), whether or not waived, has occurred, (iv)
no person has failed to make a required installment or any other payment
required under Section 412 of the Code before the applicable due date and (v)
neither the Company nor any ERISA Affiliate has provided or is required to
provide security to such plan under Section 401(a)(29) of the Code due to a plan
amendment that results in an increase in current liability, where the liability,
individually or in the aggregate, that would be reasonably expected to result
would have a Material Adverse Effect on the Company.
(f) There is no dispute, arbitration, claim, suit or grievance, pending
or to its knowledge threatened, involving a Benefit Plan (other than routine
claims for benefits payable under any such plan), and to the knowledge of the
Company, there is no basis for any such claim, which would reasonably be
expected to have a Material Adverse Effect on the Company.
(g) Except as disclosed in item 3.12(g) of the Company Letter, there are
no controversies, strikes, work stoppages or disputes pending or to its
knowledge threatened between the Company or any of its Subsidiaries and any
current or former employees, and, to the Company's knowledge, no organizational
effort by any labor union or other collective bargaining unit currently is under
way or threatened with respect to any employee, which would reasonably be
expected to have a Material Adverse Effect on the Company. No employee of the
Company or its Subsidiaries is a member of a collective bargaining unit.
(h) Except as set forth in item 3.12(h) of the Company Letter, there is
no controversy pending between the Company or any Subsidiary and any of their
respective employees, or former employees or applicants for employment, that,
individually or in the aggregate with other such controversies, could reasonably
be expected to have a Material Adverse Effect on the Company. To the knowledge
of this Company, there is no basis for any claim, grievance, arbitration,
negotiation, suit, action or change of or by any employee of the Company or any
Subsidiary, and no complaint is pending against the Company or any Subsidiary
before the National Labor Relations Board or any state or local agency that
would
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reasonably be expected to have a Material Adverse Effect on the Company. The
Company and its Subsidiaries have complied, in respect of their employees, in
all materials respects with all applicable statutes, regulations, orders and
restrictions of the United States of America, all states and other subdivisions
thereof, all foreign jurisdictions and all agencies and instrumentalities of the
foregoing, including without limitation workers' compensation laws, the Fair
Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Equal Pay Act of 1963, the
National Labor Relations Act of 1935 ("NLRA"), the Occupational Safety and
Health Act of 1970, the Vocational Rehabilitation Act of 1973 and Immigration
Act of 1986, as amended, except where noncompliance would not reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 3.13 Litigation. Except as disclosed in item 3.13 of the Company
Letter or in the Company Filed SEC Documents, there is no suit, claim (including
product warranty claims), action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries (i) as of the date hereof, that would reasonably be expected to be
successful and, if adversely determined, would result in a liability for the
Company or any of its Subsidiaries in excess of $300,000 or (ii) that otherwise,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company or prevent or result in a third party
materially delaying the consummation of the Merger. Except as disclosed in item
3.13 of the Company Letter or in the Company Filed SEC Documents, neither the
Company nor any of its Subsidiaries is subject to any outstanding judgment,
order, writ, injunction or decree that would reasonably be expected to have a
Material Adverse Effect on the Company or prevent or result in a third party
materially delaying the consummation of the Merger.
SECTION 3.14 Environmental Matters. Except as set forth in the Company
Filed SEC Documents or in item 3.14 of the Company Letter, neither the Company
nor any of its Subsidiaries has (i) placed, held, located, released, transported
or disposed of any Hazardous Substances (as defined below) on, under, from or at
any of the Company's or any of its Subsidiaries' properties or any other
properties, other than in a manner that would not, in all such cases taken
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company, (ii) any knowledge of the release or threatened
release of any Hazardous Substances into the environment on, under or at any of
the Company's or any of its Subsidiaries' properties other than that which would
not reasonably be expected to result in a Material Adverse Effect on the
Company, or (iii) received any written notice (A) of any violation of any
applicable statute, law, ordinance, regulation, rule, judgment, decree or order
of any Governmental Entity relating to any matter of pollution, protection of
the environment or natural resources or environmental regulation or control,
including worker health or safety or regarding Hazardous Substances
(collectively, "Environmental Laws") that has not been resolved or settled with
the relevant Governmental Entity, (B) of the institution or pendency of any
suit, action, claim, proceeding or investigation by any Governmental Entity or
any third party in connection with any such violation, (C) requiring the
response to or remediation of Hazardous Substances at or arising from any of the
Company's or any of its Subsidiaries' properties or any other properties, (D)
alleging noncompliance by the Company or any of its Subsidiaries with the terms
of any
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<PAGE> 26
permit required under any Environmental Law or (E) demanding payment for
response to or remediation of Hazardous Substances at or arising from any of the
Company's or any of its Subsidiaries' properties or any other properties, except
in each case for the notices set forth in item 3.14 of the Company Letter and
except in each case for notices that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on the
Company. For purposes of this Agreement, the term "Hazardous Substance" shall
mean any material or substance defined or classified as waste or toxic or
hazardous materials or substances or otherwise regulated as pollutants or
contaminants, including any petroleum and petroleum products, under any
applicable Environmental Law.
SECTION 3.15 Intellectual Property.
(a) For purposes of this Agreement and the representations and
warranties contained in this section: (1) the term "Intellectual Property" shall
mean: all patents, trademarks, trade names, service marks, registered and
unregistered copyrights, maskworks and any applications therefor, technology,
know-how, computer software programs or applications (in both source code and
object code form), customer lists, trade secrets and tangible or intangible
proprietary information or material; and the term "Company's knowledge" shall
mean the knowledge of an officer or director of Company. Except as set forth in
item 3.15(a) of the Company Letter:
(i) To the Company's knowledge, the Company owns, is licensed or
otherwise possesses legally sufficient rights to use all Intellectual
Property that Company uses in any material respect in the business of
the Company.
(ii) Item 3.15(a) of the Company Letter lists and identifies the
nature and status of all current patents, registered copyrights,
registered trademarks and maskwork registrations (including any
application(s) therefor) owned by the Company (the "Company IP
Registrations"), and specifies the jurisdictions in which each such
Company IP Registration has been issued or registered or in which an
application for such issuance and registration has been filed, including
the respective registration or application numbers and the names of all
registered owners.
(iii) Item 3.15(a) of the Company Letter lists:
(A) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to
which any person is authorized to use any Company Intellectual
Property Rights (as hereinafter defined); and
(B) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any Intellectual Property
of any third party ("Third Party Intellectual Property Rights")
in or as part of any product and includes the identity of all
parties to such material licenses, sublicenses and/or agreements.
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(iv) To the Company's knowledge, no claims as described below are
currently pending or, to the knowledge of the Company, threatened by any
person, nor does the Company know of any grounds for any bona fide
claims:
(A) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed by the Company
infringes on any Intellectual Property right;
(B) against the use by the Company of any Intellectual
Property used in the Company's business as currently conducted by
the Company;
(C) challenging the ownership, validity or effectiveness
of any of the Intellectual Property owned by Company ("Company
Intellectual Property Rights"); or
(D) challenging the Company's license or legally
enforceable right to use of the Third Party Intellectual Property
Rights.
(v) To the Company's knowledge, there is no material unauthorized
use, infringement or misappropriation of any of the Company Intellectual
Property by any third party, including any employee or former employee
of the Company or any of its Subsidiaries.
(vi) To the Company's knowledge, neither the Company nor any of
its Subsidiaries (A) has been sued or charged in writing as a defendant
or party in any claim, suit, action or proceeding which involves a claim
or infringement of any Intellectual Property right and which has not
been finally terminated prior to the date hereof, (B) has been informed
or notified by any third party that the Company may be engaged in such
infringement or that any such action described in (A) above may be
instituted or (C) is or has any alleged or actual infringement liability
with respect to any alleged or actual infringement by the Company or any
of its Subsidiaries or any Intellectual Property right of another.
(vii) To the Company's knowledge, neither the Company nor any of
its Subsidiaries are using or in any way making use of any confidential
information or Intellectual Property of any third party, including
without limitation a former employer of any present or past employee of
the Company or any Subsidiary, without a written license or other
agreement.
(viii) To the Company's knowledge, no director, officer or
employee of the Company or any of its Subsidiaries owns, directly or
indirectly, in whole or in part, any material Intellectual Property
right which the Company or any of its Subsidiaries has used or is
presently using which is reasonably necessary to Company or its
Subsidiaries' respective businesses as now conducted.
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(b) Except as explicitly set forth in Section 3.15(a) above and in item
3.15(a) of the Company Letter, to the Company's knowledge, all rights to the
Company Intellectual Property are: (i) owned exclusively by the Company or a
Subsidiary, free and clear of any attachments, liens, or encumbrances, and no
other person has any right or interest in or license to use or right to license
others to use any of them, except as reasonable in the course of Company's
business; (ii) freely transferable (except as otherwise required by law) and
(iii) are not subject to any outstanding order, decree, judgment or stipulation.
(c) Each current and former employee (with date of hire after June 1,
1987) of the Company has executed a confidentiality, invention and assignment
agreement with the Company in substantially the form(s) previously delivered to
Parent.
SECTION 3.16 State Takeover Statutes; Charter Provisions. The action of
the Board of Directors of the Company in approving the Merger, this Agreement
and the transactions contemplated by this Agreement (including the execution of
the Stockholder Voting Agreement) is sufficient to render inapplicable to the
Merger, this Agreement and the Stockholders Voting Agreement the provisions of
Section 203 of the DGCL and the provisions of any California takeover laws.
SECTION 3.17 Brokers. No broker, investment banker, financial advisor or
other person, other than Lehman Brothers the fees and expenses of which will be
paid by the Company (and are reflected in an agreement between Lehman Brothers
and the Company, a complete copy of which has been furnished to Parent), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. Other than the
foregoing agreement, the Company is not aware of any claim for payment by the
Company of any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 3.18 Required Vote of Stockholders. The affirmative vote of not
less than a majority of the outstanding Shares is required to adopt the plan of
merger contained in this Agreement and approve the Merger. No other vote of the
stockholders of the Company is required by law, the Certificate of Incorporation
or By-Laws of the Company as currently in effect or otherwise to adopt the plan
of merger contained in this Agreement and approve the Merger.
SECTION 3.19 Title to Property. The Company and each of its Subsidiaries
has good and marketable title to all of its properties and assets, free and
clear of all Liens, except for liens for taxes not yet due and payable and such
liens or other imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property affected thereby
or which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
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SECTION 3.20 Real Property.
(a) Item 3.20 of the Company Letter sets forth a list of all fee and
leasehold interests in real property of the Company and the Subsidiaries of the
Company, which collectively constitute the "Specified Real Estate."
(b) Neither the Company nor any of its Subsidiaries has given or
received notice of any material default under any material lease under which the
Company or any of its Subsidiaries is the lessee of real property (each a
"Lease" and collectively the "Leases") and, to the knowledge of the Company,
neither the Company nor any of its Subsidiaries nor any other party thereto is
in default in any material respect under any of the Leases. Item 3.20 of the
Company Letter contains a complete list of all leases (including all amendments,
modifications, waivers, supplements and other agreements relating thereto) under
which the Company or any of its Subsidiaries is the lessee of the real property.
Except as set forth in item 3.20, none of the Leases has been modified in any
material respect and such Leases are in full force and effect. Except as set
forth in item 3.20, neither the Company nor any of its Subsidiaries has leased,
subleased, licensed or assigned, as the case may be, all or any portion of its
fee or leasehold interest in any Specified Real Estate to any person and the
Company or one or more of its Subsidiaries is in sole and exclusive possession
of and has the right to use all of the Specified Real Estate. Except as set
forth in item 3.20, no person other than the Company or one or more of its
Subsidiaries has any option or right to purchase, lease or use any portion of
the Specified Real Estate. Item 3.20 sets forth all rights of the Company and
its Subsidiaries to purchase the Specified Real Estate leased by the Company or
its Subsidiaries under any Lease.
(c) Except as disclosed in item 3.20 of the Company Letter, the
buildings and improvements on the Specified Real Estate (including all fixtures,
roofs, plumbing systems, fire protection systems, electrical systems, equipment,
elevators and all structural components) in all material respects are in good
operating condition and in a state of good and working maintenance and repair,
ordinary wear and tear excepted, are adequate and suitable for the purposes for
which they are presently being used, and to the knowledge of the Company, there
are no condemnation or appropriation proceedings pending or threatened against
any of such Specified Real Estate or the improvements thereon, and, to the
knowledge of the Company, no buildings or improvements on such Specified Real
Estate encroach on real property not leased to or owned by the Company or any of
its Subsidiaries, to the extent that removal of such encroachment would have a
material adverse effect on the current use, value, occupancy or operation of
such improvements. To the knowledge of the Company, no improvements or buildings
not located on Specified Real Estate encroach upon any of the Specified Real
Estate to the extent that the same would have a material adverse effect on the
current use, value, occupancy or operation of such Specified Real Estate.
(d) To the knowledge of the Company, no part of any Specified Real
Estate is subject to any building or use restriction that materially restricts
or prevents the present use and operation of such property. To the knowledge of
the Company, none of the Specified Real Estate nor the use thereof by the
Company or any of its Subsidiaries constitutes a nonconforming use or legal
non-conforming use.
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(e) The Company or one or more of its Subsidiaries is in possession of
and has good title to, or has valid leasehold interests in or valid rights under
contract to use, all tangible personal property used in the business of the
Company and its Subsidiaries or reflected in the audited financial statements of
the Company and its consolidated subsidiaries dated as of December 31, 1996,
except for personal property disposed of in the ordinary course since the date
thereof.
(f) No labor has been performed or material furnished for any portion of
any property owned by the Company or any of its Subsidiaries for which a Lien in
excess of $500,000 in value can be claimed against any such property. All of the
Specified Real Estate has rights of access to dedicated public ways (and makes
no material use of any means of access or egress that is not pursuant to such
dedicated public ways or recorded, irrevocable rights-of-way) and is served by
water, sewer, sanitary sewer, telephone, electric, gas and other public
utilities necessary or desirable for the current use thereof which utilities are
available to such Specified Real Estate through a public right-of-way. There are
no pending or proposed special or other assessments for public improvements on
the Specified Real Estate.
(g) To the knowledge of the Company, there is no pending or threatened
proceeding or governmental action to modify the zoning classification of, or to
condemn or take by power or eminent domain (or any purchase in lieu thereof), or
to classify as a landmark, all or any material part of the Specified Real Estate
except, in each case, for any proceeding or action that would not have a
Material Adverse Effect on the Company.
SECTION 3.21 Outstanding Commitments.
(a) Item 3.21 of the Company Letter contains a list, accurate and
complete in all material respects, as of the date hereof of all material
contracts, true and complete copies of which have been furnished (or made
available) to Parent and Sub (excluding purchase orders), to which the Company
or any of its Subsidiaries is a party or by which any of the assets or
operations of the Company or any of its Subsidiaries are bound. Each material
contract is a valid and binding obligation of at least the Company or one of its
Subsidiaries and, to the knowledge of the Company, each other party thereto, and
is enforceable against the Company or one or more of its Subsidiaries and, to
the knowledge of the Company, each other party thereto, in accordance with its
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, and neither the Company nor any of its Subsidiaries, nor to the
knowledge of the Company, any other party, is in default under any material
contract, except in each case for such failures to be valid, binding and
enforceable and for such defaults which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
(b) Except as would not have a Material Adverse Effect on the Company,
neither the Company nor any of its Subsidiaries is in default under any of the
material contracts. No proceeding (to the knowledge of the Company in the case
of any investigation) or event or condition has occurred or exists, or to the
knowledge of the Company, is alleged by any party to have occurred or exist
which, with notice or lapse of time or both, would constitute a
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default by any of the parties thereto of their respective obligations under a
material contract (or would give rise to any right of termination or
cancellation), except as would not have a Material Adverse Effect on the
Company.
SECTION 3.22 Insurance. The insurance carried by the Company and its
Subsidiaries is in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company and its Subsidiaries.
Except as would not have a Material Adverse Effect on the Company, all such
insurance is in full force and effect and none of the Company nor any of its
Subsidiaries is in default thereunder. Except as would not have a Material
Adverse Effect on the Company, all claims thereunder have been filed in a due
and timely fashion. Except as would not have a Material Adverse Effect on the
Company, neither the Company nor any of its Subsidiaries has been notified in
writing of a refusal of any material insurance coverage relating to products
liability (including renewals of any such products liability coverage) by any
insurance carrier to which it has applied for insurance during the past three
years.
SECTION 3.23 Affiliate Transactions. Except as set forth in item 3.23 of
the Company Letter, (a) there is no indebtedness (other than indebtedness
between the Company and its Subsidiaries) between the Company or any of its
Subsidiaries, on the one hand, and any holder of record of 5% or more of the
Shares outstanding on the date hereof or officer, director or affiliate of the
Company or any of its Subsidiaries, on the other hand, (b) no such officer,
director, stockholder or affiliate provides or causes to be provided any assets,
services (other than in such capacity as officer or director) or facilities to
the Company or any of its Subsidiaries which are individually or in the
aggregate material to the business or condition of the Company and its
Subsidiaries, taken as a whole, (c) neither the Company nor any of its
Subsidiaries provides or causes to be provided any assets, services or
facilities to any such officer, director, stockholder or affiliate other than in
the ordinary course of the Company's business, affiliate which are individually
or in the aggregate material to the business or condition of the Company and its
Subsidiaries, taken as a whole, and (d) neither the Company nor any of its
Subsidiaries owns any capital stock, indebtedness or other securities issued by
any such officer, director, stockholder or affiliate.
SECTION 3.24 Management Payments. Other than payments under Benefit
Plans and Employee Agreements, payments properly accrued in the Company's budget
for the 1997 fiscal year, or as provided in this Agreement, no employee or
former employee will be entitled to additional compensation or to the early
vesting or acceleration of payment of any compensation that arises out of or are
related to the consummation of the Merger and the transactions contemplated
thereby.
SECTION 3.25 Accuracy of Information. The financial forecasts for fiscal
1997 and 1998 previously furnished to the Parent, as updated through the date
hereof, have been prepared in good faith, represent the reasonable judgment of
the Company's management and are based on assumptions which the Company believes
as of the date hereof are reasonable. No representation is made, however, as to
whether the assumptions on which the projections are based are true and correct
or that events will not occur which would make such
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assumptions incorrect. All of the information furnished to Parent or Sub by the
Company (including the information set forth in the Company Letter) was
furnished in the good faith belief that, as of the date furnished, such
information taken as a whole was accurate and complete in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and (at such time as Sub becomes a party to this Agreement) Sub
represent and warrant to the Company as of the date hereof (provided, that the
following representations and warranties relating to Sub shall instead be made
as of such time as Sub becomes a party hereto) as follows:
SECTION 4.1 Organization. Parent is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now being
conducted.
SECTION 4.2 Authority. Parent and Sub have all requisite partnership or
corporate power and authority to execute and deliver this Agreement and all
documents and agreements contemplated hereby and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly authorized by all necessary partnership or
corporate action on the part of Parent and Sub and no other partnership or
corporate action on the part of Parent or Sub is necessary to authorize or
execute this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by Parent and Sub and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company) constitutes a valid and binding obligation of each of Parent and Sub
enforceable against them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
SECTION 4.3 Consents and Approvals; No Violations. The execution and
delivery by Parent and Sub of this Agreement do not, and the consummation by
Parent and Sub of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its Subsidiaries under, (i) any
provision of the partnership agreement, Certificate of Incorporation, By-laws or
comparable organization documents of Parent, Sub or any Significant Subsidiaries
of Parent, (ii) any loan or credit agreement, note,
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bond, mortgage, indenture, lease or other agreement (other than, with respect to
termination, agreements terminable at will or upon 90 days' or less notice by
the terminating party), instrument, permit, concession, franchise or license
applicable to Parent or any of its Significant Subsidiaries or (iii) assuming
all the consents, filings and registrations referred to in the next sentence are
made and obtained, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its Significant Subsidiaries or any of
their respective properties or assets, other than, in the case of clause (ii) or
(iii), any such violations, defaults, rights, losses or Liens, that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent or Sub or prevent or result in a third party
materially delaying the consummation of the Merger. No filing or registration
with, or authorization, consent or approval of, any Governmental Entity is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Parent or Sub or is
necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except (i) in connection, or in compliance, with
the provisions of the HSR Act and the Exchange Act, (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
Parent or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the other transactions contemplated by this
Agreement, (iv) such filings, authorizations, orders and approvals as may be
required to obtain the State Takeover Approvals or state securities or "blue
sky" laws, (v) such filings as may be required in connection with the taxes
described in Section 6.6, (vi) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which Parent or any of its Subsidiaries
conducts any business or owns any property or assets and (vii) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent or
prevent or result in a third party materially delaying the consummation of the
Merger.
SECTION 4.4 Information Supplied. None of the information supplied or to
be supplied by Parent or Sub specifically for inclusion in (i) the S-4
Registration Statement will, at the time the S-4 Registration Statement becomes
effective under the Securities Act, and (ii) the Prospectus/Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to stockholders
and at the time of the Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any 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, except that no
representation or warranty is made by Parent or Sub in connection with any of
the foregoing with respect to statements made or incorporated by reference
therein based on information supplied by the Company or any of its
representatives specifically for inclusion or incorporation by reference
therein.
SECTION 4.5 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
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SECTION 4.6 Brokers. No broker, investment banker, financial advisor or
other person, other than any person the fees and expenses of which will be paid
by Parent or Sub, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the negotiations leading to
this Agreement or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub. Other than as aforesaid,
Parent is not aware of any claim for payment by Parent of any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 4.7 Financing. Parent has binding written commitments, addressed
to Parent or Sub, from one or more financially responsible financial
institutions, true and complete copies of which have been furnished to the
Company (collectively, the "Commitments") to obtain, together with the other
funds to be provided by Parent, the financing necessary to pay the Cash Election
Price with respect to each Share outstanding at the Effective Time (other than
Electing Shares), to pay (or provide the funds for the Company to pay) all
amounts contemplated by Section 2.2 when due, to refinance any indebtedness or
other obligation of the Company and its Subsidiaries which may become due as a
result of this Agreement or any of the transactions contemplated hereby, to pay
all related fees and expenses and to provide for the anticipated working capital
needs of the Surviving Corporation following the Merger (the financing necessary
to provide such funds being hereinafter referred to as the "Financing"), which
Commitments are in full force and effect as of the date hereof. There are no
conditions precedent or other contingencies related to the funding of the full
amount of the Financing other than as set forth in the Commitments. Subject to
the terms and conditions of this Agreement and receipt of the proceeds of the
Financing as set forth in the Commitments (or on other terms reasonably
satisfactory to Parent), at the closing of the Merger, Parent will capitalize
Sub with an aggregate equity contribution of at least $140 million. Parent will
be under no obligation pursuant to the preceding sentence unless and until the
proceeds of the Financing are received as set forth in the Commitments. In
addition, Parent will be under no obligation under any circumstances to
capitalize Sub with equity of more than $140 million.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of Business by the Company Pending the Merger.
During the period from the date of this Agreement until the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to, except as
contemplated by this Agreement, carry on its business in the ordinary course of
its business as currently conducted, maintain all assets other than those
disposed of in the ordinary course of business in good repair and condition,
confer on a regular basis with Parent to report material operational matters and
any proposals to engage in material transactions and, to the extent consistent
therewith, use reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and employees
and preserve its present relationships with customers, suppliers
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and others having significant business dealings with it. Without limiting the
generality of the foregoing, during such period, except as contemplated by this
Agreement, the Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent (which consent shall not be
unreasonably withheld or delayed):
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than the payment by a Subsidiary of a dividend or distribution to
the Company or another wholly owned Subsidiary), (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase (other than issuances by a wholly owned
Subsidiary), redeem or otherwise acquire any shares of its capital stock or
those of any Subsidiary or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(b) except as set forth in item 3.12(a) of the Company Letter, issue,
deliver, sell, pledge, dispose of or otherwise encumber any shares of its
capital stock, any other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or options to acquire any
such shares, voting securities, equity equivalent or convertible securities
(other than issuances by a wholly owned Subsidiary of the Company of its capital
stock to the Company), or modify or alter the terms of any of the foregoing;
(c) amend its Certificate of Incorporation or By-laws or other similar
organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any other
manner, any business or any corporation, partnership, limited liability company,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, other than (i) transactions which
involve assets having a purchase price not in excess of $100,000 individually or
$500,000 in the aggregate or (ii) acquisitions or purchases of assets to the
extent permitted by Section 6.1(m);
(e) sell, lease, license, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets, other than
transactions that are in the ordinary course of business consistent with past
practice or which involve assets which in the aggregate are not in excess of
$500,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell, or vary the terms of, any debt securities or
warrants or rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of others, enter into any
"keep-well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for borrowings incurred in the ordinary course of
business consistent with past practice not to exceed $100,000 in the aggregate
or non-acquisition-related borrowings under existing credit facilities not to
exceed $100,000 in the aggregate, or make
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any loans, advances or capital contributions to, or other investments in, any
other person, other than to or in the Company or any wholly owned Subsidiary of
the Company;
(g) alter (through merger, liquidation, reorganization, restructuring or
in any other fashion) the corporate structure or ownership of the Company or any
Subsidiary;
(h) except as disclosed in item 3.12(a) of the Company Letter, increase
the compensation payable or to become payable to its directors, officers or
employees, except for increases required under employment agreements existing on
the date hereof, and increases for employees other than officers in the ordinary
course of business consistent with past practice, or grant any severance or
termination pay, or make any loan, to, or enter into any employment or severance
agreement, or establish, adopt, enter into, or amend or take action to enhance
or accelerate any rights or benefits under, any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except, in each case, for changes which are less
favorable to participants in plans, agreements, trusts, funds, policies or
arrangements, or as may be required by the terms of any such plan, agreement,
trust, fund, policy or arrangement existing on the date hereof or to comply with
applicable law or regulation;
(i) knowingly violate or fail to perform any material obligation or duty
imposed upon it by any applicable material federal, state or local law, rule,
regulation, guideline or ordinance;
(j) settle or compromise any suit, proceeding, investigation or claim or
threatened suit, proceeding, investigation or claim for an amount that is more
than $100,000 in the case of any individual suit, proceeding or claim or
$500,000 for all suits, proceedings or claims;
(k) except to the extent required by law or agreed to by Parent, (i)
compromise any material tax liability or (ii) prepare or file any material tax
return inconsistent with past practice or, on any such tax return or otherwise,
take any position, make any material election, or adopt any material accounting
method that is inconsistent with positions taken, elections made or methods used
in the past in preparing or filing similar tax returns;
(l) except as may be required as a result of a change in law or in
United States generally accepted accounting principles, make any material change
in its method of accounting;
(m) make or agree to make any new capital expenditure not previously
finally committed to that, individually, exceeds $2,000,000; provided, however,
that as to any individual capital expenditure in an amount equal to or greater
than $500,000 but less than or equal to $2,000,000, the Company will consult
with Parent (it being understood that no consent is required hereunder);
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(n) except to the extent permitted by Section 5.1(j), pay, discharge,
settle or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, (1) in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
recognized or disclosed in the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company Filed SEC Documents or
incurred since the date of such financial statements in the ordinary course of
business consistent with past practice or (2) of liabilities required to be
paid, discharged or satisfied pursuant to the terms of any contract in existence
on the date hereof;
(o) enter into, modify in any material respect, amend in any material
respect or terminate any material contract or agreement to which the Company or
any of its Subsidiaries is a party or waive (except to the extent permitted by
Section 5.3), release or assign any material rights or claims;
(p) commence any voluntary petition, proceeding or action under any
bankruptcy, insolvency or other similar laws;
(q) except in the ordinary course of business consistent with past
practice, sell, assign, transfer, license or permit to lapse any material right
with respect to the Company Intellectual Property Rights; or
(r) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
SECTION 5.2 No Solicitation.
(a) The Company shall, and shall direct and cause its officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties that may be ongoing with respect to
a Takeover Proposal (as hereinafter defined). The Company shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize or permit any of
its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative or agent retained by it or
any of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or
knowingly encourage (including by way of furnishing information) any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the receipt of the Company Stockholder Approval the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it would be consistent with its fiduciary responsibilities
to the Company's stockholders under applicable law, the Company may, in response
to a Superior Proposal (as defined below) which was not solicited subsequent to
the date hereof, (x) furnish information with respect to the Company to any
person pursuant to a confidentiality agreement substantially identical to the
Confidentiality Agreement (as defined in Section 6.2 hereof) and (y) participate
in discussions, investigations and/or negotiations regarding such Superior
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Proposal. The Company will promptly notify Parent in the event of the occurrence
of any matter referred to in the foregoing proviso. For purposes of this
Agreement, "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of 25% or more
of the aggregate assets of the Company and its Subsidiaries, taken as a whole,
or 25% or more of the voting power of the shares of Common Stock then
outstanding or any tender offer or exchange offer that if consummated would
result in any person beneficially owning 25% or more of the voting power of the
shares of Common Stock then outstanding or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company, other than the transactions contemplated by this
Agreement. For purposes of this Agreement, a "Superior Proposal" means any
proposal determined by the Board of Directors of the Company in good faith,
after consultation with outside legal counsel, to be a bona fide proposal and
made by a third party to acquire, directly or indirectly, for consideration
consisting of cash, property and/or securities, more than 50% of the combined
voting power of the shares of Common Stock then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment, after
consultation with outside counsel and with a financial advisor of nationally
recognized reputation, to be more favorable to the Company's stockholders than
the Merger.
(b) Except as set forth in this Section 5.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement; provided that, the Board of Directors may, (A) in
response to any Takeover Proposal, suspend such recommendation pending its
analysis of such Takeover Proposal or (B) at any time prior to the receipt of
the Company Stockholder Approval, modify or withdraw such recommendation if the
Board of Directors of the Company determines in good faith that a Takeover
Proposal is a Superior Proposal and, after consultation with outside counsel,
that it would be consistent with its fiduciary responsibilities to so modify or
withdraw such recommendation, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal or (iii) cause the Company to enter
into any acquisition agreement or other similar agreement (an "Acquisition
Agreement") related to any Takeover Proposal. Notwithstanding the foregoing, in
the event that prior to the receipt of the Company Stockholder Approval, the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that it would be consistent with its fiduciary
responsibilities to the Company's stockholders under applicable law, the Board
of Directors of the Company may approve or recommend a Superior Proposal or
terminate this Agreement, but in each case, subject to the provisions of Section
6.3 hereof and only at a time that is after the second business day following
Parent's receipt of written notice (a "Notice of Superior Proposal") advising
Parent that the Board of Directors of the Company has received a Takeover
Proposal that may constitute a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making such
Superior Proposal.
(c) Nothing contained in this Section 5.2 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rules
14d-9 and 14e-2
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promulgated under the Exchange Act or making any disclosure to the Company's
stockholders if, in the good faith judgment of the Board of Directors of the
Company, after consultation with outside counsel, such disclosure is necessary
in order to comply with its fiduciary duties to the Company's stockholders under
applicable law or is otherwise required under applicable law.
SECTION 5.3 Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not,
except in connection with the making of a Superior Proposal, terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement to
which the Company or any of its Subsidiaries is a party (other than any
involving Parent) unless the Company's Board of Directors shall have determined
in good faith, after consultation with outside counsel, that such release of any
third party or amendment, modification or waiver of such provisions is necessary
in order to comply with its fiduciary duties to the Company's stockholders under
applicable law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholder Meeting. The Company will take, in accordance
with applicable law and its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of Shares (the "Stockholder Meeting")
as promptly as practicable after the S-4 Registration Statement is declared
effective to consider and vote upon the approval of this Agreement and the
Merger. Except as otherwise expressly provided herein, the Company's Board of
Directors shall recommend approval of the transactions contemplated hereby and
shall take all lawful action to solicit such approval.
SECTION 6.2 Filings; Other Actions; Notification; Access to Information.
(a) Parent and the Company shall promptly prepare and file with the SEC
the Prospectus/Proxy Statement and the S-4 Registration Statement as promptly as
practicable. Parent and the Company each shall use all reasonable efforts to
have the S-4 Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the stockholders of the Company. Parent and the
Company shall also use all reasonable efforts to obtain prior to the effective
date of the S-4 Registration Statement all necessary state securities law or
"blue sky" permits and approvals required in connection with the Merger and to
consummate the other transactions contemplated by this Agreement and will pay
all expenses incident thereto.
(b) The Company shall notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or for additional
information and will supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
at any time prior to the Stockholder Meeting there shall occur any event that
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should be set forth in an amendment or supplement to the Proxy Statement, the
Company shall promptly prepare and mail to its stockholders such an amendment or
supplement. Parent shall cooperate with the Company in the preparation of the
Proxy Statement or any amendment or supplement thereto.
(c) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this Agreement.
Each of the Company and Parent shall give prompt notice to the other of any
change that is reasonably likely to result in a Material Adverse Effect on it.
(e) The Company shall deliver to Parent a letter identifying all persons
whom the Company believes to be, at the date of the Stockholder Meeting,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
Each of the Company and Parent shall use all reasonable efforts to cause each
Person who is identified as an "affiliate" in the letter referred to above to
deliver to Parent at least thirty-five days prior to the date of the Stockholder
Meeting a written agreement substantially in the form of Exhibit B. Prior to the
Effective Time, the Company shall amend and supplement such letter and use all
reasonable efforts to cause each additional person who is identified as an
"affiliate" to execute a written agreement as set forth in this Section 6.2(e).
(f) The Company shall, and shall cause each of its Subsidiaries to, upon
reasonable notice, afford to Parent and to the officers, employees, accountants,
counsel, financial advisors and other representatives and agents of Parent
reasonable access to all their respective key employees, properties, books,
contracts, commitments, documents and records of the Company or its Subsidiaries
during normal business hours during the period from the date of this Agreement
through the Effective Time and, during such period, the Company shall, and shall
cause each of its Subsidiaries to, furnish promptly to Parent (i) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its business, properties and personnel as
Parent may reasonably request; provided that the Company shall not be required
to furnish to Parent any information which is subject to an attorney-client
privilege or which constitutes attorney work product. All information obtained
by or on behalf of Parent pursuant to this Section 6.2 shall be kept
confidential in accordance with the letter agreement dated May 27, 1997 between
Parent and Lehman Brothers, on behalf of the Company (the "Confidentiality
Agreement").
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SECTION 6.3 Fees and Expenses.
(a) The Company shall pay to Parent by wire transfer $15,000,000 (the
"Company Termination Fee") if:
(i) the Company terminates this Agreement pursuant to Section
8.1(e), in which case, the Company Termination Fee must be paid
simultaneously with such termination;
(ii) Parent terminates this Agreement pursuant to Section 8.1(d),
in which case, the Company Termination Fee must be paid no later than
one business day after the termination of this Agreement; or
(iii) (A) Parent or the Company terminates this Agreement
pursuant to Section 8.1(b)(iii), (B) the approval of this Agreement by
the stockholders of the Company shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of stockholders
duly convened thereon as contemplated by this Agreement (a "Company
Negative Vote"), (C) at the time of such Company Negative Vote there
shall be pending a Takeover Proposal, and (D) within one year after such
termination, the Company consummates either (1) a merger, consolidation
or other business combination between the Company and any other person
(other than Parent, Sub or an affiliate of Parent) or (2) the sale of
30% or more (in voting power) of the voting securities of the Company or
of 30% or more (in fair market value) of the assets of the Company and
its Subsidiaries, on a consolidated basis, in which case, the Company
Termination Fee must be paid simultaneously with the closing of the
event described in clause (1) or (2) of this subparagraph.
(b) Parent shall pay to the Company by wire transfer $5,000,000 (the
"Parent Termination Fee") if this Agreement is terminated by either Parent or
the Company pursuant to Section 8.1(b)(i) and at the time of such termination
(A) the condition set forth in Section 7.2(c) to the obligations of Parent and
Sub shall not have been satisfied or waived and (B) each of the other conditions
set forth in Article VII to the obligations of the Company, Parent and Sub shall
have been satisfied or waived and Parent and Sub shall not have then been
entitled to terminate this Agreement pursuant to any of the provisions of
Section 8.1 (other than Section 8.1(b)(i)). If payable, the Parent Termination
Fee shall be paid no later than one business day after the termination of this
Agreement.
(c) Except as set forth above, all fees and expenses incurred in
connection with the Merger, this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated; provided, however, that all filing fees related
to compliance with the HSR Act in connection with the transactions contemplated
hereby shall be borne equally by Parent and the Company.
SECTION 6.4 Awards. No further awards of any type shall be made under
any Company Stock Plan after the date of this Agreement.
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SECTION 6.5 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, fiduciary
duties or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 6.6 Real Estate Transfer Tax. Parent and the Company agree that
either the Surviving Corporation or Parent (without any liability to any of the
Company's stockholders) will pay any state or local tax which is attributable to
the transfer of the beneficial ownership of the Company's or its Subsidiaries'
real property, if any (collectively, the "Transfer Taxes"), and any penalties or
interest with respect to the Transfer Taxes, payable in connection with the
consummation of the Merger. The Company agrees to cooperate with Parent in the
filing of any returns with respect to the Transfer Taxes, including supplying in
a timely manner a complete list of all real property interests held by the
Company and its Subsidiaries and any information with respect to such property
that is reasonably necessary to complete such returns. The portion of the
consideration allocable to the real property of the Company and its Subsidiaries
shall be determined by Parent in its reasonable discretion. To the extent
permitted by law, the stockholders of the Company shall be deemed to have agreed
to be bound by the allocation established pursuant to this Section 6.6 in the
preparation of any return with respect to the Transfer Taxes.
SECTION 6.7 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and its Board of
Directors shall use reasonable best efforts to grant such approvals and take
such actions as are necessary so that the transactions contemplated hereby may
be consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
SECTION 6.8 Indemnification; Directors and Officers Insurance.
(a) From and after the Effective Time, the Surviving Corporation agrees
that it will indemnify and hold harmless each present and former director and
officer of the Company (when acting in such capacity) determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under the DGCL and its articles of
incorporation or by-laws in effect on the date hereof to indemnify such Person
(and the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided the Person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to indemnification).
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(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified Party if
such failure does not materially prejudice the indemnifying party. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Surviving Corporation shall have
the right to assume the defense thereof and the Surviving Corporation shall not
be liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if the Surviving Corporation
does not elect to assume such defense or counsel for the Indemnified Parties
advises that there are issues which raise conflicts of interest between the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that the
Surviving Corporation shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction
(unless there is a conflict of interest as provided above), (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) the Surviving
Corporation shall not be liable for any settlement effected without the prior
written consent of the Surviving Corporation.
(c) The Surviving Corporation shall maintain a policy of officers' and
directors' liability insurance for acts and omissions occurring prior to the
Effective Time with coverage in amount and scope at least as favorable as the
Company's existing directors' and officers' liability insurance coverage for a
period of six years after the Effective Time; provided, however, that in
satisfying the obligations under this provision, the Surviving Corporation shall
not be obligated to pay annual premiums in excess of 200% of the amount per
annum paid by the Company in its last full fiscal year. The amount per annum of
premiums paid by the Company in its last full fiscal year equaled $270,000.
(d) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives and shall be binding on all successors and assigns of
the Surviving Corporation.
SECTION 6.9 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence, of which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, and (ii) the failure of the Company or
Parent to comply with in any material respect or satisfy in any material respect
any covenant, condition or agreement of such entity to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.9 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
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SECTION 6.10 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement and the
fiduciary responsibilities of the Board of Directors of the Company, each of the
Company, Parent and Sub agrees to use its reasonable best efforts to cause the
consummation of the Merger to occur as soon as practicable. Without limiting the
foregoing, (i) each of the Company, Parent and Sub agree to use its reasonable
best efforts to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements that may be imposed on itself with respect
to the Merger (which actions shall include furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and shall promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon any of them
or any of their Subsidiaries in connection with the Merger and (ii) each of the
Company, Parent and Sub shall, and shall cause its Subsidiaries to, use its
reasonable best efforts to obtain (and shall cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by Parent, Sub, the Company or any of their Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement. In connection with any action to be taken by Parent, the
Company or any of its respective Subsidiaries to consummate the Merger or the
other transactions contemplated in this Agreement, the Company shall not,
without Parent's prior written consent, commit to any divestiture of assets or
businesses of the Company and its Subsidiaries if such divested assets and/or
businesses are material to the assets or profitability of the Company and its
Subsidiaries taken as a whole; and neither Parent nor any of its Subsidiaries
shall be required to divest or hold separate or otherwise take or commit to take
any action that materially limits its freedom of action with respect to, or its
ability to retain, the Company or any of the businesses or assets of Parent or
that would have a Material Adverse Effect on Parent or the Company.
(b) Parent hereby agrees to use its reasonable best efforts to arrange
and complete the Financing including, (i) to negotiate definitive agreements
with respect thereto and (ii) to satisfy all conditions applicable to Parent and
Sub in such definitive agreements. Parent will keep the Company informed at all
times with respect to the status of its efforts to arrange and complete the
Financing, including, without limitation, with respect to the occurrence of any
event which Parent believes may have a materially adverse effect on the ability
of Parent to obtain the Financing. In the event Parent is unable to arrange or
complete any portion of the Financing in the manner or from the sources
originally contemplated, Parent will use its reasonable best efforts to arrange
any such portion from alternative sources. The Company hereby agrees to use its
reasonable best efforts to assist Parent to arrange and complete the Financing,
including to satisfy all conditions applicable to the Company in connection
therewith; provided that the Company shall not be obligated to incur any
monetary obligations or expenditures in connection with such assistance.
SECTION 6.11 Employee Benefits.
(a) During the period from the Effective Time until December 31, 1997,
the Surviving Corporation shall maintain or cause to be maintained wages,
compensation levels,
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employee pension and welfare plans for the benefit of employees and former
employees of the Company or its Subsidiaries which, in the aggregate, are not
less favorable than those wages, compensation levels and other benefits under
the Benefit Plans that are in effect as of the date hereof; provided, however,
that the Surviving Corporation shall not have any obligation to provide benefits
based on equity securities or any equivalent thereof. For all purposes of
eligibility to participate in and vesting in benefits provided under employee
benefits plans maintained by the Surviving Corporation (but not for purposes of
determining benefits (or accruals thereof) under such plans) which employees and
former employees of the Company become eligible to participate in after the
Effective Time, all persons previously employed by the Company and its
Subsidiaries and then employed by the Surviving Corporation shall be credited
with their years of service with the Company and its Subsidiaries and years of
service with prior employers to the extent service with prior employers is taken
into account under the Benefit Plans. With respect to the Company's Deferred
Compensation Plan and the trust established thereunder (collectively, the
"Deferred Compensation Plan"), the Surviving Corporation shall cause the
Deferred Compensation Plan to be amended such that all amounts payable
thereunder shall become fully vested as of the Effective Time. The Deferred
Compensation Plan shall be continued (but Company contributions to the Deferred
Compensation Plan may be discontinued after December 31, 1997) and, except as
provided in the preceding sentence, may not be amended or terminated until all
benefits payable thereunder are distributed in accordance with the Deferred
Compensation Plan and any and all elections thereunder.
(b) The foregoing shall not constitute any commitment, contract,
understanding or guarantee (express or implied) on the part of the Surviving
Corporation of a post-Effective Time employment relationship of any term of
duration or on any terms other than those that the Surviving Corporation may
establish. Employment of any of the employees by the Surviving Corporation will
be "at will" and may be terminated by the Surviving Corporation at any time for
any reason (subject to any legally binding agreement other than this Agreement,
or any applicable laws or collective bargaining agreement, or any other
arrangement or commitment). Except as otherwise provided in Sections 6.11
through 6.14, nothing in this Agreement shall be interpreted as limiting the
power of the Surviving Corporation to amend or terminate any particular Benefit
Plan or any other employee benefit plan, program, agreement or policy or as
requiring the Surviving Corporation to offer to continue (other than as required
by its terms) any written employment contract.
SECTION 6.12 Severance Policy and Other Agreements.
(a) With respect to any officer or employee who is covered by a
severance policy or plan separate from the standard severance policy for the
Company's employees (all of which separate severance policies or plans are
incorporated in the terms of the employment agreements listed in item 6.12 of
the Company Letter), the Surviving Corporation shall maintain (or shall cause to
be maintained) such separate policy or plan as in effect as of the date hereof,
and, as to all other officers and employees, the Surviving Corporation shall
maintain (or shall cause to be maintained) the Company's standard severance
policy as in effect as of the date hereof until at least December 31, 1997;
provided, however, that with
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respect to any severance policy maintained pursuant to any statutory
requirement, such policy shall continue to be maintained in compliance with the
applicable statute.
(b) The Surviving Corporation shall honor or cause to be honored all
severance agreements and employment agreements with the Company's directors,
officers and employees to the extent disclosed in item 6.12 of the Company
Letter (it being understood that nothing herein shall be deemed to mean that the
Company shall not be required to honor its obligations under any severance
agreement or employment agreement to which it is a party).
(c) The Company shall furnish to Parent as soon as practicable, but in
no event later than two days after the date hereof, a listing which specifies as
of July 18, 1997 the maximum number of shares of Common Stock covered by Company
Stock Options with an exercise price of less than $25.00 per share and the
average exercise price for such Company Stock Options.
SECTION 6.13 1997 Bonus. Subject to any executive employment agreements,
the Surviving Corporation will maintain the Company's bonus plans (as in effect
on or before March 1, 1997) through the end of the 1997 fiscal year, with
bonuses to be paid to the employee participating thereunder at the greater of
(i) the target level, if applicable, (ii) the prior year's bonus, or (iii) such
bonus as the employee would have earned if the transaction contemplated by this
Agreement had not occurred, in all events on a basis consistent with past
practices; provided, however, that with respect to any bonus which will be paid
in installments, the dividend amount payable with respect to the payment shall
be equal to an annual interest rate of fifteen percent (15%). The maximum
amounts that may be payable under the Company's bonus plans pursuant to this
Section 6.13 are set forth in item 6.13 of the Company Letter.
SECTION 6.14 401(k)/Profit Sharing Contributions for 1997. The Surviving
Corporation, prior to the end of the third month following the end of the
current fiscal year, will make all Company contributions to the Company's
Tax-Deferred Investment Plan on behalf of each eligible Company employee who was
employed on the last day of the current fiscal year. The Surviving Corporation
will make a Discretionary Contribution with respect to the 1997 Plan Year which
is not less than the amount of the Discretionary Contribution (on a percentage
basis) that the Company made for the 1996 Plan Year.
SECTION 6.15 Certification. The Company and each of its Subsidiaries
agree to provide to the Sub the statement described in Treasury Regulation
Section 1.1445-2(c)(3), certifying that none of the interests in the Company
held by the Company's stockholders are U.S. real property interests for purposes
of Section 1445 of the Code. Such statement will be complete, accurate and valid
on the Closing Date. If such statement is not received by or on the Closing
Date, the Sub shall withhold all amounts required to be withheld by Section 1445
of the Code.
SECTION 6.16 Recapitalization Accounting. The Company shall cooperate
with any reasonable requests of Parent or the SEC related to the recording of
the Merger as a
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recapitalization for financial reporting purposes, including, without
limitation, to assist Parent and Sub with any presentation to the SEC with
regard to such recording and to include appropriate disclosure with regard to
such recording in all filings with the SEC and all mailings to stockholders made
in connection with the Merger. In furtherance of the foregoing, the Company
shall provide to Parent for the prior review of Parent's advisors any
description of the transactions contemplated by this Agreement which is meant to
be disseminated.
SECTION 6.17 NYSE Delisting. Each of the parties agrees to cooperate
with each other in taking, or causing to be taken, all actions necessary to
delist the Company Common Stock from the New York Stock Exchange, Inc. ("NYSE"),
provided that such delisting shall not be effective until after the Effective
Time. The parties also acknowledge that it is Parent's intent that the Common
Stock following the Merger will not be quoted on NASDAQ or listed on any
national securities exchange.
SECTION 6.18 Formation of Sub. As soon as practicable following the
execution of this Agreement, but no later than one week following such date,
Parent shall cause Sub to be formed in the State of Delaware and to take all
corporate action necessary to approve and to become a party to this Agreement.
Each of the parties hereto agrees that upon formation of Sub it shall execute an
amendment to this Agreement and such other documents as may be necessary to
cause Sub to become a party to this Agreement.
SECTION 6.19 Stockholders Agreement. The Company and Parent agree that,
prior to the Effective Time, they, Warburg Pincus and the other stockholders
retaining shares in the Merger will enter into a Stockholders Agreement
consistent with the provisions of Schedule B to the Stockholders Voting
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved in the manner required by
applicable law or the applicable regulations of any stock exchange or regulatory
body, as the case may be, by the holders of the issued and outstanding shares of
capital stock of the Company;
(b) Governmental Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
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obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby shall have been made or obtained (as
the case may be) upon terms and conditions that are not reasonably likely to
have a Material Adverse Effect on the Company.
(c) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, order, decree or ruling (whether temporary, preliminary or permanent) that
is in effect and would (i) restrain, enjoin or otherwise prohibit consummation
of the Merger or make the acquisition or holding by Parent of the common stock
of the Surviving Corporation illegal, (ii) compel Parent or any of its
Subsidiaries, on the one hand, or the Company or any of its Subsidiaries, on the
other, to dispose of or hold separate all or a material portion of the business
or assets of Parent and its Subsidiaries, taken as a whole, or the Company and
its Subsidiaries, taken as a whole, respectively, or (iii) impose any financial
burden on Parent or the Surviving Corporation or any limitation on the ability
of Parent to hold or operate the business of the Company or any of its
Subsidiaries, in either such case, which would materially reduce the economic or
business benefits Parent expects, as of the date hereof, to realize from the
Merger.
(d) S-4 Registration Statement. The S-4 Registration Statement shall
have become effective under the Securities Act. No stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued, and no
proceedings for that purpose shall have been initiated or be threatened by the
SEC.
(e) Blue Sky Approvals. The Company shall have received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated hereby.
SECTION 7.2 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are also subject to the satisfaction or
waiver by Parent at or prior to the Effective Time of the following conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects all obligations contained
in this Agreement required to be performed by it prior to the Closing Date; each
of the representations and warranties of the Company contained in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Closing Date as if made at and as of the Closing Date and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of the Closing Date, provided that representations and warranties that speak
as of a specified date shall only be true and correct (to the extent required by
this sentence) as of such date; and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Consents Under Agreements. The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate
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the transactions contemplated by this Agreement under any agreement to which the
Company or any of its Subsidiaries is a party, except those for which the
failure to obtain such consent or approval, individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect on the Company or is not
reasonably likely to materially adversely affect the ability of the Company to
consummate the transactions contemplated by this Agreement.
(c) Financing. The Financing shall have been obtained on the terms set
forth in the Commitments or on other terms reasonably satisfactory to Parent.
(d) Non-Cash Election. Warburg Pincus shall have made a Non-Cash
Election with respect to a number (subject to adjustment as provided in Section
2.4 of this Agreement) of its Shares equal to the Non-Cash Election Number in
accordance with the terms of the Stockholders Voting Agreement and such election
shall be in full force and effect and shall not have been revoked.
SECTION 7.3 Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) Performance of Obligations; Representations and Warranties. Parent
and Sub each shall have performed in all material respects all obligations
contained in this Agreement required to be performed by it at or prior to the
Closing Date; each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct at and as of the Closing Date as if made at and as of the Closing Date
and each of such representations and warranties that is not so qualified shall
be true and correct in all material respects at and as of the Closing Date as if
made at and as of the Closing Date, provided that representations and warranties
that speak as of a specified date shall only be true and correct (to the extent
required by this sentence) as of such date; and the Company shall have received
a certificate signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of the General Partner of Parent to such effect.
(b) Consents Under Agreements. Parent shall have obtained the consent or
approval of each person whose consent or approval shall be required in order to
consummate the transactions contemplated by this Agreement under any agreement
to which Parent or any of its Subsidiaries is a party, except those for which
failure to obtain such consents and approvals, individually or in the aggregate,
is not reasonably likely to have a Material Adverse Effect on the Company or is
not reasonably likely to materially adversely affect the ability of Parent to
consummate the transactions contemplated by this Agreement.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after Company Stockholder
Approval:
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(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by January 31,
1998; provided that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the
Merger by January 31, 1998;
(ii) if any court or Governmental Entity of competent
jurisdiction shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree
or ruling or other action shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement pursuant
to this Section 8.1(b)(ii) shall not be available to any party who has
not used its reasonable best efforts to cause such order to be lifted;
(iii) the approval of the Company's stockholders required by
Section 7.1(a) shall not have been obtained at the Stockholder Meeting
or any adjournment thereof;
(c) by Parent or Sub if:
(i) (A) as of such time of determination, any of the
representations or warranties of the Company set forth in this Agreement
(other than as to the absence of a Material Adverse Change contained in
Section 3.7(i)) that are qualified as to materiality shall not be true
and correct in any respect or any such representations or warranties
that are not so qualified shall not be true and correct in any material
respect, or (B) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or covenant of the Company to be performed
or complied with by it under this Agreement and, in the case of (A) such
untruth or incorrectness cannot be or has not been cured within 60 days
after the giving of written notice to the Company, and, in the case of
(B) such failure cannot be or has not been cured within 20 days after
the giving of written notice to the Company;
(ii) as of such time of determination, the representation and
warranty by the Company as to the absence of a Material Adverse Change
contained in Section 3.7(i) shall not be true and correct in any
respect, and such untruth or incorrectness cannot be or has not been
cured within 60 days after the giving of written notice to the Company;
(d) by Parent or Sub if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
or Sub its approval or recommendation of the Merger or this Agreement, or
approved or recommended any Takeover Proposal or Acquisition Agreement (other
than the Merger), or shall have resolved to take any of the foregoing actions;
provided that the suspension of the recommendation of
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the Company's Board of Directors referred to herein in accordance with Section
5.2(b) shall not give rise to a right of termination pursuant to this Section
8.1(d);
(e) by the Company in accordance with Section 5.2(b); provided, however,
that it has complied with all provisions thereof, including the notice
provisions therein and the requirements of Section 6.3 hereof;
(f) by the Company, if (i) as of such time of determination, any of the
representations or warranties of Parent or Sub set forth in this Agreement that
are qualified as to materiality shall not be true and correct in any respect or
any such representations or warranties that are not so qualified shall not be
true and correct in any material respect, or (ii) Parent or Sub shall have
failed to perform in any material respect any material obligation or to comply
in any material respect with any material agreement or covenant of Parent or Sub
to be performed or complied with by it under this Agreement and, in the case of
(i) such untruth or incorrectness cannot be or has not been cured within 60 days
after the giving of written notice to Parent or Sub, and, in the case of (ii)
such failure cannot be or has not been cured within 20 days after the giving of
written notice to Parent or Sub.
SECTION 8.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to Section 6.3, this Section 8.2 and
Article IX and the last sentence of Section 6.2; provided, however, that nothing
herein shall relieve any party from liability for any breach hereof.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Board of Directors or
General Partner, as applicable, at any time before or after obtaining Company
Stockholder Approval, but after Company Stockholder Approval no amendment shall
be made which by law requires further approval by the stockholders of the
Company without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Board of
Directors or General Partner, as applicable, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations and Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time except that the agreements set forth in Article II, Sections 6.8, 6.11,
6.12, 6.13 and 6.14 and Article IX shall survive the Effective Time.
SECTION 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
TPG Partners II, L.P.
600 California Street, Suite 1850
San Francisco, California 94108
Attn: Mr. David M. Stanton
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Daniel S. Sternberg, Esq.
(b) if to the Company, to:
Zilog, Inc.
210 E. Hacienda Avenue
Campbell, CA 95008
Attn: Richard R. Pickard, Esq.
with a copy to:
Pillsbury Madison & Sutro LLP
2700 Sand Hill Road
Menlo Park, CA 94025
Attn: Nathaniel M. Cartmell III, Esq.
SECTION 9.3 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated.
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The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "subsidiary" or "Subsidiary" of
any person means another person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first person. As used in this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with the Company or Parent, as the case may be, any change or
effect that is materially adverse to the business, financial condition or
results of operations of such entity and its Subsidiaries taken as a whole;
provided, however, that (i) any adverse change, event or effect that is
demonstrated to be primarily caused by conditions affecting the United States
economy generally or the economy of any nation or region in which such entity or
any of its Subsidiaries conducts business that is material to the business of
such entity and its Subsidiaries, taken as a whole, shall not be taken into
account in determining whether there as been or would be a "Material Adverse
Change" or "Material Adverse Effect" on or with respect to such entity, (ii) any
adverse change, event or effect that is demonstrated to be primarily caused by
conditions generally affecting the semiconductor industry shall not be taken
into account in determining whether there has been or would be a "Material
Adverse Change" or "Material Adverse Effect" on or with respect to such entity
and (iii) any adverse change, event or effect that is demonstrated to be
primarily caused by the announcement or pendency of the Merger or the
transactions contemplated hereby shall not be taken into account in determining
whether there has been or would be a "Material Adverse Change" or "Material
Adverse Effect" on or with respect to such entity. Whenever the word "knowledge"
is used in this Agreement, it shall mean the actual knowledge of any officer of
the Company, in the case of the Company, or any officer of TPG Advisors II,
Inc., in the case of Parent.
SECTION 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries. Except for
the Confidentiality Letter referred to in the last sentence of Section 6.2, the
Company Letter and the Stockholders Voting Agreement, this Agreement constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; provided, however, that it is expressly agreed that the transactions
contemplated by this Agreement do not violate any provision of the
Confidentiality Letter. This Agreement, except for the provisions of Section
6.8, is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
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SECTION 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, except that
Parent or Sub may assign, in its sole discretion, any of or all of its rights,
interests and obligations under this Agreement to Parent (in the case of Sub) or
to any direct or indirect wholly owned Subsidiary of Parent or Sub or to any
affiliate of Parent or Sub, but no such assignment shall relieve Parent or Sub
of any of its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 9.9 Enforcement of This Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity.
SECTION 9.10 Obligations of Subsidiaries. Except as specifically set
forth herein, whenever this Agreement requires any Subsidiary of Parent
(including Sub) or of the Company to take any action, such requirement shall be
deemed to include an undertaking on
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the part of Parent or the Company, as the case may be, to cause such Subsidiary
to take such action.
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized all as of the
date first written above.
TPG PARTNERS II, L.P.
By TPG GenPar II, L.P., its General Partner
By TPG Advisors II, Inc., its General Partner
By /s/ David M. Stanton
------------------------------------------
Name: David M. Stanton
Title: Vice President
ZILOG, INC.
By /s/ Edgar A. Sack
------------------------------------------
Name: Edgar A. Sack
Title: President and Chief
Executive Officer
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EXHIBIT 2.2
AMENDMENT NUMBER ONE TO THE
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AMENDMENT NUMBER ONE TO THE AGREEMENT AND PLAN OF MERGER (this
"AMENDMENT"), dated as of November 18, 1997, by and between TPG PARTNERS II,
L.P., a Delaware limited partnership ("PARENT"), TPG ZEUS ACQUISITION
CORPORATION, a Delaware corporation ("SUB") and ZILOG, INC., a Delaware
corporation (the "COMPANY"),
W I T N E S S E T H:
WHEREAS, Parent and the Company are parties to that certain Agreement
and Plan of Merger (the "MERGER AGREEMENT"), dated as of July 20, 1997; and
WHEREAS, pursuant to Section 8.3 of the Merger Agreement, the parties
hereto wish to amend the Merger Agreement as provided herein:
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined herein
shall the meanings set forth in the Merger Agreement.
SECTION 2. Amendments to the Merger Agreement.
SECTION 2.1. The Preamble to the Merger Agreement shall be amended and
restated in its entirety, and shall be replaced by the following:
"AGREEMENT AND PLAN OF MERGER, dated as of July 20, 1997 (as amended by
Amendment Number One, dated November 18, 1997, this "Agreement"),
between TPG PARTNERS II, L.P., a Delaware limited partnership
("Parent"), and ZILOG, INC., a Delaware corporation (the "Company"),"
SECTION 2.2. Section 1.5(a) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(a) The Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be amended as of
the Effective Time so that Article IV of such Certificate of
Incorporation is amended to read in its entirety as follows:
FOURTH: The Corporation shall be authorized to issue 10,000,000 shares
of common stock and 5,000,000 shares of preferred stock. There shall be
two classes of common stock of the Corporation. The first class of
common stock of the Corporation shall have a par value of $0.01 and
shall be designated "Common Stock" and the number of shares
<PAGE> 2
constituting such class shall be 4,000,000. The second class of stock
of the Corporation shall have a par value of $0.01 and shall be
designated "Class A Non-Voting Common Stock" and the number of shares
constituting such class shall be 6,000,000. Holders of shares of Common
Stock shall be entitled to one vote for each share of such stock held
on all matters as to which stockholders may be entitled to vote
pursuant to the Delaware General Corporation Law. Holders of shares of
Class A Non-Voting Common Stock shall not have any voting rights,
except that the holders of shares of Class A Non-Voting Common Stock
shall have the right to vote as a class to the extent required by the
Delaware General Corporation Law. In all other respects the rights,
powers, preferences and limitations of the Common Stock and Class A
Non-Voting Common Stock shall be identical. The preferred stock shall
have a par value of $100.00 and the board of directors may authorize
the issuance from time to time of the preferred stock in one or more
classes and/or series and with such powers, designations, preferences,
rights and qualifications, limitations or restrictions (which may
differ with respect to each such class and/or series) as the board may
fix by resolution."
"As so amended, such Certificate of Incorporation shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable
law."
SECTION 2.3. Section 2.1(a) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(a) Conversion (or Retention) of Shares. Except as otherwise
provided herein and subject to Section 2.1(d), each Share issued and
outstanding immediately prior to the Effective Time, other than Shares
to be canceled pursuant to Section 2.1(b) ("Excluded Shares") and any
Dissenting Shares, shall be converted into the following (the "Merger
Consideration"):
(i) for each Share with respect to which an election
to retain pursuant to Section 2.1(c) has been effectively
made, and not revoked or lost ("Electing Shares"), the right
to retain one fully paid and nonassessable Share (a "Non-Cash
Election Share"); and
(ii) for each Share (other than Electing Shares), the
right to receive in cash from the Company following the Merger
an amount equal to $20.00 (the "Cash Election Price")."
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<PAGE> 3
SECTION 2.4. Section 2.1(d)(i) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(i) Notwithstanding anything in this Agreement to
the contrary (but subject to the provisions of Section 2.4),
the aggregate number of Shares to be converted into the right
to retain Shares at the Effective Time (the "Non-Cash Election
Number") shall equal 375,000 Shares."
SECTION 2.5. Section 2.1(f) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(f) Capital Stock of Sub. The shares of capital stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become in the aggregate 3,375,000 shares of Common
Stock of the Surviving Corporation, 1,250,000 shares of Class A
Non-Voting Common Stock of the Surviving Corporation and 250,000 shares
of a new series of Non-Voting 13.5% Pay-in-Kind Preferred Stock, stated
value $100.00 per share, of the Surviving Corporation."
SECTION 2.6. Section 3.7 of the Merger Agreement shall be amended and
restated in its entirety, and shall be replaced by the following:
"SECTION 3.7 Absence of Material Adverse Change. Except as
disclosed in items 3.7 or 3.12(a) of the Company Letter or in the
Company SEC Documents filed and publicly available prior to the date of
this Agreement (the "Company Filed SEC Documents"), since December 31,
1996, the Company and its Subsidiaries have conducted their respective
businesses in all material respects only in the ordinary course
consistent with past practice, and there has not been (i) any
declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock or any redemption,
purchase or other acquisition of any of its capital stock, (ii) any
split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iii) (x) any granting by the Company or any of its
Subsidiaries to any officer of the Company or any of its Subsidiaries
of any increase in compensation, except in the ordinary course of
business (including in connection with promotions) consistent with past
practice or as was required under employment agreements in effect as of
December 31, 1996, (y) any material change to the Company's or any of
its Subsidiaries' severance or termination plans, agreements or
arrangements with any of their employees, except as part of a standard
employment package to any person promoted or hired (but not including
the five most senior officers), or as was required under employment,
severance or termination agreements in effect as of December 31, 1996,
or (z) except for employment agreements in the ordinary course of
business consistent with past practice with employees other than any
executive officer of the Company, any entry by the Company or any of
its Subsidiaries into any employment, consulting, severance,
termination or indemnification agreement with any such employee or
executive officer, (iv) any damage, destruction or loss, whether or not
covered by
-3-
<PAGE> 4
insurance, that would reasonably be expected to have a
Material Adverse Effect on the Company, (v) any revaluation by the
Company of any of its material assets, (vi) any material change in
accounting methods, principles or practices by the Company or (vii) any
other action that occurred prior to the date hereof that, if it
occurred after the date of this Agreement and prior to the Closing
Date, would be prohibited by paragraphs (a), (b) (only with respect to
the Company's Subsidiaries), (c), (f), (g) or (p) of Section 5.1 of
this Agreement.
SECTION 2.7. Section 4.7 of the Merger Agreement shall be amended and
restated in its entirety, and shall be replaced by the following:
"SECTION 4.7 Financing. Parent has binding written
commitments, addressed to Parent or Sub, from one or more financially
responsible financial institutions, dated as of November 18, 1997, true
and complete copies of which have been furnished to the Company
(collectively, the "Commitments") to obtain, together with the other
funds to be provided by Parent, the financing necessary to pay the Cash
Election Price with respect to each Share outstanding at the Effective
Time (other than Electing Shares), to pay (or provide the funds for the
Company to pay) all amounts contemplated by Section 2.2 when due, to
refinance any indebtedness or other obligation of the Company and its
Subsidiaries which may become due as a result of this Agreement or any
of the transactions contemplated hereby, to pay all related fees and
expenses and to provide for the anticipated working capital needs of
the Surviving Corporation following the Merger (the financing necessary
to provide such funds being hereinafter referred to as the
"Financing"), which Commitments are in full force and effect as of
November 18, 1997. There are no conditions precedent or other
contingencies related to the funding of the full amount of the
Financing other than as set forth in the Commitments. Subject to the
terms and conditions of this Agreement and receipt of the proceeds of
the Financing as set forth in the Commitments (or on other terms
reasonably satisfactory to Parent), at the closing of the Merger,
Parent will capitalize Sub with an aggregate equity contribution of at
least $117.5 million. Parent will be under no obligation pursuant to
the preceding sentence unless and until the proceeds of the Financing
are received as set forth in the Commitments. In addition, Parent will
be under no obligation under any circumstances to capitalize Sub with
equity of more than $117.5 million."
-4-
<PAGE> 5
SECTION 2.8. Section 5.2(a) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(a) The Company shall, and shall direct and cause its
officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that
may be ongoing with respect to a Takeover Proposal (as hereinafter
defined). The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative or agent retained by it or
any of its Subsidiaries to, directly or indirectly, (i) solicit,
initiate or knowingly encourage (including by way of furnishing
information) any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; provided, however, that if, at any
time prior to the receipt of the Company Stockholder Approval, the
Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it would be consistent with its
fiduciary responsibilities to the Company's stockholders under
applicable law, the Company may, in response to a Takeover Proposal
which was not solicited subsequent to the date hereof, (x) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement substantially identical to the
Confidentiality Agreement (as defined in Section 6.2 hereof) and (y)
participate in discussions, investigations and/or negotiations
regarding such Takeover Proposal. The Company will promptly notify
Parent in the event of the occurrence of any matter referred to in the
foregoing proviso. For purposes of this Agreement, "Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 25% or more of the
aggregate assets of the Company and its Subsidiaries, taken as a whole,
or 25% or more of the voting power of the shares of Common Stock then
outstanding or any tender offer or exchange offer that if consummated
would result in any person beneficially owning 25% or more of the
voting power of the shares of Common Stock then outstanding or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company,
other than the transactions contemplated by this Agreement."
SECTION 2.9. Section 5.2(b) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(b) Except as set forth in this Section 5.2, neither the
Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by such Board
of Directors or such committee of the Merger or this Agreement;
provided that, the Board of Directors may, (A) in response to any
Takeover
-5-
<PAGE> 6
Proposal, suspend such recommendation pending its analysis of
such Takeover Proposal or (B) at any time prior to the receipt of the
Company Stockholder Approval, modify or withdraw such recommendation if
the Board of Directors of the Company determines in good faith that a
Takeover Proposal is a Superior Proposal (as hereinafter defined) and,
after consultation with outside counsel, that it would be consistent
with its fiduciary responsibilities to so modify or withdraw such
recommendation, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal or (iii) cause the Company
to enter into any acquisition agreement or other similar agreement (an
"Acquisition Agreement") related to any Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the receipt
of the Company Stockholder Approval, the Board of Directors of the
Company determines in good faith, after consultation with outside
counsel, that it would be consistent with its fiduciary
responsibilities to the Company's stockholders under applicable law,
the Board of Directors of the Company may approve or recommend a
Superior Proposal or terminate this Agreement, but in each case,
subject to the provisions of Section 6.3 hereof and only at a time that
is after the second business day following Parent's receipt of written
notice (a "Notice of Superior Proposal") advising Parent that the Board
of Directors of the Company has received a Takeover Proposal that may
constitute a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making
such Superior Proposal. For purposes of this Agreement, a "Superior
Proposal" means any proposal determined by the Board of Directors of
the Company in good faith, after consultation with outside legal
counsel, to be a bona fide proposal and made by a third party to
acquire, directly or indirectly, for consideration consisting of cash,
property and/or securities, more than 50% of the combined voting power
of the shares of Common Stock then outstanding or all or substantially
all the assets of the Company and otherwise on terms which the Board of
Directors of the Company determines in its good faith judgment, after
consultation with outside counsel and with a financial advisor of
nationally recognized reputation, to be more favorable to the Company's
stockholders than the Merger."
SECTION 2.10. Section 5.3 of the Merger Agreement shall be amended and
restated in its entirety, and shall be replaced by the following:
"SECTION 5.3 Third Party Standstill Agreements. During the
period from the date of this Agreement through the Effective Time, the
Company shall not, except in connection with the making of a Takeover
Proposal, terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which the Company or any of
its Subsidiaries is a party (other than any involving Parent) unless
the Company's Board of Directors shall have determined in good faith,
after consultation with outside counsel, that such release of any third
party or amendment, modification or waiver of such provisions is
necessary in order to comply with its fiduciary duties to the Company's
stockholders under applicable law."
SECTION 2.11. Section 6.12(a) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
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<PAGE> 7
"(a) With respect to any officer or employee who is covered by
a severance policy or plan separate from the standard severance policy
for the Company's employees (all of which separate severance policies
or plans are incorporated in the terms of the employment agreements
listed in item 6.12 of the Company Letter), the Surviving Corporation
shall maintain (or shall cause to be maintained) such separate policy
or plan as in effect as of the date hereof, and, as to all other
officers and employees, the Surviving Corporation shall maintain (or
shall cause to be maintained) the Company's standard severance policy
as in effect as of the date hereof until at least June 30, 1998;
provided, however, that with respect to any severance policy maintained
pursuant to any statutory requirement, such policy shall continue to be
maintained in compliance with the applicable statute."
SECTION 2.12. A new Section 6.20 shall be added to the Merger
Agreement, which shall read in its entirety as follows:
"SECTION 6.20 Surviving Corporation Preferred Stock.
Immediately after the Effective Time, the Board of Directors of the
Surviving Corporation shall adopt a resolution providing for the
creation of the series of Non-Voting 13.5% Pay-in-Kind Preferred Stock,
stated value $100.00 per share, of the Surviving Corporation into which
the shares of capital stock of Sub are to be converted in the Merger."
SECTION 2.13. Section 8.1(b)(i) of the Merger Agreement shall be
amended and restated in its entirety, and shall be replaced by the following:
"(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
February 28, 1998; provided that the terminating party shall
not have breached in any material respect its obligations
under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Merger by
February 28, 1998;"
SECTION 2.14. Section 8.1(c) of the Merger Agreement shall be amended
and restated in its entirety, and shall be replaced by the following:
"(c) by Parent or Sub if: (A) as of such time of
determination, any of the representations or warranties of the Company
set forth in this Agreement that are qualified as to materiality shall
not be true and correct in any respect or any such representations or
warranties that are not so qualified shall not be true and correct in
any material respect, or (B) the Company shall have failed to perform
in any material respect any material obligation or to comply in any
material respect with any material agreement or covenant of the Company
to be performed or complied with by it under this Agreement and, in the
case of (A) such untruth or incorrectness cannot be or has not been
cured within 60 days after the giving of written notice to the Company,
and, in the case of (B) such failure cannot be or has not been cured
within 20 days after the giving of written notice to the Company;"
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<PAGE> 8
SECTION 3. Sub. Pursuant to Section 6.18 of the Merger Agreement, each
of Parent, Sub and the Company hereby agree that by execution and delivery of
this Amendment, Sub will be deemed to have signed and become a party to the
Merger Agreement as of the date hereof and shall be entitled to all of the
rights and subject to all of the obligations and otherwise bound by all of the
provisions thereof, in each case applicable to Sub.
SECTION 4. Representations and Warranties.
(a) The Company. The execution, delivery and performance of this
Amendment by the Company have been duly authorized by the Board of Directors of
the Company and by all other necessary corporate action on the part of the
Company. This Amendment has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Amendment by
Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
(b) Parent and Sub. The execution, delivery and performance of this
Amendment by each of Parent and Sub have been duly authorized by the General
Partner of Parent and the Board of Directors of Sub, respectively, and by all
other necessary partnership or corporate action on the part of Parent or Sub,
respectively. This Amendment has been duly executed and delivered by each of
Parent and Sub and (assuming the valid authorization, execution and delivery of
this Amendment by the Company) constitutes the valid and binding obligation of
each of Parent and Sub enforceable against them in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
SECTION 5. Miscellaneous.
(a) Other than as set forth in Section 2.1 through Section 2.8 and
Section 3 hereof, this Amendment does not modify, change or delete any other
addendum, term, provision, representation, warranty or covenant (the
"PROVISIONS") relating to or contained in the Merger Agreement, and all such
Provisions remain in full force and effect. For the avoidance of doubt, all
references in the Merger Agreement to "the date hereof" or "the date of this
Agreement" shall be deemed to be references to the date July 20, 1997.
(b) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. This
Amendment may be executed in counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
(c) This Amendment and any of the provisions hereof may not be amended,
altered or added to in any manner except by a document in writing and signed by
each party.
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<PAGE> 9
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Amendment to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P., its General Partner
By: TPG Advisors II, Inc., its General Partner
By /s/ DAVID M. STANTON
--------------------------------------------
Name: David M. Stanton
Title: Vice President
TPG ZEUS ACQUISITION CORPORATION
By: /s/ DAVID M. STANTON
--------------------------------------------
Name: David M. Stanton
Title: Vice President
ZILOG, INC.
By /s/ EDGAR A. SACK
--------------------------------------------
Name: Edgar A. Sack
Title: President & CEO
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NUMBER TWO TO THE
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NUMBER TWO TO THE AGREEMENT AND PLAN OF MERGER (this
"AMENDMENT"), dated as of December 10, 1997, by and between TPG PARTNERS II,
L.P., a Delaware limited partnership ("PARENT"), TPG ZEUS ACQUISITION
CORPORATION, a Delaware corporation ("SUB") and ZILOG, INC., a Delaware
corporation (the "COMPANY"),
W I T N E S S E T H:
WHEREAS, Parent and the Company are parties to that certain Agreement and
Plan of Merger, dated as of July 20, 1997, as amended by Amendment Number One to
the Agreement and Plan of Merger, dated as of November 18, 1997 (the "Merger
Agreement"); and
WHEREAS, pursuant to Section 8.3 of the Merger Agreement, the parties
hereto wish to amend the Merger Agreement as provided herein:
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, the parties hereto hereby
agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined herein
shall the meanings set forth in the Merger Agreement.
SECTION 2. Amendment to the Merger Agreement.
SECTION 2.1. Section 1.5(a) of the Merger Agreement shall be amended and
restated in its entirety, and shall be replaced by the following:
"(a) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended as of the
Effective Time so that Article IV of such Certificate of Incorporation is
amended to read in its entirety as follows:
FOURTH: The Corporation shall be authorized to issue 50,000,000 shares of
common stock and 5,000,000 shares of preferred stock. There shall be two
classes of common stock of the Corporation. The first class of common
stock of the Corporation shall have a par value of $0.01 and shall be
designated "Common Stock" and the number of shares constituting such class
shall be
<PAGE> 2
35,000,000. The second class of stock of the Corporation shall have a par
value of $0.01 and shall be designated "Class A Non-Voting Common Stock"
and the number of shares constituting such class shall be 15,000,000.
Holders of shares of Common Stock shall be entitled to one vote for each
share of such stock held on all matters as to which stockholders may be
entitled to vote pursuant to the Delaware General Corporation Law. Holders
of shares of Class A Non-Voting Common Stock shall not have any voting
rights, except that the holders of shares of Class A Non-Voting Common
Stock shall have the right to vote as a class to the extent required by
the Delaware General Corporation Law. In all other respects the rights,
powers, preferences and limitations of the Common Stock and Class A
Non-Voting Common Stock shall be identical. The preferred stock shall have
a par value of $100.00 and the board of directors may authorize the
issuance from time to time of the preferred stock in one or more classes
and/or series and with such powers, designations, preferences, rights and
qualifications, limitations or restrictions (which may differ with respect
to each such class and/or series) as the board may fix by resolution."
"As so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law."
SECTION 3. Representations and Warranties.
(a) The Company. The execution, delivery and performance of this
Amendment by the Company have been duly authorized by the Board of Directors of
the Company and by all other necessary corporate action on the part of the
Company. This Amendment has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Amendment by
Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
(b) Parent and Sub. The execution, delivery and performance of this
Amendment by each of Parent and Sub have been duly authorized by the General
Partner of Parent and the Board of Directors of Sub, respectively, and by all
other necessary partnership or corporate action on the part of Parent or Sub,
respectively. This Amendment has been duly executed and delivered by each of
Parent and Sub and (assuming the valid authorization, execution and delivery of
this Amendment by the Company) constitutes the valid and binding obligation of
each of Parent and Sub enforceable against them in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
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<PAGE> 3
SECTION 4. Miscellaneous.
(a) Other than as set forth in Section 2.1, this Amendment does not
modify, change or delete any other addendum, term, provision, representation,
warranty or covenant (the "PROVISIONS") relating to or contained in the Merger
Agreement, and all such Provisions remain in full force and effect. For the
avoidance of doubt, all references in the Merger Agreement to "the date hereof"
or "the date of this Agreement" shall be deemed to be references to the date
July 20, 1997.
(b) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. This
Amendment may be executed in counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
(c) This Amendment and any of the provisions hereof may not be amended,
altered or added to in any manner except by a document in writing and signed by
each party.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Amendment
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<PAGE> 4
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P., its General Partner
By: TPG Advisors II, Inc., its General Partner
By /s/ Richard Ekleberry
--------------------------------------------
Name: Richard Ekleberry
Title: Vice President
TPG ZEUS ACQUISITION CORPORATION
By: /s/ Richard Ekleberry
-------------------------------------------
Name: Richard Ekleberry
Title: Secretary and Treasurer
ZILOG, INC.
By /s/ Edgar A. Sack
--------------------------------------------
Name: Edgar A. Sack
Title: President and CEO
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<PAGE> 1
EXHIBIT 2.4
AMENDMENT NUMBER THREE TO THE
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NUMBER THREE TO THE AGREEMENT AND PLAN OF MERGER (this
"AMENDMENT"), dated as of January 26, 1998, by and among TPG PARTNERS II, L.P.,
a Delaware limited partnership ("PARENT"), TPG ZEUS ACQUISITION CORPORATION, a
Delaware corporation ("SUB") and ZILOG, INC., a Delaware corporation (the
"COMPANY"),
WITNESSETH:
WHEREAS, Parent and the Company are parties to that certain Agreement
and Plan of Merger, dated as of July 20, 1997, as amended by Amendment Number
One, dated as of November 18, 1997, and Amendment Number Two, dated as of
December 10, 1997 (the "MERGER AGREEMENT"); and
WHEREAS, pursuant to Section 8.3 of the Merger Agreement, the parties
hereto wish to amend the Merger Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined herein
shall the meanings set forth in the Merger Agreement.
SECTION 2. Amendment to the Merger Agreement. The third sentence of
Section 2.1(c)(ii) of the Merger Agreement shall be amended and restated in
its entirety, and shall be replaced by the following:
"Any such holder's election to retain Non-Cash Election Shares shall
have been properly made only if the Exchange Agent (as defined in
Section 2.3(a)) shall have received at its designated office by 5:00
p.m., New York City time on February 20, 1998 (the "Election Date"), a
Form of Election properly completed and signed and accompanied by
certificates for the Shares to which such Form of Election relates, duly
endorsed in blank or otherwise in form acceptable for transfer on the
books of the Company (or by an appropriate guarantee of delivery of such
certificates as set forth in such Form of Election from a firm which is
a member 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, provided
such certificates are in fact delivered to the Exchange Agent within
three New York Stock Exchange trading days after the date of execution
of such guarantee of delivery)."
<PAGE> 2
SECTION 3. Representations and Warranties.
(a) The Company. The execution, delivery and performance of this
Amendment by the Company have been duly authorized by the Board of Directors of
the Company and by all other necessary corporate action on the part of the
Company. This Amendment has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Amendment by
Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
(b) Parent and Sub. The execution, delivery and performance of this
Amendment by each of Parent and Sub have been duly authorized by the General
Partner of Parent and the Board of Directors of Sub, respectively, and by all
other necessary partnership or corporate action on the part of Parent or Sub,
respectively. This Amendment has been duly executed and delivered by each of
Parent and Sub and (assuming the valid authorization, execution and delivery of
this Amendment by the Company) constitutes the valid and binding obligation of
each of Parent and Sub enforceable against them in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
SECTION 4. Miscellaneous.
(a) Other than as set forth in Section 2, this Amendment does not
modify, change or delete any other addendum, term, provision, representation,
warranty or covenant (the "PROVISIONS") relating to or contained in the Merger
Agreement, and all such Provisions remain in full force and effect. For the
avoidance of doubt, all references in the Merger Agreement to "the date hereof"
or "the date of this Agreement" shall be deemed to be references to the date
July 20, 1997.
(b) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. This
Amendment may be executed in counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
(c) This Amendment and any of the provisions hereof may not be amended,
altered or added to in any manner except by a document in writing and signed by
each party.
* * *
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<PAGE> 3
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Amendment
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P., its General Partner
By: TPG Advisors II, Inc., its General Partner
By: /s/ DAVID M. STANTON
-----------------------
Name: David M. Stanton
Title: Vice President
TPG ZEUS ACQUISITION CORPORATION
By: /s/ DAVID M. STANTON
-----------------------
Name: David M. Stanton
Title: President
ZILOG, INC.
By:
-----------------------
Name:
Title:
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<PAGE> 4
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Amendment to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P., its General Partner
BY: TPG Advisors II, Inc., its General Partner
By
-------------------------------
Name: David M. Stanton
Title: Vice President
TPG ZEUS ACQUISITION CORPORATION
By
-------------------------------
Name: David M. Stanton
Title: President
ZILOG, INC,
By /s/ EDGAR A. SACK
-------------------------------
Name: Edgar A. Sack
Title: Chairman of the Board
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ZILOG, INC.
I.
The name of the Corporation is Zilog, Inc.
II.
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange St., Wilmington, Delaware, New Castle County. The name
of the registered agent of the Corporation at such address is The Corporation
Trust Company.
III.
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware as
the same exists or hereafter may be amended.
IV.
1. The Corporation is authorized to issue two classes of stock to be
designated Common Stock ("Common Stock") and Preferred Stock ("Preferred
Stock"), respectively. The total number of shares which the Corporation is
authorized to issue is Seventy-Five Million One Hundred and Ninety Thousand
(75,190,000). The number of shares of Common Stock authorized to be issued is
Seventy-Five Million (75,000,000), $0.01 par value. The number of shares of
Preferred Stock authorized to be issued is One Hundred Ninety Thousand
(190,000), $0.01 par value.
2. The Board of Directors is expressly authorized to provide for the
issue, in one or more series, of all or any shares of the Preferred Stock and,
in the resolution or resolutions providing for such issue, to establish for each
such series,
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<PAGE> 2
(a) the number of its shares, which may thereafter (unless
forbidden in the resolution or resolutions providing for such issue) be
increased or decreased (but not below the number of shares of the series
then outstanding) pursuant to a subsequent resolution of the Board of
Directors,
(b) the voting powers, full or limited, of the shares of such
series, or that such shares shall have no voting powers, and
(c) the designations, preferences and relative, participating,
optional or other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof.
3. In furtherance of the foregoing authority and not in limitation of it,
the Board of Directors is expressly authorized, in the resolution or resolutions
providing for the issue of a series of Preferred Stock,
(a) to subject the shares of such series, without the consent of
the holders of such shares, to being converted into or exchanged for
shares of another class or classes of stock of the Corporation, or to
being redeemed for cash, property or rights, including securities, all on
such conditions and on such terms as may be stated in such resolution or
resolutions, and
(b) to make any of the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of the shares of
the series dependent upon facts ascertainable outside this Certificate of
Incorporation.
4. Whenever the Board of Directors shall have adopted a resolution or
resolutions to provide for,
(a) the issue of a series of Preferred Stock,
(b) a change in the number of authorized shares of a series of
Preferred Stock, or
(c) the elimination from this Certificate of Incorporation of all
references to a previously authorized series of Preferred Stock by
stating that none of the authorized shares of a series of Preferred Stock
are outstanding and that none will be issued,
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<PAGE> 3
the officers of the Corporation shall cause a certificate, setting forth a copy
of such resolution or resolutions and, if applicable, the number of shares of
stock of such series, to be executed, acknowledged, filed and recorded, in order
that the certificate may become effective in accordance with the provisions of
the General Corporation Law of the State of Delaware, as from time to time
amended. When any such certificate becomes effective, it shall have the effect
of amending this Certificate of Incorporation, and whenever such term is used in
this certificate, it shall be deemed to include the effect of the provisions of
any such certificate.
5. As used in this Article IV, the term "Board of Directors" shall
include, to the extent permitted by the General Corporation Law of the State of
Delaware, any duly authorized committee of the Board of Directors.
6. Holders of shares of Common Stock shall be entitled to receive such
dividends or distributions as are lawfully declared on the Common Stock; to have
notice of any authorized meeting of stockholders; to one vote for each share of
Common Stock on all matters which are properly submitted to a vote of such
stockholders; and, upon dissolution of the Corporation, to share ratably in the
assets thereof that may be available for distribution after satisfaction of
creditors and of the preferences, if any, of any shares of Preferred Stock.
V.
The name and mailing address of the incorporator are as follows:
Richard R. Pickard, Esq.
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
VI.
The number of Directors which constitute the whole Board of Directors of
the Corporation shall be as specified in the Bylaws of the Corporation.
VII.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, amend, rescind or repeal
the Bylaws of the Corporation.
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<PAGE> 4
VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws of the Corporation may provide. The books of the
Corporation may be kept (subject to any provision contained in the General
Corporation Law of the State of Delaware) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation.
IX.
1. A Director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent permitted
by the laws of the State of Delaware as now in effect or hereafter amended. In
particular, no Director shall be liable to the Corporation or any of 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 General Corporation Law of the State of Delaware, as the same
exists or hereafter may be amended, or (iv) for any transaction from which the
Director derived an improper personal benefit.
2. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director existing at the time of such repeal or modification.
3. If the General Corporation Law of the State of Delaware is amended to
authorize corporate action further eliminating or limiting the liability of
directors, then a Director, in addition to the circumstances in which he or she
is not now liable, shall be free of liability to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
X.
This Corporation shall indemnify its officers, Directors, employees and
agents to the maximum extent permitted by the General Corporation Law of the
State of Delaware, which power to indemnify shall include, without limitation,
the power to enter into indemnification agreements and amendments thereto upon
such terms as the Board of Directors shall deem advisable.
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<PAGE> 5
The undersigned, being the Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
under penalties of perjury, under the laws of the State of Delaware, that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 2nd day of April, 1997.
/s/ Richard R. Pickard
-----------------------------------
Richard R. Pickard
Incorporator
-5-
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF MERGER
of
TPG ZEUS ACQUISITION CORPORATION
into
ZILOG, INC
Pursuant to Section 251 of the General
Corporation Law of the State of Delaware
Zilog, Inc. ("Zilog"), a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "General Corporation
Law"), hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
---- ----------------------
TPG Zeus Acquisition Corporation Delaware
Zilog, Inc. Delaware
SECOND: An Agreement and Plan of Merger, dated as of July 20, 1997, by
and between TPG Partners II, L.P. ("TPG") and Zilog, as amended by Amendments
Number One, Number Two and Number Three to the Agreement and Plan of Merger,
dated as of
1
<PAGE> 2
November 18, 1997, December 10, 1997 and January 26, 1998, respectively, by and
among TPG, TPG Zeus Acquisition Corporation and Zilog (the "Agreement and Plan
of Merger"), was approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
251 of the General Corporation Law.
THIRD: The name of the surviving corporation of the merger is "Zilog,
Inc." (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of the Surviving Corporation
(the "Certificate") shall be the Certificate of Incorporation of Zilog, provided
that Article IV of such Certificate of Incorporation shall be amended to read in
its entirety as follows:
"FOURTH: The Corporation shall be authorized to issue 50,000,000 shares
of common stock and 5,000,000 shares of preferred stock. There shall be
two classes of common stock of the Corporation. The first class of
common stock of the Corporation shall have a par value of $0.01 and
shall be designated "Common Stock" and the number of shares constituting
such class shall be 35,000,000. The second class of stock of the
Corporation shall have a par value of $0.01 and shall be designated
"Class A Non-Voting Common Stock" and the number of shares constituting
such class shall be 15,000,000. Holders of shares of Common Stock shall
be entitled to one vote for each share of such stock held on all matters
as to which stockholders may be entitled to vote pursuant to the
Delaware General Corporation Law. Holders of shares of Class A
Non-Voting Common Stock shall not have any voting rights, except that
the holders of shares of Class A Non-Voting Common Stock shall have the
right to vote as a class to the extent required by the Delaware General
Corporation Law. In all other respects the rights, powers, preferences
and limitations of the Common Stock and Class A Non-Voting Common Stock
shall be identical. The preferred stock shall have a par value of
$100.00 and the board of directors may authorize the issuance from time
to time of the preferred stock in one or more classes and/or series and
with such powers, designations, preferences, rights and qualifications,
limitations or restrictions (which may differ with respect to each such
class and/or series) as the board may fix by resolution."
2
<PAGE> 3
FIFTH: The executed Agreement and Plan of Merger is on file at the
offices of the Surviving Corporation at 210 East Hacienda Avenue, Campbell,
California 95008-6600.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
Zilog or TPG Zeus Acquisition Corporation.
SEVENTH: The merger of the constituent entities shall become effective
upon the filing hereof with the Secretary of State of the State of Delaware.
3
<PAGE> 4
IN WITNESS WHEREOF, Zilog, as the Surviving Corporation, has caused this
Certificate of Merger to be signed by Richard R. Pickard, its Secretary, on the
27th day of February, 1998.
ZILOG, INC.
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
Title: Secretary
S-1
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
ZILOG, INC.
(A DELAWARE CORPORATION)
ADOPTED AS OF MAY 21, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I OFFICES..................................................................1
1.1 Registered Office........................................................1
1.2 Other Offices............................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS.................................................1
2.1 Annual Meeting...........................................................1
2.2 Special Meetings.........................................................1
2.3 Notices..................................................................1
2.4 Stockholder Lists........................................................2
2.5 Quorum and Adjournments..................................................2
2.6 Majority.................................................................2
2.7 Voting...................................................................2
2.8 Consent of Absentees.....................................................3
2.9 Action Taken Without a Meeting...........................................3
2.10 Record Date of Stockholders..............................................3
2.11 Conduct of Meeting.......................................................4
2.12 Notice of Business Proposed at Meetings..................................4
2.13 Inspectors of Election...................................................4
ARTICLE III DIRECTORS................................................................5
3.1 Powers...................................................................5
3.2 Number, Election and Term of Office......................................5
3.3 Vacancies................................................................5
3.4 Annual Meetings..........................................................5
3.5 Regular Meetings.........................................................6
3.6 Special Meetings.........................................................6
3.7 Quorum and Majority......................................................6
3.8 Telephonic Meeting.......................................................6
3.9 Committees...............................................................6
3.10 Action Taken Without a Meeting...........................................6
3.11 Compensation of Directors................................................7
3.12 Interested Directors.....................................................7
ARTICLE IV OFFICERS.................................................................7
4.1 Officers and Elections...................................................7
4.2 Removal..................................................................7
4.3 Resignation..............................................................8
4.4 Terms of Office and Vacancies............................................8
4.5 Salaries.................................................................8
4.6 Chairman of the Board....................................................8
4.7 President................................................................8
4.8 Vice President...........................................................8
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.9 Secretary................................................................8
4.10 Assistant Secretary......................................................9
4.11 Treasurer................................................................9
4.12 Assistant Treasurer......................................................9
ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS,
RATIFICATION OF CONTRACTS, AND VOTING OF
SHARES OWNED BY THE CORPORATION........................................ 10
5.1 Execution of Corporate Instruments..................................... 10
5.2 Ratification by Stockholders........................................... 10
5.3 Voting of Shares Owned by the Corporation.............................. 11
ARTICLE VI CERTIFICATES OF STOCK.................................................. 11
6.1 Entitlement............................................................ 11
6.2 Facsimile Signatures................................................... 11
6.3 Lost Certificates...................................................... 11
6.4 Transfer of Stock...................................................... 11
6.5 Fixing a Record Date................................................... 11
6.6 Registered Stockholders................................................ 12
GENERAL PROVISIONS........................................................................ 12
7.1 Dividends.............................................................. 12
7.2 Reserves............................................................... 12
7.3 Checks, Notes, Instruments, Etc........................................ 13
7.4 Seal................................................................... 13
7.5 Fiscal Year............................................................ 13
7.6 Waiver of Notice....................................................... 13
7.7 Registrars and Transfer Agents......................................... 13
7.8 Indemnification of Officers and Directors.............................. 13
7.9 Amendments............................................................. 13
CERTIFICATE OF SECRETARY.................................................................. 14
</TABLE>
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<PAGE> 4
BYLAWS OF
ZILOG, INC.
(A Delaware Corporation)
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware.
1.2 Other Offices. The Corporation may additionally have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors from time to time may determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of the stockholders shall be held
for the purpose of electing directors and conducting such other business as may
come before the meeting. The date, time and place, within or without the State
of Delaware, of the annual meeting shall be determined by resolution of the
Board of Directors.
2.2 Special Meetings. Special meetings of the stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings may be called by the Board of
Directors or by the President, or one or more stockholders holding shares in the
aggregate entitled to cast not less than ten percent (10%) of the votes at the
meeting, and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors. Such request shall state the
purpose or purposes of the proposed special meeting. Business transacted at any
special meeting of stockholders shall be limited to the purpose or purposes
stated in the notice.
2.3 Notices. Written or printed notice of every annual or special
meeting of the stockholders, stating the place, date, time and, in the case of
special meetings, the purpose or purposes of such meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10), nor more
than sixty (60), days before the date of the meeting. All such notices shall be
delivered, either personally or by mail, by or at the direction of the Board of
Directors, the President or the Secretary, and if mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to the
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<PAGE> 5
stockholder at his address as it appears on the records of the Corporation, with
postage prepaid.
2.4 Stockholder Lists. The officer having charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at such
meeting, arranged in alphabetic order, specifying the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list also shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.5 Quorum and Adjournments. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting, and entitled to vote thereat,
shall have the power, by affirmative vote of the holders of a majority of such
shares, to adjourn the meeting to another time and/or place. Unless the
adjournment is for more than thirty (30) days or unless a new record date is set
for the reconvened meeting, no notice of the reconvened meeting need be given to
any stockholder, provided that the time and place of the reconvened meeting are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the reconvened meeting, a notice of the reconvened meeting shall be
given to each stockholder of record entitled to vote at the meeting. At the
reconvened meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
2.6 Majority. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of an applicable
statute or of the certificate of incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
2.7 Voting. Every stockholder shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, except that no
proxy shall be voted on after three years from its date, unless such proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the
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<PAGE> 6
stock itself or an interest in the Corporation generally. Voting at meetings of
stockholders need not be by written ballot.
2.8 Consent of Absentees. The transactions of any meeting of
stockholders, however called and noticed, shall be valid as though had at a
meeting duly held after regular call and notice, if a quorum was present either
in person or by proxy, and if, either before or after the meeting, each of the
stockholders entitled to vote, not present in person or by proxy, signs a
written waiver of notice or a consent to the holding of such meeting, or an
approval of minutes thereof. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
2.9 Action Taken Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing. Every
written consent shall bear the date of signature of each stockholder or member
who signs the consent, and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the Corporation in the manner required by
the General Corporation Law of Delaware, written consents signed by sufficient
number of holders or members to take this action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or an agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
2.10 Record Date of Stockholders. The Board of Directors is authorized to
fix in advance the date not exceeding sixty (60) nor less than ten (10) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as the
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent, and, in such case, such stockholders and
only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting, and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as the
case may be, notwithstanding any transfer of any stock on the books of the
Corporation, after such record date fixed as described above.
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<PAGE> 7
2.11 Conduct of Meeting. The Chairman of the Board of, in his or her
absence the President or any Vice President designated by the Chairman of the
Board, shall preside at all regular or special meetings of stockholders. To the
maximum extent permitted by law, such presiding person shall have the power to
set procedural rules, including but not limited to, rules respecting the time
allotted to stockholders to speak, governing all aspects of the conduct of such
meetings.
2.12 Notice of Business Proposed at Meetings. To be properly brought
before any meeting of the stockholders, business must either be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at any meeting except in accordance with the procedures set
forth in this Section 2.12, provided, however, that nothing in this Section 2.12
shall be deemed to preclude discussion by any stockholder of any business
properly brought before a meeting.
The Chairman of the Board shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2.12, and if he or she should
so determine, he or she shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
2.13 Inspectors of Election. In advance of any meeting of stockholders,
the Board of Directors may appoint any person(s), other than nominees for
office, inspectors of election to act at such meeting or any adjournment
thereof. If inspectors of election are not so appointed, the President may, and
on the request of any stockholder or his proxy, shall, make such appointment at
the meeting. The number of inspectors shall be either one (1) or three (3). If
appointed at a meeting on the request of one or more stockholders or proxies,
the majority of shares present shall determine whether one (1) or three (3)
inspectors shall be appointed. In case any person appointed as inspector fails
to appear or fails or refuses to act, the vacancy may be filled by appointment
by the Board of Directors in advance of the meeting, or at the meeting by the
President. The duty of such inspector shall include the following: determining
the number of shares outstanding and the voting power of each; the shares
represented at the meeting, the existence of a quorum and the authenticity and
effect of proxies; receiving votes, ballots or consents; hearing and determining
all challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining the results;
and such other acts as may be proper to conduct the election or vote with
fairness to all stockholders.
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<PAGE> 8
ARTICLE III
DIRECTORS
3.1 Powers. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or to be done by the stockholders.
3.2 Number, Election and Term of Office. The number of the directors of
the Corporation shall be determined from time to time by resolution of the Board
of Directors. The initial number of authorized members of the Board of Directors
shall consist of six (6) directors, until such time as the Board of Directors
modifies such number by amendment to this Paragraph 3.2. All directors shall be
elected at the annual meeting or any special meeting of the stockholders, except
as provided in Section 3.3, and each director so elected shall hold office until
the next annual meeting and until his or her successor is elected and qualified
or until his or her earlier resignation or removal. Directors need not be
stockholders.
3.3 Vacancies. A vacancy or vacancies in the Board of Directors shall be
deemed to exist in the case of death, resignation or removal of any director for
cause, or if the authorized number of directors be increased. Vacancies may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, unless otherwise provided in the Certificate of
Incorporation. The stockholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. If the Board accepts
the resignation of a director tendered to take effect at a future time, the
Board shall have power to elect a successor to take office when the resignation
is to become effective. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling a vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
3.4 Annual Meetings. The annual meeting of each newly elected Board of
Directors shall be held at such time and place as is specified by the
stockholders at the meeting at which the directors were elected. If no such time
and place is specified by the stockholders, the President shall specify such
time and place and give at least twenty-four (24) hours' notice thereof to each
newly elected director, either personally, by telephone, by mail or by
telegraph.
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3.5 Regular Meetings. Regular meetings, other than the annual meeting,
of the Board of Directors shall be held at such times and places within or
without the State of Delaware as shall be determined, from time to time, by
resolution of the Board of Directors.
3.6 Special Meetings. Special meetings of the Board of Directors may be
called by the President, any Vice President or the Secretary, and shall be
called by the President upon the express written request of any two directors,
on twenty-four (24) hours' prior notice to each director, either personally, by
telephone, by mail or by telegraph, at such time and such place within or
without the State of Delaware as shall be specified in such notice.
3.7 Quorum and Majority. At all meetings of the Board of Directors, a
majority of the total number of directors shall constitute a quorum for the
transaction of business. The vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
3.8 Telephonic Meeting. Members of the Board of Directors, or any
committee designated by such Board, may participate in a meeting of such Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this Paragraph 3.8 shall
constitute presence in person at such meeting.
3.9 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation, which to the extent
provided in the resolution of the Board of Directors, or in these bylaws, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require the
same, except as limited by Delaware General Corporation Law. Each committee of
the Board of Directors may fix its own rules of procedure and shall hold its
meetings as provided by such rules, except as may otherwise be provided by the
resolution of the Board of Directors designating such committee, but in all
cases, the presence of at least a majority of the members of such committee
shall be necessary to constitute a quorum. In the event that a member of such
committee is absent or disqualified, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
3.10 Action Taken Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent
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thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.11 Compensation of Directors. The Board of Directors, by resolution
adopted by a majority of the whole Board, may establish reasonable compensation
of all directors for services to the Corporation as directors, officers or
otherwise. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees designated by the Board of Directors may be allowed like
compensation for their services to the Corporation.
3.12 Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (a) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (b) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
4.1 Officers and Elections. The officers of the Corporation shall be
chosen by the Board of Directors and shall consist of a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, a Treasurer and such other
officers and assistant officers as may be deemed necessary or desirable by the
Board of Directors. Any number of offices may be held by the same person. In its
discretion, the Board of Directors may leave unfilled for any period as it may
deem necessary or advisable any office except the offices of President,
Secretary and Treasurer.
4.2 Removal. Subject to the rights, if any, of an officer under any
contract of employment, any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors at any time, with or without
cause.
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4.3 Resignation. Any officer may resign at any time by giving written
notice to the Corporation. Any resignation shall take effect on the date of the
receipt of that notice or at any later time specified in that notice, the
acceptance of the resignation shall not be necessary to make it effective. Any
resignation shall be without prejudice to the rights, if any, of the Corporation
under any contracts to which the officer is a party.
4.4 Terms of Office and Vacancies. The officers of the Corporation shall
hold office until their successors are duly elected and qualified, or until
their earlier resignation or removal. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation, by death, resignation or otherwise, shall be filled by the Board of
Directors.
4.5 Salaries. Salaries of all officers shall be fixed by the Board of
Directors.
4.6 Chairman of the Board. The Chairman of the Board shall, when
present, preside at all meetings of the stockholders and of the Board of
Directors and, subject to these bylaws, shall exercise such other powers and
shall perform such other duties as may from time to time be prescribed by the
Board of Directors.
4.7 President. The president shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation, and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
4.8 Vice President. In the absence of the President or in the event of
his inability or refusal to act, the Vice President, or if there be more than
one, the Vice Presidents in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all powers
of and be subject to all the restrictions upon the President. The Vice President
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
4.9 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority
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to affix the same to any instrument requiring it, and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
4.10 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
4.11 Treasurer. The Treasurer shall have the custody of the Corporation's
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
The Treasurer may disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
transactions and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give to
the Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
4.12 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
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ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS, RATIFICATION
OF CONTRACTS, AND VOTING OF SHARES OWNED BY THE CORPORATION
5.1 Execution of Corporate Instruments. The Board may, in its
discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute any corporate instrument or
documents, or to sign the corporate name without limitation, except where
otherwise provided by law, and such execution or signature shall be binding upon
the Corporation. Unless otherwise specifically determine by the Board:
(a) formal contracts of the Corporation, promissory notes, deeds
of trust, mortgages, and other evidences of indebtedness of
the Corporation, and other corporate instruments or documents
requiring the corporate seal (except for share certificates
issued by the Corporation), and share certificates owned by
the Corporation, shall be executed, signed, or endorsed by the
President, or jointly endorsed by any Vice President and the
Secretary, Assistant Secretary, Treasurer or Assistant
Treasurer.
(b) checks drawn on banks or other depositories on funds to the
credit of the Corporation, or in special accounts of the
Corporation, shall be signed in such manner (which may be a
facsimile signature) and by such person or persons as shall be
authorized by the Board; and
(c) dividend warrants, drafts, insurance policies, and all other
instruments and documents requiring the corporate signature,
but not requiring the corporate seal, shall be executed or
signed in the manner directed by the Board.
5.2 Ratification by Stockholders. The Board may, in its discretion,
submit any contract or act for approval or ratification by the stockholders at
any special meeting of stockholders called for that purpose. Any contract or act
which shall be approved or ratified by the holders of a majority of the voting
power of the Corporation represented at such meeting shall be as valid and
binding upon the Corporation as though approved or ratified by each and every
shareholder of the Corporation, unless a greater vote is required by law for
such purpose.
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5.3 Voting of Shares Owned by the Corporation. All shares of other
corporations owned or held by the Corporation for itself or for other parties in
any capacity shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized to do so by resolution of the Board or, in
the absence of such authorization, by the President, any of the Vice Presidents,
the Secretary or an Assistant Secretary.
ARTICLE VI
CERTIFICATES OF STOCK
6.1 Entitlement. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation, by
the Chairman or Vice Chairman of the Board, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, representing the number of shares
owned by him in the Corporation.
6.2 Facsimile Signatures. Any signature on the certificate may be
facsimile, other than the counter-signature (a) of a transfer agent other than
the Corporation or its employee, or (b) of a registrar other than the
Corporation or its employee. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 Lost Certificates. The Board of Directors may direct a new
certificate of stock or uncertificated shares to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give to the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
6.4 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
6.5 Fixing a Record Date. The Board of Directors may fix in advance a
date, not more than sixty (60) nor fewer than ten (10) days, preceding the date
of any meeting of the stockholders, or the date for the payment of any dividend
or the date of the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into
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effect, or a date in connection with obtaining such consent, as a record date
for the determination of the stockholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitlement to receive payment
of any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital stock,
or to give such consent, as in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consents, as the case may be
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the next day preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the next day preceding the day on which the meeting is held; the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is delivered to
the Corporation as provided in Article 2.9 of these Bylaws; the record date for
determining stockholders for any other purpose shall be at the close of business
on the day which the Board of Directors adopts the resolution relating thereof;
and a determination of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
6.6 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of the shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
ARTICLE VII
GENERAL PROVISIONS
7.1 Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock of the Corporation, subject to the provisions of the certificate of
incorporation.
7.2 Reserves. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of
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the Corporation, or for such other purposes as the directors shall think
conducive to the interests of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
7.3 Checks, Notes, Instruments, Etc. All checks or demands for money,
notes, instruments or other documents of the Corporation shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate. Unless so designated by the Board, no such
officer or officers or such other person or persons shall have any power or
authority to render the Corporation liable for any purpose or to any amount.
7.4 Seal. The corporate seal shall be prescribed by the Board of
Directors. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
7.5 Fiscal Year. The fiscal year of the Corporation shall be determined
from time to time by resolution of the Board of Directors.
7.6 Waiver of Notice. Whenever any notice is required to be given under
the provisions of the laws of the State of Delaware or under the provisions of
the certificate of incorporation or these bylaws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. Except as may
otherwise be specifically provided by law, any waiver by mail, telegraph, cable
or wireless bearing the name of the person entitled to notice shall be deemed a
waiver in writing duly signed. The presence of any person at any meeting, either
in person or by proxy, shall be deemed the equivalent of a waiver in writing
duly signed, except where the person attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
7.7 Registrars and Transfer Agents. The Board of Directors may appoint
one or more registrars of transfer, which shall be incorporated banks or trust
companies, either domestic or foreign, and one or more transfer agents or
transfer clerks, who shall be appointed at such times and places as the Board of
Directors shall determine.
7.8 Indemnification of Officers and Directors. The Corporation shall
indemnify any and all of its Directors or officers, including former Directors
or officers, and any employee, who shall serve as an officer or director of any
corporation at the request of the Corporation, to the fullest extent permitted
under and in accordance with the laws of the State of Delaware.
7.9 Amendments. These bylaws may be altered, amended or repealed, or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the Board of
Directors, or at any special meeting of the stockholders or of the Board of
Directors, if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
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CERTIFICATE OF SECRETARY
I, Richard R. Pickard, do hereby certify:
1. That I am the duly elected and acting Secretary of Zilog, Inc., a
Delaware corporation (the "Corporation"), and;
2. That the foregoing bylaws constitute the Bylaws of the Corporation
duly adopted by the Board of Directors thereof effective as of May 21, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation.
/s/ RICHARD R. PICKARD
----------------------------------------
Richard R. Pickard, Secretary
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EXHIBIT 3.4
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE PREFERRED STOCK
OF ZILOG, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
Zilog, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 151(g) thereof, hereby
certifies on February 27, 1998 as follows:
FIRST: The Certificate of Incorporation of the Corporation
authorizes the issuance of up to 5,000,000 shares of Preferred Stock (the
"Preferred Stock"), par value $100.00 per share, in one or more classes and/or
series, pursuant to a resolution providing for such issue adopted by the Board
of Directors of the Corporation (the "Board"), and further authorizes the Board
to determine the powers, designations, preferences, rights and qualifications,
limitations or restrictions granted to or imposed upon any such class and/or
series of Preferred Stock.
SECOND: On February 27, 1998, the Board adopted the following
resolution and Exhibit A authorizing the creation and issuance of a series of
said Preferred Stock to be known as Series A Cumulative Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board in
accordance with the provisions of its Certificate of Incorporation, a series of
preferred stock of the Corporation, designated as Series A Cumulative Preferred
Stock, par value $100.00 per share ("Series A Preferred Stock"), be, and it
hereby is, created, and that the powers, designations, preferences, rights and
qualifications, limitations or restrictions granted to or imposed upon such
series of preferred stock are as set forth below:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A
Cumulative Preferred Stock" ("Series A Preferred Stock") and the number of
shares constituting such series shall be one million five hundred thousand
(1,500,000), which number may be decreased by the Board of Directors (the
"Board") of Zilog, Inc. (the "Corporation") without a vote of
stockholders; provided, however, that such number may not be decreased
below the number of then currently outstanding shares of Series A
Preferred Stock.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A Preferred Stock, in
preference to the holders of shares of the Corporation's Common Stock, par
value $.01 per share (the "Voting Common Stock"), and the Corporation's
Class A Non-Voting Common
<PAGE> 2
Stock, par value $.01 per share (together with the Voting Common Stock,
the "Common Stock"), and to any other capital stock of the Corporation
ranking junior to Series A Preferred Stock as to payment of dividends,
shall be entitled to receive, when, as and if declared by the Board out of
funds of the Corporation legally available for the payment of dividends,
cumulative dividends at an annual rate of (i) 13.5% of the Total Value, as
defined in Section 7, per share in respect of periods ending on or prior
to February 26, 2008 and (ii) 15.5% of the Total Value per share in
respect of periods commencing after February 26, 2008, subject to the
provisions of Section 4(d). Dividends payable in respect of the
outstanding shares of Series A Preferred Stock shall begin to accrue and
compound quarterly (by virtue of the increase to Total Value in accordance
with Sec as defined in Section 7, the Business Day next preceding such
day) in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date") for each of the fiscal quarters ended March 31,
June 30, September 30 and December 31, respectively, (each such date being
referred to herein as a "Quarterly Dividend Accrual Date") commencing in
respect of each share of Series A Preferred Stock on the first Quarterly
Dividend Payment Date which is at least seven days after the date of
original issue thereof.
(b) To the extent dividends due and payable on a Quarterly
Dividend Payment Date are not paid in cash (whether or not declared by the
Board) on such Quarterly Dividend Payment Date (an "Accretion Date"), an
amount, equal to all dividends which have accumulated on each share of
Series A Preferred Stock then outstanding during the quarterly period
ending on the Quarterly Dividend Accrual Date immediately preceding such
Accretion Date (or for such shorter period beginning on the date of
issuance in the case of an Accretion Date occurring on the initial
Quarterly Dividend Payment Date), will be added, as of the Quarterly
Dividend Accrual Date immediately preceding such Accretion Date, to the
Total Value of such share of Series A Preferred Stock and will remain a
part thereof (and will accrue further dividends by virtue of Section
2(a)(i)) until such dividends are paid in cash, at which time the Total
Value will be reduced by the amount of dividends so paid; provided that in
no event shall Total Value be reduced below Liquidation Value, as defined
in Section 7, pursuant to this Section 2(b).
(c) The amount of dividends payable shall be determined on the
basis of twelve 30-day months and a 360-day year. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accumulated and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board may fix a record date (a "Regular Record
Date") for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend declared
2
<PAGE> 3
thereon, which record date shall be no more than 60 days nor less than ten
days prior to the date fixed for the payment thereof. Any dividend
declared by the Board as payable and punctually paid on a Quarterly
Dividend Payment Date will be paid to the Persons, as defined in Section
7, in whose names Series A Preferred Stock is registered at the close of
business on the Regular Record Date set with respect to that Quarterly
Dividend Payment Date (the "Registered Holders"). All cash payments shall
be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
(d) The Registered Holder of any shares of Series A Preferred
Stock, upon the Corporation's written request therefor containing a
reasonably complete description of the basis for such request, shall
indemnify the Corporation for any and all withholding tax liabilities
incurred by the Corporation in connection with any dividends paid or
distributions made (including, without limitation, in connection with any
redemption of Series A Preferred Stock, but excluding any penalties other
than penalties resulting from the failure of the Registered Holder to
provide any required information) to such holder in respect of Series A
Preferred Stock. Each Registered Holder, by acceptance of the certificate
evidencing such holder's shares of Series A Preferred Stock, shall be
deemed to have agreed to the terms of this Section 2(d).
(e) The holders of shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions in respect of
such shares of Series A Preferred Stock except as provided for hereby.
Section 3. Restrictive Covenants; Voting Rights.
(a) So long as any shares of Series A Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of
shares shall then be required by law, without first obtaining the consent
or approval of the holders of a majority of the number of then-outstanding
shares of Series A Preferred Stock, given in person or by proxy at a
meeting at which the holders of such shares shall be entitled to vote
separately as a class, or by written consent, the Corporation shall not:
(i) authorize or create any class or series, or any shares
of any class or series, of capital stock of the Corporation having
any preference or priority as to dividends or upon redemption,
liquidation, dissolution, or winding up over Series A Preferred
Stock ("Senior Stock"); provided, however, that no such vote shall
be required with respect to the authorization or creation by the
Corporation of one or more classes and/or series of Senior Stock if
the proceeds of the Corporation's issuance of such Senior Stock are
sufficient, and are used, to redeem all outstanding shares of Series
A Preferred Stock concurrently with the issuance of such Senior
Stock;
(ii) (A) authorize or create any class or series, or any
shares of any class or series, of capital stock of the Corporation
ranking on a parity
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<PAGE> 4
(either as to dividends or upon redemption, liquidation, dissolution
or winding up) with the Series A Preferred Stock ("Parity Stock") or
(B) issue shares of Parity Stock; provided, however, that no such
vote shall be required with respect to the authorization, creation
or issuance by the Corporation of one or more classes and/or series
of Parity Stock if the proceeds of the Corporation's issuance of
such Parity Stock are sufficient, and are used, to redeem all
outstanding shares of Series A Preferred Stock concurrently with the
issuance of such Parity Stock;
(iii) reclassify, convert or exchange any shares of any
capital stock of the Corporation into shares of Senior Stock or
Parity Stock;
(iv) authorize any security exchangeable for, convertible
into, or evidencing the right to purchase any shares of Senior Stock
or Parity Stock;
(v) amend, alter or repeal the Corporation's Certificate of
Incorporation, as it may be amended from time to time, or the
Corporation's By-Laws, as they may be amended from time to time, to
alter or change the powers, designations, preferences, rights and
qualifications, limitations or restrictions of Series A Preferred
Stock or any Senior Stock or Parity Stock so as to affect Series A
Preferred Stock in any material adverse respect;
(vi) declare or pay dividends or make any other distributions
on, or redeem or repurchase any, shares of Common Stock or other
capital stock of the Corporation ranking junior (either as to
dividends or upon redemption, liquidation, dissolution or winding
up) to the Series A Preferred Stock ("Junior Stock"), other than (A)
dividends, redemptions, repurchases or distributions made in the
form of, or exchangeable for, shares of Junior Stock, or warrants,
rights or options to acquire shares of Junior Stock; (B) from time
to time during the period in which shares of Series A Preferred
Stock are outstanding, redemptions or repurchases of Junior Stock
held by management of the Corporation in connection with termination
of employment, retirement and similar circumstances; and (C)
redemptions or repurchases permitted by the proviso to clause (ix)
of this Section 3(a);
(vii) declare or pay dividends or make any other distributions
on, or redeem or repurchase any, shares of Parity Stock, other than
(A) dividends, distributions or redemptions made in the form of, or
exchangeable for, shares of Junior Stock, or warrants, rights or
options to acquire shares of Junior Stock, (B) other dividends or
distributions paid ratably on Series A Preferred Stock and all
Parity Stock on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all such
shares are then entitled, (C) repurchases in exchange for shares of
Junior Stock, or warrants, rights or options to acquire shares of
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<PAGE> 5
Junior Stock, and (D) other redemptions or repurchases effected
ratably on Series A Preferred Stock and all Parity Stock, in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(viii) merge or consolidate with, or sell all or substantially
all of the Corporation's assets to, another entity unless shares of
Series A Preferred Stock outstanding immediately prior to such
transaction (A) remain outstanding after such transaction without
change to the powers, designations, preferences, rights and
qualifications, limitations or restrictions thereof, (B) are
exchanged for securities possessing substantially equivalent
preferences, rights and powers or (C) are redeemed concurrently with
the effectiveness and closing of such transaction; provided that, in
the case of each of (A) and (B), immediately following the
consummation of any such transaction, there shall not be issued and
outstanding any shares of any class or series of stock of the
surviving entity having any preference or priority as to dividends
or upon redemption, liquidation, dissolution, or winding up over, or
ranking on a parity either as to dividends or upon redemption,
liquidation, dissolution, or winding up with, such Series A
Preferred Stock (or the securities issued in exchange therefor)
unless such shares shall have been shares of Senior Stock or Parity
Stock outstanding immediately prior to the consummation of the
transaction;
(ix) use cash proceeds of any recapitalization or refinancing
transaction to pay a dividend or distribution on, or to redeem or
repurchase, any shares of Junior Stock without also redeeming or
repurchasing each outstanding share of Series A Preferred Stock at
the redemption price therefor; provided, however, that the
Corporation shall be permitted to use the proceeds of the issuance
of Junior Stock (other than pursuant to an underwritten public
offering) to redeem or repurchase shares of Junior Stock to the
extent that, after giving effect to such transaction, TPG, as
defined in Section 7, would hold at least ninety percent (90%) of
the common equity interest in the Corporation that TPG held
immediately following the consummation of the merger (the "Merger")
effected pursuant to the Agreement and Plan of Merger, dated as of
July 20, 1997, between TPG Partners II, L.P. and the Corporation, as
amended; or
(x) permit any Subsidiary of the Corporation to issue shares
of preferred stock or common stock other than to the Corporation or
a wholly owned Subsidiary of the Corporation.
(b) Whenever the Corporation shall not have (i) mailed a Change of
Control Notice as required by Section 4(e) (a "Notice Default"), (ii)
repurchased shares of Series A Preferred Stock required to be repurchased
pursuant to Section 4(e) within ten days of the Change of Control Payment
Date, regardless of whether the Financing Agreements, as defined in
Section 7, permit such a repurchase or whether
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<PAGE> 6
there shall be funds legally available to effect such repurchase (a
"Repurchase Default"), or (iii) complied with its covenants contained in
Section 4(b) (a "Clean-Down Default"), then thereafter and until such time
as such Notice Default, Repurchase Default or Clean-Down Default shall
have been cured, as the case may be, notwithstanding anything to the
contrary contained in the Certificate of Incorporation or By-Laws of the
Corporation, as the same may be amended from time to time, the holders of
Series A Preferred Stock shall have the right, voting as a single class,
to elect one director of the Corporation. This right to elect one director
may be exercised (i) by the written consent, delivered to the Secretary of
the Corporation, of the holders of a majority of the outstanding shares of
Series A Preferred Stock, other than, if TPG shall then hold a majority of
the Voting Stock outstanding, shares held by TPG (the outstanding shares
being entitled to vote being "Eligible Shares") as of the record date of
such written consent, or (ii) by the holders of a majority of the Eligible
Shares present or represented by proxy at any annual meeting or at any
special meeting called for such purpose as hereinafter provided or at any
adjournments thereof, until each Notice Default, Repurchase Default and
Clean-Down Default shall have been cured, at which time the term of office
of the director so elected shall terminate automatically. So long as such
right to elect one director continues (and unless such right has been
exercised by the written consent of the holders of a majority of the
Eligible Shares as hereinbefore authorized), the Secretary of the
Corporation may call, and upon the written request of the holders of
record of at least twenty-five percent (25%) of the Eligible Shares
addressed to him or her at the principal office of the Corporation shall
call, a special meeting of the holders of Series A Preferred Stock for the
purpose of electing one director as provided herein. Such meeting shall be
held within 10 days after delivery of such notice to the Secretary, at the
place and upon the notice provided by law and in the By-Laws or in the
notice of meeting. No such special meeting or adjournment thereof shall be
held on a date less than 10 days before any annual meeting of stockholders
or any special meeting in lieu thereof. If at any such annual or special
meeting or any adjournment thereof the holders of a majority of the
Eligible Shares shall be present or represented by proxy, or if the
holders of a majority of the Eligible Shares shall have acted by written
consent in lieu of a meeting with respect thereto, then the authorized
number of directors shall be increased by one and the holders of the
Eligible Shares, voting as a class, shall be entitled to elect the
additional director. The absence of a quorum of the holders of any class
or series of capital stock of the Corporation at any such annual or
special meeting shall not affect the exercise by the holders of Series A
Preferred Stock of their voting rights. The director so elected shall
serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the director's term of office shall have
terminated under the circumstances set forth in the second sentence of
this Section 3(b). If any director elected by the holders of Series A
Preferred Stock as a class dies or becomes incapacitated, the holders of
Eligible Shares then outstanding may elect his or her successor to hold
office for the unexpired term at a special meeting of such holders called,
or by written consent, in each case as provided above. Only holders of
Series A Preferred Stock shall have the right to remove, with or without
cause, any director originally elected
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<PAGE> 7
by such holders, upon the affirmative vote of holders of a majority of
Eligible Shares at a special meeting of such holders called, or by written
consent, in each case as provided above. The rights of the holders of
Series A Preferred Stock to elect directors pursuant to the terms of this
Section 3(b) shall not be affected adversely by the voting or other rights
applicable to any other security of the Corporation.
(c) Except as otherwise expressly provided hereby, or as required
by law, the holders of shares of Series A Preferred Stock shall have no
voting rights and their consent shall not be required for the taking of
any corporate action.
Section 4. Redemption, Repurchase and Reduction of Total Value.
(a) The Corporation may redeem, in whole or in part, any
outstanding shares of Series A Preferred Stock at any time, but only out
of funds legally available therefor, by paying for each share of Series A
Preferred Stock an amount in cash equal to the applicable percentage as of
the redemption date (as set forth in the table below) multiplied by the
sum of (i) the Total Value as of the redemption date and (ii) the amount,
if any, of Accrued Dividends, as defined in Section 7, as of the
redemption date. If less than all outstanding shares of Series A Preferred
Stock are to be redeemed, the Corporation shall redeem shares pro rata
among the holders thereof in accordance with the respective numbers of
shares of Series A Preferred Stock held by each of them.
<TABLE>
<CAPTION>
Redemption Date During Applicable
Six Month Period Commencing Percentage
--------------------------- ----------
<S> <C>
February 27, 1998 ........................... 105.0%
August 27, 1998 ............................. 104.5%
February 27, 1999 ........................... 104.0%
August 27, 1999 ............................. 103.5%
February 27, 2000 ........................... 103.0%
August 27, 2000 ............................. 102.5%
February 27, 2001 ........................... 102.0%
August 27, 2001 ............................. 101.5%
February 27, 2002 ........................... 101.0%
August 27, 2002 ............................. 100.5%
February 27, 2003 and thereafter ............ 100.0%
</TABLE>
(b) On February 27, 2008, the Corporation shall pay in cash in
respect of each share of Series A Preferred Stock the excess, if any, of
the Total Value of such share as of such date over the Liquidation Value,
with the effect of reducing the Total Value of such share to the
Liquidation Value pursuant to Section 2(b).
(c) Notice of any redemption of shares of Series A Preferred Stock
pursuant to Section 4(a) shall specify a date and procedures for such
redemption and shall be mailed not less than 10, but not more than 60,
days prior to such date fixed
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<PAGE> 8
for redemption to each holder of shares of Series A Preferred Stock to be
redeemed, at such holder's address as it appears on the transfer books of
the Corporation. In order to facilitate the redemption of shares of Series
A Preferred Stock, the Board may fix a record date for the determination
of the holders of shares of Series A Preferred Stock to be redeemed, not
more than 60 days or less than 10 days prior to the date fixed for such
redemption.
(d) From and after the date of any redemption effected by the
Corporation pursuant to Section 4(a), all dividends on shares of Series A
Preferred Stock thereby called for redemption shall cease to accrue and
all rights of the holders thereof as holders of Series A Preferred Stock
shall, with respect to shares thereby called for redemption, cease and
terminate. Any interest allowed on moneys which shall have been Set Apart
for Payment, as defined in Section 7, prior to the date of redemption for
the payment of the redemption price shall be paid to the Corporation. Any
moneys so deposited which shall remain unclaimed by the holders of such
Series A Preferred Stock at the end of two years after the redemption date
shall to the fullest extent permitted by law become the property of, and
be paid by such bank or trust company to, the Corporation.
(e) Upon the occurrence of a Change of Control, as defined in
Section 7, if the Corporation does not redeem the outstanding shares of
Series A Preferred Stock pursuant to Section 4(a), each holder of Series A
Preferred Stock shall have the right to require the Corporation to
repurchase each outstanding share of its Series A Preferred Stock, if any,
but only out of funds legally available therefor, by paying in cash, in
respect of each share of Series A Preferred Stock, an amount equal to 101%
of the sum of the Total Value of such share plus Accrued Dividends as of
the repurchase date. Within 30 days following any Change of Control,
unless the Corporation shall have mailed the notice with respect to a
redemption pursuant to Section 4(a), the Corporation shall mail a notice
(a "Change of Control Notice") to each holder of Series A Preferred Stock
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase each share of Series A Preferred Stock
on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"). The Corporation shall comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the shares of Series A Preferred Stock
as a result of a Change of Control. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of this
paragraph, the Corporation shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations hereunder by virtue thereof. The provisions of this paragraph
shall be subject to, and are expressly conditioned upon, satisfaction of
the restrictions contained in the Financing Agreements applicable to the
making of redemption, dividend and similar payments in respect of capital
stock of the Corporation.
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<PAGE> 9
(f) If the Corporation shall default in providing for the payment
of the redemption price or the repurchase price as required pursuant to
this Section 4, dividends on such Series A Preferred Stock shall accrue
and compound quarterly at the rate of (i) with respect to periods ending
on or before February 26, 2008, 15.5% per annum, and (ii) with respect to
periods commencing after February 26, 2008, 17.5% per annum, and be added
to the required redemption or repurchase payments as provided in Section
2(a).
Section 5. Reacquired Shares.
Any shares of Series A Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or any Subsidiary of the Corporation in
any manner whatsoever shall become authorized but unissued shares of Preferred
Stock, par value $100.00 per share, of the Corporation and may be reissued as
part of another class or series of Preferred Stock, subject to the conditions or
restrictions on authorizing or creating any class or series, or any shares of
any class or series, set forth in Section 3(a).
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall liquidate, dissolve or wind up,
whether pursuant to federal bankruptcy laws, state laws or otherwise, no
distribution shall be made (i) to the holders of shares of Junior Stock, unless
prior thereto the holders of shares of Series A Preferred Stock shall have
received the Total Value for each share plus an amount equal to all Accrued
Dividends thereon as of the date of such payment or (ii) to the holders of
shares of Parity Stock, except distributions made ratably on Series A Preferred
Stock and all such Parity Stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up of the Corporation.
(b) Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons, nor the
sale, lease, exchange or conveyance of all or any part of the property, assets
or business of the Corporation to a Person or Persons other than the holders of
Junior Stock shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.
Section 7. Definitions.
As used herein, the following terms shall have the meanings
indicated.
"Accrued Dividends" in respect of a share of Series A Preferred
Stock as of any date (the "Applicable Date") means all unpaid dividends which
have become payable pursuant to Section 2(a), whether or not declared, as of the
Applicable Date, which shall not have been paid in cash and which theretofore
shall
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<PAGE> 10
not have been applied to increase the Total Value of such share pursuant to
Section 2(b).
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Person specified.
"Business Day" means any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Change in Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation) in one or a series of related transactions, of
all or substantially all of the assets of the Corporation and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than TPG, whether or not otherwise in compliance with
the provisions of this Series A Preferred Stock; (ii) the adoption of a plan
relating to the liquidation or dissolution of the Corporation, whether or not
otherwise in compliance with the provisions of this Series A Preferred Stock;
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that (A) any "person" (as
defined above), other than TPG, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of 40% or more of the Voting Stock of the Corporation (measured by
voting power rather than number of shares) and (B) TPG beneficially owns,
directly or indirectly, in the aggregate a lesser percentage of the Voting Stock
of the Corporation than such other "person"; (iv) the first day on which a
majority of the member of the Board are not Continuing Directors; or (v) the
Corporation consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Corporation, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Corporation is converted into or exchanged for cash, securities or other
property, other than any such transaction where (A) the Voting Stock of the
Corporation outstanding immediately prior to such transaction is converted into
or exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee Person and (B) either (1) the "beneficial owners" (as defined
above) of the Voting Stock of the Corporation immediately prior to such
transaction own, directly or indirectly through one or more Subsidiaries, not
less than a majority
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<PAGE> 11
of the total Voting Stock of the surviving or transferee corporation immediately
after such transaction or (2) if, immediately prior to such transaction the
Corporation is a direct or indirect Subsidiary of any other Person (such other
Person, the "Holding Company"), then the "beneficial owners" (as defined above)
of the Voting Stock of such Holding Company immediately prior to such
transaction own, directly or indirectly through one or more Subsidiaries, not
less than a majority of the Voting Stock of the surviving or transferee
corporation immediately after such transaction.
"Continuing Directors" means, as of any determination date, any
member of the Board who (i) was a member of such Board immediately after
consummation of the Merger or (ii) was nominated for election or elected to such
Board with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election, or any
successor Continuing Directors appointed by such Continuing Directors (or their
successors).
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date on which the Notes (as defined below)
mature; provided, however, that a class of Capital Stock shall not be
Disqualified Stock hereunder solely as the result of any maturity or redemption
that is conditioned upon, and subject to, compliance with the restrictions
contained in the Financing Agreements applicable to the making of redemption,
dividend and similar payments in respect of capital stock of the Corporation;
and provided further, that Capital Stock issued to any plan for the benefit of
employees of the Corporation or its Subsidiaries or by any such plan to such
employees shall not constitute Disqualified Stock solely because it may be
required to be repurchased by the Corporation in order to satisfy applicable
statutory or regulatory obligations.
"Financing Agreements" mean (i) the Credit Agreement, dated as of
February 27, 1998, among TPG Zeus Acquisition Corporation (prior to the Merger)
and the Corporation (following the Merger), as borrower, the lenders listed
therein, as lenders, Goldman Sachs Credit Partners L.P., as arranger and
syndication agent, and BankBoston, N.A., as administrative agent, and (ii) the
Indenture, dated as of February 27, 1998, among the Corporation, Subsidiaries of
the Corporation which are signatories thereto, as guarantors, and State Street
Bank and Trust Company, as trustee (the "Indenture"), with respect to the 9.5%
Senior Secured Notes due 2005 (the "Notes"); provided if the maturity of the
Credit Agreement shall be extended beyond December 31, 2003 or the Indenture
shall be extended beyond December 31, 2005, such agreement shall cease to be a
"Financing Agreement."
"Liquidation Value" with respect to any share of Series A Preferred
Stock means $100.00 per share.
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<PAGE> 12
"Person" means any individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Set Apart for Payment" means, when used with respect to funds of
the Corporation to be used to effect any redemption of shares of Series A
Preferred Stock, that funds of the Corporation sufficient to satisfy such
payment of redemption shall have been irrevocably deposited with a bank or trust
company doing business in the Borough of Manhattan in the City of New York, and
having a capital and surplus of at least $100 million, in trust for the
exclusive benefit of the holders of the shares of Series A Preferred Stock to be
redeemed and that such funds will be payable from and after the date of
redemption to holders of Series A Preferred Stock who surrender their
certificates representing such stock in accordance with the notice of redemption
provided pursuant to Section 4(c).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Voting Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (A) the sole general
partner of the managing general partner of which is such Person or a Subsidiary
of such Person or (B) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Total Value" with respect to any share of Series A Preferred Stock
as of any particular date means an amount equal to the sum of the Liquidation
Value plus, pursuant to Section 2(b), an amount equal to all dividends on such
share of Series A Preferred Stock which are not paid in cash when due and less
any reduction thereof made in accordance with the provisions of Section 2(b).
"TPG" means TPG Partners II, L.P. and its Affiliates.
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the board
of directors of such Person.
Section 8. Rank.
Series A Preferred Stock will rank, with respect to dividends and
upon distribution of assets in liquidation, dissolution or winding up, prior to
the Common Stock.
[SIGNATURE ON NEXT PAGE]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed in its name and on its behalf and affirmed, under penalties of
perjury, on the date first written above by a duly authorized officer of the
Corporation.
ZILOG, INC.
By: /s/ RICHARD R. PICKARD
------------------------------
Name: Richard R. Pickard
Title: Vice President, General
Counsel and Secretary
S-1
<PAGE> 1
EXHIBIT 4.1
STOCKHOLDERS VOTING AGREEMENT
THIS STOCKHOLDERS VOTING AGREEMENT (this "AGREEMENT"), dated as of July
20, 1997, by and among TPG PARTNERS II, L.P. ("PARENT"), on the one hand, and
WARBURG, PINCUS CAPITAL COMPANY, L.P. and WARBURG, PINCUS & CO. (each a
"STOCKHOLDER" and, collectively, the "STOCKHOLDERS"), on the other hand,
W I T N E S S E T H:
WHEREAS, Parent, TPG and Zilog, Inc., a Delaware corporation (the
"COMPANY"), propose to enter into an Agreement and Plan of Merger dated as of
the date hereof (as the same may be amended or supplemented, the "MERGER
AGREEMENT"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement) providing for the merger (the
"MERGER") of a to-be-formed Delaware corporation and wholly owned subsidiary of
Parent ("SUB") with and into the Company with the Company being the surviving
corporation (hereinafter sometimes referred to as the "SURVIVING CORPORATION"),
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, each Stockholder owns beneficially and (except as set forth on
Schedule A attached hereto) of record the number of shares of Common Stock, par
value $.01 per share, of the Company (the "COMMON STOCK") set forth opposite its
name on Schedule A attached hereto (such shares of Common Stock, together with
any other shares of capital stock of the Company acquired (including, without
limitation, through the exercise of any option or by reason of any split,
reclassification, stock dividend or other distribution with respect to the
capital stock of the Company) by such Stockholder after the date hereof and
during the term of this Agreement, being collectively referred to herein as the
"SUBJECT SHARES"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that each Stockholder enter into this Agreement:
NOW, THEREFORE, to induce Parent to enter into, and in consideration of
its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of each Stockholder. Each Stockholder
hereby, severally and not jointly, represents and warrants to Parent as of the
date hereof in respect of itself as follows:
(a) Authority. The Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Stockholder (or in the case of a Stockholder which is a partnership, by a
general partner on behalf of such partnership) and constitutes a valid and
binding obligation of the Stockholder enforceable in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
- 1 -
<PAGE> 2
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under any provision of, any trust agreement,
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets the effect of which, in
any case, would be material and adverse to the ability of the Stockholder to
consummate the transactions contemplated hereby or to comply with the terms
hereof.
(b) The Subject Shares. The Stockholder is the beneficial and (except as
set forth on Schedule A attached hereto) record owner of, and has good and
marketable title to, the Subject Shares set forth opposite such Stockholder's
name on Schedule A attached hereto, free and clear of any claims, liens,
encumbrances and security interests whatsoever. The Stockholder does not own, of
record or beneficially, any shares of capital stock of the Company other than
the Subject Shares set forth opposite such Stockholder's name on Schedule A
attached hereto. The Stockholder has the sole right to vote such Subject Shares,
and none of such Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting of such Subject
Shares, except as contemplated by this Agreement.
2. Representations and Warranties of Parent. Parent hereby represents
and warrants to each Stockholder that Parent has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary action on the part of Parent. This Agreement has
been duly executed and delivered by Parent and constitutes a valid and binding
obligation of Parent enforceable in accordance with its terms, except that such
enforceability (a) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (b) is subject to general principles of equity. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
Parent's property or assets the effect of which, in any case, would be material
and adverse to the ability of Parent to consummate the transactions contemplated
hereby or to comply with the terms hereof.
3. Covenants of each Stockholder. Until the termination of this
Agreement in accordance with Section 8, each Stockholder, severally and not
jointly, agrees as follows:
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<PAGE> 3
(a) Vote for the Merger. At any meeting of stockholders of the Company
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval (including by written consent) with respect to the Merger and the
Merger Agreement is sought, the Stockholder shall vote (or cause to be voted),
or execute a written consent in respect of, the Subject Shares in favor of the
Merger, the adoption by the Company of the Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the Merger
Agreement. The Stockholder hereby waives any appraisal rights granted pursuant
to Section 262 of the General Corporation Law of the State of Delaware (the
"DGCL") (or any successor provision) to which it may otherwise be entitled as a
result of the Merger or the other transactions contemplated by the Merger
Agreement.
(b) Vote Against Takeover Proposals. At any meeting of stockholders of
the Company or at any adjournment thereof or in any other circumstances upon
which the Stockholder's vote, consent or other approval is sought, the
Stockholder shall be present (in person or by proxy) and shall vote (or cause to
be voted) the Subject Shares against (and shall not execute any written consent
in favor of) (i) any merger agreement or merger (other than the Merger Agreement
and the Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company or any other Takeover Proposal or (ii) any amendment of the
Company's certificate of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, delay,
prevent or nullify the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement. The Stockholder further
agrees not to commit or agree to take any action inconsistent with the
foregoing.
(c) Transfer of Subject Shares. Except pursuant to this Agreement and
except as provided in the immediately succeeding sentence of this Section 3(c),
the Stockholder agrees not to (i) transfer, sell, pledge, assign or otherwise
dispose of (including by gift) (collectively, "TRANSFER"), or enter into any
contract, option or other arrangement (including any profit sharing arrangement)
with respect to the Transfer of, any of the Subject Shares to any person other
than pursuant to the terms of the Merger or (ii) enter into any voting
arrangement, whether by proxy, power-of-attorney, voting agreement, voting trust
or otherwise, in connection with, directly or indirectly, any Takeover Proposal,
and agrees not to commit or agree to take any of the foregoing actions.
(d) No Solicitation. During the term of this Agreement, the Stockholder
shall not (i) directly or indirectly solicit, initiate or encourage the
submission of, any Takeover Proposal or (ii) directly or indirectly participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal.
(e) The Stockholders shall each execute and deliver an "affiliate
letter" in the form attached as an exhibit to the Merger Agreement as
contemplated by the Merger Agreement.
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<PAGE> 4
4. Election to Retain Company Stock and Stockholders Agreement. Each
Stockholder hereby agrees that it will make and not revoke an effective Non-Cash
Election with respect to and otherwise cause that number of Subject Shares
specified as "Number of Pre-Closing Electing Shares" on Schedule A hereof
(subject to adjustment in accordance with the adjustment mechanism set forth in
Section 2.4 of the Merger Agreement) to be "Electing Shares" under the Merger
Agreement. Each of the Stockholders and Parent agrees that it and the Company
will prior to the Effective Time enter into a Stockholders Agreement consistent
with the provisions of Schedule B hereto (all of the material terms of which are
summarized therein).
5. Grant of Irrevocable Proxy.
(a) Existing Proxies Revoked. The Stockholders represent that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
(b) Grant of Irrevocable Proxy to Parent. Upon Parent's request, each
Stockholder hereby agrees to irrevocably grant to, and appoint, Parent, and any
person who may hereafter be designated by Parent as permitted under applicable
law, and each of them individually, the Stockholder's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Stockholder, to vote the Stockholder's Subject Shares, or grant a consent or
approval in respect of such Subject Shares, in favor of or against, as the case
may be, the matters set forth in Sections 3(a) and 3(b), and to execute and
deliver an appropriate instrument irrevocably granting such proxy. The proxy
granted herein shall terminate upon any termination of this Agreement in
accordance with its terms.
(c) Affirmations. Each Stockholder hereby affirms that any irrevocable
proxy granted pursuant to Section 5(b) will be given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy will be given
to secure the performance of the duties of the Stockholder under this Agreement.
If so granted, the Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue thereof. Such
irrevocable proxy, if and when executed, is intended to be irrevocable in
accordance with the provisions of Section 212(e) of the DGCL.
6. Further Assurances. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
7. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that Parent may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent or Sub or
to any affiliate of Parent or Sub. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
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<PAGE> 5
8. Termination. This Agreement shall terminate upon the earlier of (a)
the termination of the Merger Agreement (for any reason, including a termination
pursuant to Section 8.1(d) or Section 8.1(e) thereof) and (b) the Effective Time
of the Merger.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to Parent
in accordance with the notification provision contained in the Merger Agreement
and to the Stockholders at their respective addresses set forth on Schedule A
attached hereto (or at such other address for a party as shall be specified by
like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
and other than Sub, which is an express beneficiary of this Agreement, any
rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
(g) Severability. If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions herein and
the application thereof to any other circumstances, shall remain in full force
and effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
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<PAGE> 6
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
10. Stockholder Representatives. Each Stockholder signs solely in its
capacity as the record holder and beneficial owner of, or the general partner of
a partnership which is the beneficial owner of, such Stockholder's Subject
Shares and nothing contained herein shall limit or affect any actions taken by
any officer, director, partner, affiliate or representative of a Stockholder who
is or becomes an officer or a director of the Company in his or her capacity as
an officer or director of the Company and none of such actions in such capacity
shall be deemed to constitute a breach of this Agreement.
11. Enforcement. The parties agree, and the beneficiaries of each trust
which is a party hereto have agreed, that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (b) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that such party will not bring
any action relating to this Agreement or the transactions contemplated hereby in
any court other than a Federal court sitting in the state of Delaware or a
Delaware state court, (d) waives any right to trial by jury with respect to any
claim or proceeding related to or arising out of this Agreement or
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<PAGE> 7
any of the transactions contemplated hereby, and (e) appoints The Corporation
Trust Company as such party's agent for service of process in the state of
Delaware.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P.
its General Partner,
By: TPG Advisors II, Inc.
its General Partner
By: /s/ DAVID M. STANTON
------------------------------------
Name: David M. Stanton
Title: Vice President
STOCKHOLDERS:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
its General Partner,
By: /s/ WILLIAM H. JANEWAY
------------------------------------
Name: William H. Janeway
Title: A General Partner
WARBURG, PINCUS & CO.
By: /s/ WILLIAM H. JANEWAY
------------------------------------
Name: William H. Janeway
Title: A General Partner
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<PAGE> 8
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Shares of Pre-Closing
Name Common Stock Electing Share
---- ------------ --------------
<S> <C> <C>
WARBURG, PINCUS CAPITAL 5,378,004 400,000
COMPANY, L.P.
466 Lexington Avenue
New York, New York 10017
WARBURG, PINCUS & CO. 99,500 0
----------- ----------
466 Lexington Avenue
New York, New York 10017
TOTAL 5,477,504 400,000
</TABLE>
A-1
<PAGE> 9
SCHEDULE B
SUMMARY OF PRINCIPAL TERMS
OF
SHAREHOLDERS AGREEMENT
PARTIES The Company, TPG Partners II, L.P., together
with its affiliates ("TPG"), Warburg, Pincus
Capital Company, L.P. ("Warburg") and other
shareholders who receive Shares in the Merger
(the "Investors").
RIGHT OF FIRST OFFER Warburg and the Investors will grant to the
Company (or an affiliate thereof) a right of
first offer with respect to any proposed
sales by them of Shares. Reasonable and
customary procedures concerning this right of
first offer will be set forth in the
Shareholders Agreement.
RIGHT TO CAUSE SALE If TPG decides to sell all of its remaining
Shares received in the Merger (other than a
sale to an affiliate), and holds at that time
(prior to giving effect of the proposed sale)
more than 40% of such Shares, then TPG shall
have the right to require Warburg and the
Investors to sell their remaining Shares as
part of that sale on the same price and terms
(or to vote in favor of any merger or other
transaction which would effect such a sale).
RIGHT TO PARTICIPATE IN SALE In the event that, during the period
beginning immediately after the closing of
the Merger and ending upon a Public Offering,
TPG holds 40% or more of the voting power of
the Company and proposes to engage in a sale
of equity interests which would result in a
transfer of 40% or more of the voting power
of the Company to an unaffiliated purchaser,
then Warburg and the Investors shall have the
right to participate pro rata in such sale
transaction on the same price and terms as
TPG. (As used herein, "Public Offering" shall
mean a registered offering of equity
securities of the Company or an institutional
private placement or 144A offering of such
equity securities with or without
registration rights.)
REGISTRATION RIGHTS In the Shareholders Agreement (or by
separate registration rights agreement) the
Company will grant to Warburg and the
Investors "piggyback" registration rights at
the Company's expense (other than
underwriting discounts and selling
commissions), with customary
B-1
<PAGE> 10
provisions regarding notice of intent to file
a registration statement, cutbacks in the
event of an underwritten offering,
indemnification and other customary
provisions.
Warburg and the Investors will, if requested
by the underwriters for an underwritten
public offering of equity securities of the
Company, agree not to sell or transfer any
equity securities of the Company (other than
equity securities, if any, including in such
offering), without the consent of the
underwriters, for a period of not more than
180 days following effectiveness of the
registration statement relating to a Public
Offering.
FACILITATION OF DISPOSITION If a Public Offering shall have not occurred
within five years of the Closing of the
Merger, the Company will reimburse Warburg
for the cost of investment banking fees, in
an amount not to exceed $50,000, in
connection with an analysis of Warburg's
ownership position and disposition
strategies.
AFFILIATE TRANSACTIONS The Shareholders Agreement will provide that
agreements or transactions between the
Company and TPG or any of its affiliates
shall require the prior approval of the
holders of a majority of the voting common
stock of the Company (excluding stock held by
TPG and its affiliates) other than agreements
or transactions which are on arms-length
terms or consulting fees with terms which are
customary as between TPG and its portfolio
companies.
B-2
<PAGE> 1
EXHIBIT 4.2
STOCKHOLDERS' AGREEMENT
by and among
ZILOG, INC.,
TPG PARTNERS II, L.P.,
TPG INVESTORS II, L.P.,
TPG PARALLEL II, L.P.,
and
CERTAIN OTHER STOCKHOLDERS of ZILOG, INC.
dated as of February 27, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I....................................................................................1
SECTION 1.01 Definitions.....................................................1
SECTION 1.02 Interpretation..................................................5
ARTICLE II...................................................................................5
SECTION 2.01 General Prohibition on Transfers of Securities..................5
SECTION 2.02 Permitted Transfers by TPG......................................6
SECTION 2.03 Permitted Transfers by Retaining Stockholders...................6
SECTION 2.04 Tag-Along Rights................................................7
SECTION 2.05 Drag-Along Rights...............................................9
SECTION 2.06 Transfer Costs; Closing....................................... 10
SECTION 2.07 Restrictive Legend............................................ 10
ARTICLE III................................................................................ 11
SECTION 3.01 Piggy Back Registration....................................... 11
SECTION 3.02 Registration Procedures....................................... 13
SECTION 3.03 Indemnification; Contribution................................. 15
ARTICLE IV................................................................................. 17
SECTION 4.01 Transactions with Affiliates.................................. 17
SECTION 4.02 Conflict with Certificate and/or Bylaws....................... 17
SECTION 4.03 Amendment..................................................... 18
SECTION 4.04 Specific Performance.......................................... 18
SECTION 4.05 Successors and Assigns........................................ 18
SECTION 4.06 Shares Subject to this Agreement.............................. 18
SECTION 4.07 Notices....................................................... 18
SECTION 4.08 Complete Agreement; Counterparts.............................. 20
SECTION 4.09 Term of the Agreement......................................... 20
SECTION 4.10 Headings...................................................... 20
SECTION 4.11 Choice of Law................................................. 20
SECTION 4.12 Consent by TPG and by the Retaining Stockholders.............. 20
SECTION 4.13 Effectiveness of Agreement.................................... 21
</TABLE>
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<PAGE> 3
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of February 27,
1998, by and among ZILOG, INC. (the "Company"), TPG PARTNERS II, L.P. ("TPG
Partners"), TPG INVESTORS II, L.P., TPG PARALLEL II, L.P. (TPG Partners II,
L.P., TPG Investors II, L.P. and TPG Parallel II, L.P., each a "member" of, and
collectively referred to as, "TPG"), and each of the individuals or entities
that are (or are deemed to be) or become signatories hereto (each of such other
individuals or entities are collectively referred to herein as the "Retaining
Stockholders"). TPG and the Retaining Stockholders are referred to herein
collectively as the "Stockholders" and individually as a "Stockholder".
WHEREAS, TPG Partners and the Company have entered into an Agreement and
Plan of Merger dated as of July 20, 1997, as amended by Amendments Number One,
Number Two and Number Three dated as of November 18, 1997, December 10, 1997 and
January 26, 1998, respectively, (the "Merger Agreement") providing for the
merger (the "Merger") of TPG Zeus Acquisition Corporation, a subsidiary of TPG
Partners, with and into the Company with the Company being the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation"),
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, following the consummation of the Merger, the Stockholders will
own all of the issued and outstanding shares of voting common stock of the
Company; and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of agreeing to certain aspects of their continuing relationship as
Stockholders after the consummation of the Merger;
WHEREAS, this Agreement is not effective unless and until the Closing has
occurred;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and agreements of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the conditions hereof, the parties hereto agree as follows:
ARTICLE I
SECTION 1.01 Definitions. In addition to the terms defined herein, for
purposes of this Agreement, the following terms shall have the meanings
specified below. Capitalized terms used but not defined herein having the
meanings set forth in the Merger Agreement.
"100% Affiliate" shall mean (i) when used with reference to any entity,
(A) any partnership of which one hundred percent (100%) of either the capital or
profit interests of such partnership is directly or indirectly owned or
controlled by such entity or (B) any corporation or limited liability company of
which one hundred percent (100%) of the
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<PAGE> 4
outstanding voting securities or member interests of such corporation is,
directly or indirectly, owned or controlled by such entity; and (ii) when used
with respect to any natural person, any trust created for the benefit of such
person and/or members of such person's family.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person; "control" when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities or by contract or otherwise; and the term "voting securities" means
securities or interests entitling the holder thereof to vote or designate
directors or individuals performing a similar function.
"Agreement" has the meaning ascribed to it in the preamble hereto.
"Applicable Amount" has the meaning ascribed to it in Section 2.04(a)
hereof.
"Board" means the Board of Directors of the Company.
"Bona Fide Offer" means with respect to an offer from a Person pursuant to
Section 2.03(c) or 2.05, an offer (i) from a Person who (A) makes such offer in
good faith, (B) is not an Affiliate of the Person receiving the offer and (C)
has the financial capability to purchase the Shares pursuant to the offer and
(ii) whose terms do not conflict with the provisions of this Agreement.
"Certificate" shall mean the certificate of incorporation of the Company
as amended in accordance with the Merger Agreement and in effect immediately
following the Effective Time.
"Closing" means the consummation of the Merger.
"Closing Date" means the date on which the Closing occurs.
"Common Stock" shall mean the voting common stock, par value $.01 per
share, of the Company.
"Company" has the meaning ascribed to it in the preamble hereto.
"Drag-Along Notice" means a written notice delivered to the Retaining
Stockholders by TPG pursuant to Section 2.05 hereof pursuant to which each of
the Retaining Stockholders shall transfer all of its respective Shares to a
Person making a Bona Fide Offer. Such notice
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<PAGE> 5
shall include, without limitation, the identity of such Person, the price and
other material terms and conditions of the proposed transfer, the closing date
of the proposed transfer and, if applicable, TPG's valuation of any non-cash
consideration to be received by TPG and the Retaining Stockholders pursuant to
such proposed transfer.
"Electing Stockholder" means, depending upon the context used, a Retaining
Stockholder who has delivered an Election Notice pursuant to Section 2.04(a)
hereof or a Retaining Stockholder who has sold its Shares to a Prospective
Purchaser pursuant to Section 2.04(b) hereof.
"Election Notice" has the meaning ascribed to it in Section 2.04(a)
hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Initial Public Offering" has the meaning ascribed to it in Section
2.04(a) hereof.
"Merger" has the meaning ascribed to it in the recitals.
"NASDAQ" has the meaning ascribed to it in Section 3.02(a)(ix) hereof.
"Notice Date" has the meaning ascribed to it in Section 2.03(c) hereof.
"Notice of Offer" has the meaning ascribed to it in Section 2.03(c)
hereof.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or any other entity
or any government or political subdivision or an agency, department or
instrumentality thereof.
"Prospective Purchaser" has the meaning ascribed to it in Section 2.04(a)
hereof.
"Registrable Securities" means (i) the Shares and (ii) any shares of
common stock of the Company issued or issuable by way of stock dividend or other
distribution or stock split or in connection with a combination, exchange or
replacement of Shares, recapitalization, merger, consolidation or other
reorganization or otherwise with respect to Registrable Securities. Registrable
Securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the 1933 Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) such securities shall have
been distributed by a Person pursuant to a Rule 144 Sale or Rule 144(k) Sale or
(iii) such securities shall have been otherwise transferred and new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Article III including, without limitation, all
registration and filing fees, all fees and expenses of complying with securities
or blue sky laws, all printing expenses, the
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<PAGE> 6
reasonable fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
required by or incident to such performance and compliance, but excluding (i)
any allocation of salaries of personnel of the Stockholders on whose behalf
Registrable Securities are being registered or other general overhead expenses
of such Stockholders or other expenses for the preparation of financial
statements or other data prepared by such Stockholders, (ii) any fees or
expenses of legal counsel (other than the reasonable and documented fees and
expenses of one special counsel for all of the Stockholders requesting
Registrable Securities to be included in each registration statement pursuant to
Section 3.01 hereof), financial advisors, accountants or other consultants or
advisors engaged by the Stockholders on whose behalf Registrable Securities are
being registered, and (iii) underwriting fees, discounts and commissions and
applicable transfer taxes, if any, applicable to the sale of Registrable
Securities which shall be borne in all cases by the Stockholder or Stockholders
on whose behalf Registrable Securities are being sold.
"Retaining Affiliate" has the meaning ascribed to it in Section 2.03(a)
hereof.
"Retaining Stockholders" has the meaning ascribed to it in the preamble
hereto.
"Rule 144 Sale" means a sale (other than a Rule 144(k) Sale) pursuant to,
and in compliance with, Rule 144 of the 1933 Act, as such rule may be amended
from time to time or any similar rule or regulation enacted after the date of
this Agreement.
"Rule 144(k) Sale" means a sale pursuant to, and in compliance with, Rule
144(k) of the 1933 Act, as such rule may be amended from time to time, or any
similar provision, rule or regulation enacted after the date of this Agreement
which, upon compliance with its non-affiliate and holding period requirements,
terminates the volume, manner or other restrictions set forth in Rule 144 of the
1933 Act.
"SEC" means the Securities and Exchange Commission.
"Shares" means all of the issued and outstanding shares of Common Stock
and Class A non-voting common stock, par value $.01 per share, of the Company.
"Stockholder" has the meaning ascribed to it in the preamble hereto.
"Subsidiary" means, with respect to any Person, any other Person of which
a majority of the outstanding voting securities or ownership interests is owned,
directly or indirectly, by such Person.
"Tag-Along Notice" has the meaning ascribed to it in Section 2.04(a)
hereof.
"Tag-Along Rights" means the rights of the Retaining Stockholders pursuant
to Section 2.04.
"TPG" has the meaning ascribed to it in the preamble hereto.
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"TPG Partners" has the meaning ascribed to it in the preamble hereto.
SECTION 1.02 Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires:
(a) the terms defined in this Article I or elsewhere in this Agreement
have the meanings assigned to them in this Article I or elsewhere in this
Agreement and include the plural as well as the singular and vice-versa;
(b) words importing neuter or gender include all genders;
(c) any reference to an "Article", a "Section", an "Exhibit" or a
"Schedule" refers to an Article, a Section, an Exhibit or a Schedule, as the
case may be, of this Agreement;
(d) all references to this Agreement and the words "herein", "hereof",
"hereto", and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Exhibit,
Schedule or other subdivision;
(e) any references to agreements or contracts, including this Agreement,
shall mean such agreements or contracts together with all exhibits, schedules,
appendices and attachments thereto and as such agreements or contracts may be
amended, restated, supplemented or otherwise modified from time to time; and
(f) the determination of whether a Person is a "beneficial owner," has
"beneficial ownership" or "beneficially owns" Shares or any other securities
shall be made in accordance with Rule 13d-3 of the 1934 Act.
ARTICLE II
TRANSFER RESTRICTIONS
SECTION 2.01 General Prohibition on Transfers of Securities. No Retaining
Stockholder shall, directly or indirectly, sell, assign, pledge, hypothecate,
encumber or otherwise dispose (voluntarily or involuntarily) of any Shares or
any interest therein beneficially owned by it (all of which acts shall be deemed
included in the term "transfer" as used in this Agreement) unless (i) such
transfer is expressly permitted by, and made in compliance with, the terms of
Sections 2.03, 2.04, 2.05 or 3.01, or (ii) such transfer is made to a member of
TPG or one or more of TPG's Affiliates. Any transfer in violation of such
restrictions shall be void and ineffectual and shall not operate to transfer any
interest of title in the Shares so transferred to the proposed transferee. If,
notwithstanding the immediately preceding sentence, any such transfer is held by
a court of competent jurisdiction to be effective, then the provisions of this
Agreement shall apply to the transferee and to any subsequent transferee as
fully as if such transferee were a party hereto.
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SECTION 2.02 Permitted Transfers by TPG. Each member of TPG may, at any
time and from time to time after the Closing Date, transfer (voluntarily or
involuntarily) any Shares or any interest therein beneficially owned by it to
any Person (including any of its Affiliates) free and clear of any restrictions
set forth in this Agreement, subject only to the obligations of such member of
TPG under the second sentence of this Section 2.02 and under Section 2.04 of
this Agreement. In the event any member of TPG transfers any Shares or any
interest therein beneficially owned by it to an Affiliate of TPG (a "TPG
Transferee"), then such member of TPG shall remain liable for such TPG
Transferee's failure to perform its obligations under this Agreement with
respect to such transferred Shares, such TPG Transferee shall take such Shares
subject to all the provisions of this Agreement, and prior to such transfer,
such TPG Transferee shall (a) execute and deliver to the Company (i) a written
agreement, satisfactory in substance and form to the Company, assuming all of
the obligations (including, without limitation, the obligations set forth in
Section 2.04) of such member of TPG under this Agreement with respect to such
transferred Shares and (ii) such other documents as may be reasonably necessary,
in the opinion of the Company, to assume such obligations, and (b) agree that it
will not cease to be an Affiliate of TPG unless prior to the time such TPG
Transferee ceases to be an Affiliate of TPG, such TPG Transferee transfers to
such member of TPG all Shares owned by such TPG Transferee.
SECTION 2.03 Permitted Transfers by Retaining Stockholders.
Notwithstanding the provisions of Section 2.01 and without first offering its
Shares to TPG as contemplated by Section 2.03(c), any Retaining Stockholder may
transfer the Shares beneficially owned by it to a 100% Affiliate of such
Retaining Stockholder (a "Retaining Affiliate"); provided, that such Retaining
Stockholder shall remain liable for such Retaining Affiliate's failure to
perform its obligations under this Agreement with respect to such transferred
Shares, such Retaining Affiliate shall take such Shares subject to all the
provisions of this Agreement, and prior to such transfer such Retaining
Affiliate shall (i) execute and deliver to the Company and TPG (x) a written
agreement, satisfactory in substance and form to TPG, assuming all of the
obligations (including, without limitation, the obligations set forth in Section
2.05) of such Retaining Stockholder under this Agreement with respect to such
transferred Shares and (y) such other documents as may be reasonably necessary,
in the opinion of TPG, to assume such obligations, and (ii) agree that it will
not cease to be a 100% Affiliate of such Retaining Stockholder unless prior to
the time such Retaining Affiliate ceases to be a 100% Affiliate of such
Retaining Stockholder, such Retaining Affiliate transfers to such Retaining
Stockholder all Shares owned by such Retaining Affiliate.
Notwithstanding the provisions of Section 2.01 and without first offering
its Shares to TPG as contemplated by Section 2.03(c), any Retaining Stockholder
may, at any time after the Closing Date, pledge, hypothecate or encumber any
Shares beneficially owned by it to a financial institution; provided that the
pledgee (and any subsequent transferee) agrees in writing to execute and deliver
to the Company and TPG (i) a written agreement, satisfactory in substance and
form to TPG, assuming all of the obligations (including, without limitation, the
obligations set forth in Section 2.05) of such Stockholder under this Agreement
with respect to such Shares and (ii) such other documents as may be reasonably
necessary, in the opinion of TPG, to assume such obligations.
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Notwithstanding the provisions of Section 2.01 but on the terms and
subject to the conditions set forth below in this Section 2.03(c) (including the
last sentence of this Section 2.03(c)), each Retaining Stockholder may transfer
all or a portion of its Shares to a third party pursuant to a Bona Fide Offer.
If at any time after the Closing Date, a Retaining Stockholder desires to
transfer all or a portion of the Shares owned by it to a third party, such
Retaining Stockholder shall give prompt written notice (a "Notice of Offer") to
the Company and TPG, which notice shall contain the proposed purchase price for
the Shares being offered, the proposed closing date for such transfer, the
number of Shares which the Retaining Stockholder proposes to transfer and any
other material term or condition of the transfer. If a Retaining Stockholder has
received any written offer to purchase all or a portion of the Shares owned by
it, the Notice of Offer shall also contain a true and complete copy of such
offer. The date on which such notice is actually received by the Company and TPG
is referred to hereinafter as the "Notice Date." The Notice of Offer shall be
deemed an irrevocable offer to sell to TPG (or any Person designated by TPG)
such Shares on the terms and conditions set forth in the Notice of Offer. TPG
shall have 20 days following the Notice Date to notify in writing the Retaining
Stockholder of its election to purchase such Shares (or to have such Shares
purchased by its designee). If TPG notifies the Retaining Stockholder of its
election to purchase such Shares, the closing for such transaction shall take
place in accordance with the terms of Section 2.06 but in any event no earlier
than 45 days from the date of the Notice of Offer, provided that if the proposed
transfer by the Retaining Stockholder to the third party provides for the
payment of non-cash consideration, TPG may in its discretion, in lieu thereof,
pay the Retaining Stockholder in cash the fair market value of such non-cash
consideration (which fair market value shall be determined by TPG if such
Retaining Stockholder, in its sole discretion, agrees with such determination
or, in the absence of such agreement, by an independent investment bank selected
jointly by TPG and such Retaining Stockholder (or if there is no agreement as to
the selection of the independent investment bank, by an independent investment
bank selected by lot from among six such investment banks selected by TPG)). If
the Retaining Stockholder does not receive such written notice from TPG within
the 20 day period, TPG shall be deemed to have declined to purchase such Shares
and the Retaining Stockholder may transfer all, but not less than all, of the
Shares indicated in the Notice of Offer upon the terms and conditions set forth
therein; provided that as a condition to such transfer, the transferee shall
execute and deliver to the Company and TPG (i) a written agreement, satisfactory
in substance and form to TPG, assuming all of the obligations (including,
without limitation, the obligations set forth in Section 2.05) of such Retaining
Stockholder under this Agreement with respect to such transferred Shares and
(ii) such other documents as may be reasonably necessary, in the opinion of TPG,
to assume such obligations; provided further that, if the Retaining Stockholder
does not complete the contemplated sale within 90 days of the Notice Date, the
provisions of this Section 2.03(c) shall again apply, and no transfer of Shares
shall be made otherwise than in accordance with this Agreement. Notwithstanding
anything herein to the contrary, the terms and conditions of this Section
2.03(c) do not apply to transfers by any Retaining Stockholder pursuant to
Section 2.03(a), Section 2.03(b), 2.04, 2.05, Section 3.01 or in connection with
any merger or business combination of the Company approved by the Board.
SECTION 2.04 Tag-Along Rights. Notwithstanding the provisions of Section
2.01 and without first offering its Shares to TPG as contemplated by Section
2.03(c), in the event
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that at any time after the Closing Date and prior to the completion of an
initial public offering of any of the Shares (the "Initial Public Offering") TPG
reaches a binding agreement with a Person to sell all or a portion of its Shares
that would result in any Person (together with its Affiliates) unaffiliated with
TPG holding 40% or more of the voting power of the Company, TPG shall cause the
prospective purchaser ("Prospective Purchaser"), subject to the terms and
conditions set forth in this Section 2.04 and subject further to the terms and
conditions set forth in Section 2.05, which terms and conditions shall control
in the event that TPG is proposing to sell all of its shares of Common Stock, to
purchase from each Electing Stockholder (in lieu of purchasing from TPG) that
number of shares of Common Stock then owned by such Electing Stockholder that
equals the product of (1) the number of shares of Common Stock then owned by
such Electing Stockholder multiplied by (2) a fraction, the numerator of which
equals the number of shares of Common Stock to be purchased by the Prospective
Purchaser from TPG and the denominator of which equals the total number of
shares of Common Stock then owned by TPG (the "Applicable Amount"). TPG shall
notify promptly each of the Retaining Stockholders in writing of any such
binding agreement, indicating the price and other material terms and conditions
of the proposed sale, the identity of the Prospective Purchaser, the intended
closing date of such sale, the percentage of issued and outstanding shares of
Common Stock being sold by TPG and the Applicable Amount of shares of Common
Stock of each Retaining Stockholder that may be sold by such Retaining
Stockholder pursuant to this Section 2.04(a) (the "Tag-Along Notice") and shall
provide a copy of such binding agreement to each of the Retaining Stockholders.
Any purchase by the Prospective Purchaser of the Applicable Amount of shares of
Common Stock of any Electing Stockholder shall be at the same consideration per
share of Common Stock and on the same terms and conditions as are applicable to
TPG in such transaction. Each of the Retaining Stockholders will have 20 days
from receipt of the Tag-Along Notice (or any amendment or supplement thereto) to
notify TPG in writing of its election to exercise its Tag-Along Rights (an
"Election Notice") and to exercise its Tag-Along Rights pursuant to this Section
2.04. In the event that a Retaining Stockholder notifies TPG in writing of its
election to exercise Tag-Along Rights within 20 days of the receipt of a
Tag-Along Notice and such Retaining Stockholder subsequently receives an
amendment or supplement to such Tag-Along Notice from TPG, such Retaining
Stockholder shall be able to withdraw its previously given election to exercise
Tag-Along Rights by giving written notice to TPG within 20 days of the receipt
of such amendment or supplement. In the event TPG does not receive an Election
Notice from any of the Retaining Stockholders within 20 days of receipt of the
Tag-Along Notice (or any amendment or supplement thereto), such Person shall be
deemed to have elected not to exercise its Tag-Along Rights hereunder.
Notwithstanding anything to the contrary contained herein, (i) TPG shall not be
obligated to cause a Prospective Purchaser to purchase any Retaining
Stockholders' shares of Common Stock hereunder if at the time of such sale (but
prior to giving effect thereto) TPG beneficially owns less than 40% of the
voting power of the Company and (ii) TPG shall not be obligated to consummate
the transfer of shares of Common Stock contemplated by an agreement between TPG
and a Prospective Purchaser if, pursuant to the terms and conditions of such
agreement, TPG is not obligated to do so and, in the event TPG elects not to
consummate a transfer which it is not obligated to consummate as provided in
this clause (ii), TPG shall have no liability to any Retaining Stockholder
(which term includes, without limitation, any Electing Stockholder).
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The closing of the sale of TPG's shares of Common Stock to the Prospective
Purchaser hereunder shall be conditioned on the simultaneous purchase by the
Prospective Purchaser of the Applicable Amount of shares of Common Stock from
each Electing Stockholder. Notwithstanding the foregoing, in the event any
Electing Stockholder breaches any obligation it may have under this Section 2.04
or, in the event that any representation and warranty of any Electing
Stockholder contained in the purchase agreement with the Prospective Purchaser
is not true and correct as of the date made or as of the proposed closing date
or the Electing Stockholder shall fail to perform any covenant or agreement
contained in such agreement or the Electing Stockholder shall otherwise breach
its obligations under such agreement and, in each case, such misrepresentation,
breach or failure to perform such covenant or agreement results in the
nonsatisfaction of a condition precedent to such agreement (and the Prospective
Purchaser does not waive such condition precedent), TPG shall be free to sell
its Shares to the Prospective Purchaser without liability to the Electing
Stockholder under this Agreement and such sale shall not limit or waive in any
respect any claim, right or cause of action that TPG may have against such
Electing Stockholder in respect of such breach.
SECTION 2.05 Drag-Along Rights. Notwithstanding the provisions of Section
2.01 and without first offering its shares of Common Stock to TPG as
contemplated by Section 2.03(c), if TPG executes a binding agreement to transfer
all of its shares of Common Stock to a Person making a Bona Fide Offer, then
each of the Retaining Stockholders shall transfer, subject to the terms and
conditions set forth below, at the sole election of TPG (exercisable by delivery
to each of the Retaining Stockholders of a copy of such binding agreement and a
Drag-Along Notice at least 20 days prior to the closing date specified in such
Notice), all of its shares of Common Stock to such Person; provided that (i)
each of the Retaining Stockholders shall receive from such Person the same per
share consideration to be paid to TPG in such transaction, (ii) the
consideration received in such transaction shall be the same as the
consideration to be paid to TPG in such transaction and (iii) the closing of any
transaction effected pursuant to this Section 2.05 shall be conditioned on the
simultaneous purchase of TPG's shares of Common Stock; and provided, further,
that the Retaining Stockholders shall not be obligated to transfer their shares
of Common Stock pursuant to this Section 2.05 if at the time of TPG's transfer
pursuant to such agreement (prior to giving effect thereto) TPG beneficially
owns less than 40% of the voting power of the Company. Notwithstanding the
foregoing, in the event any Retaining Stockholder breaches its obligations under
this Section 2.05 or, in the event that any representation and warranty of such
Retaining Stockholder contained in the purchase agreement with the Person making
the Bona Fide Offer is not true and correct as of the date made or as of the
proposed closing date or such Retaining Stockholder shall fail to perform any
covenant or agreement contained in such agreement or such Retaining Stockholder
shall otherwise breach its obligations under such agreement and, in each case,
such misrepresentation, breach or failure to perform such covenant or agreement
results in the nonsatisfaction of a condition precedent to such agreement (and
the Person making the Bona Fide Offer does not waive such condition precedent),
TPG shall be free to sell its shares of Common Stock to such Person without
liability to any Retaining Stockholder under this Agreement and such sale shall
not limit or waive in any respect any claim, right or cause of action that TPG
may have against such Retaining Stockholder in respect of such breach.
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SECTION 2.06 Transfer Costs; Closing.
(a) In the event the Retaining Stockholders receive a Tag-Along Notice
or Drag-Along Notice pursuant to Section 2.04 or 2.05, as the case may be, each
Electing Stockholder (with respect to a Tag-Along Notice) or Retaining
Stockholder (with respect to a Drag-Along Notice), as the case may be, agrees to
use its commercially reasonable efforts, in good faith and in a timely matter,
to take, or cause to be taken, all actions and to do, or cause to be done, all
things reasonably necessary, proper or advisable, under applicable laws and
regulations (including, without limitation, to ensure that all appropriate legal
and other requirements are met and all consents of third Persons are obtained,
in each case, with respect to the transfer by such Electing Stockholder or
Retaining Stockholder, as the case may be), to consummate the proposed
transactions contemplated by Section 2.04 or 2.05, as the case may be. All
reasonable costs and expenses incurred by Electing Stockholders or Retaining
Stockholders, as the case may be, in connection with a transfer made pursuant to
Section 2.04 or 2.05 (including, without limitation, all costs and
disbursements, finders' fees or brokerage commissions but excluding the fees and
disbursements of counsel which shall be borne independently by each Electing
Stockholder or Retaining Stockholder, as the case may be), or to be paid by
Electing Stockholders or Retaining Stockholders as provided for in the relevant
purchase agreement, shall be allocated pro rata among the Electing Stockholders
or the Retaining Stockholders, as the case may be, based upon the number of
Shares sold by each Electing Stockholder or Retaining Stockholder.
(b) The closing of any transfer of Shares pursuant to Section 2.03(c),
2.04 or 2.05 shall take place at the offices of the Company (or at such other
place as the participants shall mutually agree upon) not later than 90 days from
the receipt by TPG of a Notice of Offer or from the receipt by the Retaining
Stockholders of the Tag-Along Notice or the Drag-Along Notice, as the case may
be (subject to the expiration of any waiting period under the HSR Act and the
other terms and conditions provided in the underlying purchase agreement). At
such closing, the purchaser shall pay the purchase price for such Shares, in the
form and in the manner provided for in the underlying purchase agreement,
against delivery by the transferors of the Shares to be transferred, free and
clear of all liens, security interests or adverse claims of any kind and nature
except as otherwise provided for in this Agreement, duly endorsed or accompanied
by duly executed documents of transfer, in each case with signatures guaranteed
by a signature guarantor reasonably acceptable to the purchaser, and with any
required stock transfer tax stamp affixed.
SECTION 2.07 Restrictive Legend. Each certificate evidencing Shares shall
contain the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF A STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1998 AND MAY
BE VOTED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE
WITH SUCH AGREEMENT.
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ARTICLE III
PIGGY BACK REGISTRATION
SECTION 3.01 Piggy Back Registration.
(a) If the Company, at any time, proposes to register any of its equity
securities (or securities convertible into equity securities) under the 1933 Act
(other than by registration on a Form S-4 or Form S-8 or any successor or
similar form then in effect), whether or not for sale for its own account, on a
form and in a manner which would permit registration of Registrable Securities
for sale, each such time it shall give prompt written notice to all Stockholders
owning Registrable Securities of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration, and upon the written request of any such
Stockholder delivered to the Company within 30 days after the giving of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such Stockholder and the intended method of disposition thereof),
the Company shall use its reasonable best efforts to effect the registration
under the 1933 Act of all Registrable Securities which the Company has been so
requested to register by such Stockholders, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, provided that:
(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
or delay the registration of such securities, the Company may, at its
election, give written notice of such determination to each Stockholder
owning Registrable Securities and thereupon, (A) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration,
and (B) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities.
(ii) if (A) the registration so proposed by the Company involves an
underwritten offering of the securities so being registered, whether or
not for sale for the account of the Company, to be distributed (on a firm
commitment basis) by or through one or more underwriters under
underwriting terms appropriate for such a transaction and (B) the managing
underwriter of such underwritten offering shall advise the Company, and/or
the party on whose behalf the securities are being registered, that, in
its opinion, the distribution of all or a specified portion of such
Registrable Securities concurrently with the securities being distributed
by such underwriters will adversely affect the distribution of such
securities by such underwriters, then the Company shall promptly furnish
each such holder of Registrable Securities with a copy of such opinion and
may deny, by written notice to each such Stockholder
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accompanying such opinion, the registration of all or a specified portion
of such Registrable Securities (in case of a denial as to a portion of
such Registrable Securities, such portion to be allocated among such
Stockholders in proportion to the respective number of Shares requested to
be included therein by such Stockholder); and
(iii) each Stockholder requesting registration of Registrable
Securities pursuant to this Section 3.01 shall be permitted to withdraw
all or part of such Stockholder's Registrable Securities at any time prior
to the effective date of such registration; provided that in the event of
a withdrawal from a registration, any fees and disbursements incurred by
Stockholders requesting withdrawal in connection with such registration
shall be paid by such Stockholders.
(iv) the Company shall not be obligated to effect any registration
of Registrable Securities under this Section 3.01, (A) in connection with
any merger, acquisition, exchange offer, recapitalization, or
consolidation of the Company or any of its Subsidiaries or the adoption or
implementation of any dividend reinvestment plan, stock option or other
employee benefit plan or (B) in connection with an Initial Public Offering
unless the Company permits any Stockholder to participate in such Initial
Public Offering, in which case, then all other Stockholders shall be
allowed to participate in such offering, and the Company shall be
obligated to give prompt written notice to all Stockholders owning
Registrable Securities of their right to do so.
(v) the Retaining Stockholders will, if requested by the
underwriters for an underwritten public offering of equity securities of
the Company, agree not to sell or transfer any equity securities of the
Company (other than equity securities, if any, included in such offering),
without the consent of the underwriters, for a period of not more than 180
days following effectiveness of the registration statement relating to
such public offering
(b) In connection with the preparation and filing of each registration
statement under the 1933 Act pursuant to which Registrable Securities will be
registered, the Company will give (i) each holder of Registrable Securities, who
beneficially owns in excess of 5% of the shares of Common Stock then
outstanding, to be registered under such registration statement, (ii) their
underwriters, if any, and (iii) their respective counsel and accountants such
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act.
(c) Subject to Section 3.01(a)(iii), the Company shall pay all
Registration Expenses in connection with each registration of Registrable
Securities requested to be registered pursuant to this Section 3.01 (including
Registration Expenses incurred in connection with registration
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efforts which are terminated in accordance with Section 3.01(a)(1) hereof). All
other costs and expenses shall be borne by the party bearing such costs or
expenses.
SECTION 3.02 Registration Procedures.
(a) In connection with the registration of any Registrable Securities
under the 1933 Act as provided in Section 3.01, the Company shall as soon as
practicable:
(i) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective;
(ii) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities covered by such
registration statement until the earlier of such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller, or sellers, thereof set
forth in such registration statement or the expiration of six (6) months
after such registration statement becomes effective;
(iii) furnish to each seller of such Registrable Securities such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the 1933 Act, such
documents incorporated by reference in such registration statement or
prospectus, and such other documents, as such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities being sold by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement, except that the Company
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any such jurisdiction, or
to consent to general service of process in any such jurisdiction;
(v) use its best efforts to furnish to each holder of at least
twenty-five percent (25%) of the Registrable Securities covered by the
registration statement, upon such holder's request, a signed counterpart,
addressed to such
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holder, of an opinion of counsel for the Company, dated the effective date
of such registration statement (or, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement speaking both as of the effective date of the
registration statement and the date of the closing under the underwriting
agreement) covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are
customarily covered in opinions of issuer's counsel;
(vi) use its reasonable best efforts to obtain a "cold comfort"
letter from the Company's independent public accountant in customary form
and covering such matters of the type customarily covered by "cold
comfort" letters as the holders of a majority of the Registrable
Securities covered by the registration statement may request;
(vii) promptly notify each holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening
of any event known to the Company as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such holder or holders prepare and furnish to such holder
or holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not include 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 in the light of the
circumstances then existing;
(viii) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and generally make available
to its securities holders an earnings statement satisfying the provisions
of Section 11(a) of the 1933 Act and Rule 158 under the 1933 Act not later
than eighteen (18) months after the effective date of such registration;
and
(ix) use its reasonable best efforts to (A) list the Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Shares is then listed, if any, or (B) have
authorized for quotation and/or listing, as applicable, on the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") or
the National Market System of NASDAQ if the Registrable Securities so
qualify; in each case subject to the applicable listing requirements of
the respective securities exchange or NASDAQ.
-14-
<PAGE> 17
The Company may require, as a condition to each holder's participation in the
registration, each holder of Registrable Securities as to which any registration
is being effected (i) to furnish the Company with such information regarding
such holder and the distribution of such Registrable Securities as the Company
may from time to time reasonably request or as shall be required by law
(including, without limitation, any applicable state securities law) or by the
SEC in connection therewith and (ii) to enter into a holdback agreement on
customary terms and conditions.
(b) If the securities proposed to be registered are to be distributed by
or through one or more underwriters, the managing underwriter shall be selected
by the Company or the Person (other than the Retaining Stockholders) on whose
behalf the securities were initially requested to be registered.
SECTION 3.03 Indemnification; Contribution.
(a) In the event of any registration of any Registrable Securities under
the 1933 Act, the Company shall indemnify and hold harmless (i) in the case of
any registration statement (including any related notification or document
incident to such registration statement) filed pursuant to Section 3.01, the
seller of any Registrable Securities covered by such registration statement, its
directors and officers, each officer and director of each underwriter, each
other Person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other Person, if any, who controls such seller
or any such underwriter, within the meaning of the 1933 Act, against any losses,
claims, damages, liabilities and expenses (including reasonable fees and
expenses incurred in connection with enforcing the provisions of this Section
3.03(a)), joint or several, to which any such indemnified party may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (x) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Securities were registered under the 1933 Act, any
preliminary prospectus (unless any such statement is corrected in a subsequent
prospectus and the underwriters are given the opportunity to circulate the
corrected prospectus to all persons receiving the preliminary prospectus), final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (y)
any 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
the Company will reimburse such indemnified parties for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable in any such case and shall not indemnify any
Person to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement or document incorporated
by reference based upon written information furnished by such Person to the
Company for use in the preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified parties and shall survive the transfer of such securities by
-15-
<PAGE> 18
such seller. The Company shall agree to provide for contribution relating to
such indemnity pursuant to Section 3.03(b) below.
(b) If for any reason the foregoing indemnity and reimbursement is
unavailable or is insufficient to hold harmless an indemnified party under
Section 3.03(a), then the Company shall contribute to the amount paid or payable
by such indemnified party as a result of any loss, claim, damage or liability
(as actions or proceedings, whether commenced or threatened, in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Company on the other. The relative fault 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 indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, the Company shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative fault but also the relative benefits to the
Company and the indemnified party as well as any other relevant equitable
considerations. The parties agree that it would not be just and equitable if
contributions pursuant to this Section 3.03(b) were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentences of this
Section 3.03(b). Notwithstanding anything in this Section 3.03(b) to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 3.03(b) to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(c) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to Section 3.02(a), that
the Company shall have received an undertaking satisfactory to it from each of
the prospective sellers of such securities and their underwriters, to indemnify
and hold harmless, and to provide for contribution (in the same manner and to
the same extent as set forth in subdivisions (a) and (b) of this Section 3.03),
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement and each other Person, if any, who controls the
Company within the meaning of the 1933 Act, with respect to any untrue
statement, or alleged untrue statement, or omission, or alleged omission, made
in such registration statement, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto, or
any document incorporated by reference therein, if such untrue statement, or
alleged untrue statement, or omission, or alleged omission, was based upon
written information furnished by any such prospective sellers or their
underwriters to the Company for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or
-16-
<PAGE> 19
supplement or document incorporated by reference. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling Person and shall
survive the transfer of such securities by such seller.
(d) Promptly after receipt by an indemnified party of written notice of
the commencement of any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 3.03, such indemnified party shall,
if a claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 3.03 except to the extent that the indemnifying
party's liabilities and obligations under this Section 3.03 are prejudiced as a
result of such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof unless (i) the indemnifying party shall have
failed to retain counsel for the indemnified party as aforesaid, (ii) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (iii) representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interest between such indemnified party and any
other Person represented by such counsel in such proceeding. No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01 Transactions with Affiliates. All transactions between the
Company and any member of TPG or any Affiliate of TPG shall require the prior
approval of the holders of a majority of the Common Stock (excluding stock held
by TPG and its Affiliates) other than agreements or transactions which are on
arms-length terms or consulting fees with terms which are customary as between
TPG and its portfolio companies.
SECTION 4.02 Conflict with Certificate and/or Bylaws. The parties hereto
intend that in the event of any conflict or inconsistency between this Agreement
and the Certificate or Bylaws of the Company, the provisions of this Agreement
shall control, and therefore in the event that any term or provision of this
Agreement is rendered invalid, illegal or unenforceable by the Certificate or
Bylaws, the parties agree to take all action, including
-17-
<PAGE> 20
voting their Shares, to amend the Certificate or Bylaws (as the case may be) so
as to render such term or provision valid, legal and enforceable, if and to the
extent legally permitted.
SECTION 4.03 Amendment. This Agreement may be altered or amended only with
the written consent of the Company, TPG and the collective consent of the
Retaining Stockholders. Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof.
SECTION 4.04 Specific Performance. The parties hereto agree that the
obligations imposed on them in this Agreement are special, unique and of an
extraordinary character, and that in the event of breach by any party damages
would not be an adequate remedy, and each of the other parties shall be entitled
to specific performance and injunctive and other equitable relief in addition to
any other remedy to which it may be entitled, at law or in equity; and the
parties hereto further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such injunctive or
other equitable relief.
SECTION 4.05 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assignees of the parties hereto; provided that except
as expressly permitted or required elsewhere in this Agreement, the rights and
obligations of the parties hereto may not be assigned without the prior written
consent of all of the other parties. Notwithstanding the foregoing, TPG may
assign its rights under this Agreement to any transferee of its Shares other
than a transferee pursuant to Article III or pursuant to a Rule 144 or Rule
144(k) Sale and (ii) any Retaining Stockholder may assign any of its rights
hereunder to any transferee of its Shares pursuant to Section 2.03. Any party
to, or Person who is subject to, this Agreement, upon ceasing to own Shares or
any interest therein, shall thereupon cease to be a party to, or Person who is
subject to, this Agreement and shall thereafter have no rights or obligations
hereunder except as expressly provided for elsewhere in this Agreement,
including, without limitation, Section 2.03(a) and Section 3.03.
SECTION 4.06 Shares Subject to this Agreement. All Shares of the Company
(or any successor thereto) beneficially owned or hereafter acquired by the
Stockholders or their Affiliates shall be subject to the terms of this
Agreement. Any Shares acquired in the open market or pursuant to a public
offering or a Rule 144 or Rule 144(k) Sale shall not be subject to this
Agreement.
SECTION 4.07 Notices. All notices, statements, instructions or other
documents provided for herein shall be in writing and shall be delivered either
personally or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or
-18-
<PAGE> 21
registered, return receipt requested or by mailing (as set forth above) and
transmitting by facsimile a copy of such writing, addressed as follows:
(a) if to TPG, to:
TPG Partners II, L.P.
345 California Street, Suite 3300
San Francisco, California 94104
Attention: Mr. David M. Stanton
Facsimile: (415) 616-0420
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Facsimile: (212) 225-3999
(b) if to the Company, to:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008
Attention: Richard R. Pickard, Esq.
Facsimile: (408) 374-8183
with a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304-1115
Attention: Katharine A. Martin, Esq.
Facsimile: (650) 233-4545
(c) if to the Retaining Stockholders, to their respective addresses and
facsimile numbers set forth on Schedule I hereto.
Each party, by written notice given to the other parties in accordance with this
Section 4.07, may change the address to which notices, statements, instructions
or other documents are to be sent to such party. Except as otherwise provided
herein, all notices, statements, instructions and other documents hereunder
shall be deemed to have been given on the earlier of the date of actual delivery
and 3 days after the date of mailing, except that notice of a change of address
shall be effective only upon actual delivery.
-19-
<PAGE> 22
SECTION 4.08 Complete Agreement; Counterparts. This Agreement constitutes
the entire agreement among the parties hereto or any of them with respect to the
matters referred to herein as they relate to the parties hereto. This Agreement
may be executed by the parties hereto in any number of counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute one and the same instrument.
SECTION 4.09 Term of the Agreement. Unless this Section 4.09 is amended in
accordance with the provisions of Section 4.03 hereof, this Agreement shall
expire on the eighth anniversary of the Closing; provided that the provisions of
Article II of this Agreement shall expire upon the earlier of the eighth (8th)
anniversary of the Closing and the completion of the Initial Public Offering;
provided further that the provisions of Article III of this Agreement shall
expire on the fifteenth (15th) anniversary of the Closing.
SECTION 4.10 Headings. The section headings herein are for convenience of
reference only and in no way define, limit or extend the scope or intent of this
Agreement or any provisions hereof.
SECTION 4.11 Choice of Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without regard
to principles of conflicts of law). The parties agree that any service of
process to be made hereunder may be made by certified mail, return receipt
requested, addressed to the party at the address appearing in Section 4.07
together with a copy to be delivered to such party's attorneys as provided in
Section 4.07. The parties consent and agree that the state or federal courts
located in Delaware shall have jurisdiction to hear and determine any claims or
disputes pertaining to this Agreement or to any matter arising out of or related
to this Agreement and each party waives any objection that it may have based
upon lack of personal jurisdiction, improper venue or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.
SECTION 4.12 Consent by TPG and by the Retaining Stockholders.
(a) Any provision of this Agreement that requires any consent,
agreement, waiver, designation or other determination or decision of TPG shall
require, and shall be deemed to have been given or made upon, the consent,
agreement, waiver, designation or other determination or decision of TPG
Partners.
(b) Any provision of this Agreement that requires any collective
consent, agreement, waiver, designation or other determination or decision of
the Retaining Stockholders, shall require, and shall be deemed to have been
given or made upon, the consent, agreement, waiver, designation or other
determination or decision of holders of a majority of the Shares held by the
Retaining Stockholders, as of the date such collective consent, agreement,
waiver, designation or other determination or decision is required.
-20-
<PAGE> 23
SECTION 4.13 Effectiveness of Agreement. This Agreement shall not be
effective unless and until the Closing has occurred.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PG PARTNERS II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc., General Partner
By /s/ DAVID M. STANTON
--------------------------------------
Title Vice President
--------------------------------------
TPG INVESTORS II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc., General Partner
By /s/ DAVID M. STANTON
--------------------------------------
Title Vice President
--------------------------------------
TPG PARALLEL II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc., General Partner
By /s/ DAVID M. STANTON
--------------------------------------
Title Vice President
--------------------------------------
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<PAGE> 24
ZILOG, INC.
By /s/ RICHARD R. PICKARD
-------------------------------------------
Title SECRETARY
----------------------------------------
RETAINING STOCKHOLDERS
______________________________________________
Print Name ___________________________________
Address ______________________________________
______________________________________
______________________________________
Facsimile ____________________________________
Telephone ____________________________________
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<PAGE> 25
SCHEDULE I
SCHEDULE OF RETAINING STOCKHOLDERS
-23-
<PAGE> 1
EXHIBIT 4.3
TPG PARTNERS II, L.P.
345 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
November 18, 1997
Warburg, Pincus Capital Company, L.P.
Warburg, Pincus & Co.
466 Lexington Avenue
New York, New York 10017
Gentlemen and Ladies:
Reference is made to the Stockholders Voting Agreement (the "Voting
Agreement") dated as of July 20, 1997, among TPG Partners II, L.P. ("Parent"),
on the one hand, and Warburg, Pincus Capital Company, L.P. and Warburg, Pincus &
Co., on the other hand, and to the Agreement and Plan of Merger, dated as of
July 20, 1997, between Zilog, Inc. and Parent, as amended through the date
hereof (the "Merger Agreement"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement. The purpose of this
letter agreement is to amend, pursuant to Section 9(a) of the Voting Agreement,
Section 4 of the Voting Agreement. The parties hereto hereby agree to amend and
restate Section 4 of the Voting Agreement to read in its entirety as follows:
4. Election to Retain Company Stock and Stockholders Agreement. Warburg,
Pincus Capital Company, L.P. hereby agrees that it will make and not revoke an
effective Non-Cash Election with respect to and otherwise cause the Requisite
Number (subject to adjustment in accordance with Section 2.4 of the Merger
Agreement) of Subject Shares to be "Electing Shares" under the Merger Agreement.
For purposes of this Agreement, the "Requisite Number" shall mean 375,000 less
the aggregate number of Electing Shares, if any, held by holders of Shares other
than Warburg, Pincus Capital Company, L.P.; provided, however, that in no event
shall the Requisite Number be less than zero. Parent shall cause the Exchange
Agent to provide Warburg, Pincus Capital Company, L.P., Parent and the Company
with the information necessary as of the Election Date to determine the
Requisite Number and to permit Warburg, Pincus Capital Company, L.P. to make the
Non-Cash Election called for hereby. Each of the Stockholders hereby agrees
that, except for the election required to be made by Warburg, Pincus Capital
Company, L.P., neither Stockholder will make a Non-Cash Election with respect to
any of the Subject Shares. Prior to the Effective Time, each of Warburg, Pincus
Capital Company, L.P. and Parent agrees that it and the Company will enter into
a Stockholders Agreement consistent with the provisions of Schedule B hereto
(all of the material terms of which are summarized therein).
* * *
<PAGE> 2
If the foregoing accurately sets forth your understandings and
agreements with Parent, please execute this letter agreement in the space
indicated below, whereupon this letter agreement will constitute a binding
agreement among the signatories hereto.
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P.
its General Partner,
By: TPG Advisors II, Inc.
its General Partner
By: /s/ David M. Stanton
------------------------
Name: David M. Stanton
Title: Vice President
Accepted and Agreed to as of the date
first above written:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
its General Partner,
By: /s/ WILLIAM H. JANEWAY
--------------------------
Name: William H. Janeway
Title: A General Partner
WARBURG PINCUS & CO.
By: /s/ WILLIAM H. JANEWAY
--------------------------
Name: William H. Janeway
Title: A General Partner
Acknowledged as of the date
first above written:
ZILOG, INC.
By: /s/ Richard R. Pickard
--------------------------
Name: Richard R. Pickard
Title: Vice President, General Counsel and Secretary
3
<PAGE> 1
EXHIBIT 4.4
(Face of Note)
================================================================================
(a) CUSIP No. __________________
9 1/2% [Series A] [Series B] Senior Secured Notes due 2005
No. ____ $280,000,000
ZILOG, INC.
promises to pay to _______________________________________
or registered assigns,
the principal sum of ________________________________
Dollars on March 1, 2005.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Dated: February 27, 1998
ZILOG, INC.
By:_________________________
Name:
Title:
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company,
as Trustee
By: _______________________
================================================================================
A-1
<PAGE> 2
(Back of Note)
9 1/2% [Series A] [Series B] Senior Secured Notes due 2005
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE
PROVISIONS OF THE INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE
PURSUANT TO THE PROVISIONS OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Zilog, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 9 1/2% per
annum from February 27, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually on March 1 and September 1 of each year, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 1, 1998. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made
by check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on, all Global Notes and all other Notes the Holders of
which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any
A-2
<PAGE> 3
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act in any such capacity.
4. INDENTURE AND COLLATERAL AGREEMENTS. The Company issued the
Notes under an Indenture dated as of February 27, 1998 ("Indenture") between
the Company, the Guarantors and the Trustee. 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 of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are secured obligations of the Company limited to $280,000,000 in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof. The Notes are
secured by a first priority security interest, subject to Permitted Liens, in
substantially all of the Company's and its domestic subsidiaries real and
personal property at operating facilities, excluding, among other things,
inventory accounts receivable and proceeds of inventory and accounts
receivable, pursuant to the Collateral Documents referred to in the Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to March 1, 2002.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on March 1 or the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 .................................... 104.750%
2003 .................................... 102.375%
2004 and thereafter ..................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time on or prior to March 1, 2001, the Company may (but
shall not have the obligation to) redeem up to an aggregate of 35% of the
aggregate principal amount of Notes issued under the Indenture at a redemption
price equal to 109.50% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
all or a portion of net cash proceeds of one or more Public Equity Offerings;
provided that at least $100 million in aggregate principal amount of Notes
remain outstanding (and held by Persons other than the Company and its
Subsidiaries) immediately after the occurrence of such redemption; and provided
further, that such redemption shall occur within 90 days of the closing of
such Public Equity Offering.
A-3
<PAGE> 4
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER. Under certain circumstances, as
provided in the Indenture, the Company may be required to purchase all or a
portion of the Notes. Holders of Notes that are subject to an offer to purchase
shall receive an offer to purchase from the Company prior to any related
purchase date, and may elect to have such Notes purchased by completing the
form entitled "Option of Holders to Elect Purchase" appearing below.
8. 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 whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSON DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees, the Notes or the Collateral Documents may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the then outstanding Notes voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees, the Notes or the Collateral Documents may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees, the Notes or the
Collateral Documents may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Note Guarantee with respect to
the Notes.
A-4
<PAGE> 5
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages with respect
to, the Notes; (ii) default in payment when due of the principal of or premium,
if any, on the Notes; (iii) failure by the Company or any of its Subsidiaries
for 30 days after notice by the Trustee or by the Holders of at least 25% of
Notes then outstanding to comply with any of its other agreements in the
Indenture or the Notes; (iv) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Subsidiaries) whether such indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness after giving effect to any grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its stated maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$15.0 million or more; (v) failure by the Company or any of its Subsidiaries to
pay final judgments (net of any amounts with respect to which a reputable and
creditworthy insurance company has acknowledged liability in writing)
aggregating in excess of $15.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vi) except as permitted by the
Indenture, any Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Note Guarantee; (vii) material
breach by the Company of any representation or warranty set forth in the
Collateral Documents, or a material default by the Company in the performance of
any covenant set forth in the Collateral Documents, or repudiation by the
Company of its obligations under the Collateral Documents or the
unenforceability of the Collateral Documents against the Company for any
reason, which in any such case materially impairs the trustee's lien on or the
value of the Collateral, taken as a whole; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. In the
event of a declaration of acceleration of the Notes because an Event of Default
has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (iv) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (iv) of the preceding paragraph
have rescinded the declaration of acceleration in respect of such Indebtedness
within 30 days of the date of such declaration and if (a) the annulment of the
acceleration of such Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all the Notes waive any existing
Default or Event of Default and its consequences under
A-5
<PAGE> 6
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Company is required to deliver
to the Trustee annually a statement regarding compliance with the Indenture,
and the Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (=tenants in common ), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of February 27, 1998, between the
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Notes and the Trustee may use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-6
<PAGE> 7
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008
Attention: General Counsel
A-7
<PAGE> 8
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note 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 face of this Note)
SIGNATURE GUARANTEE.
A-8
<PAGE> 9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $_________
Date: __________________ Your Signature: __________________________
(Sign exactly as your
name appears on the Note)
Signature Guarantee: Tax Identification No: ____________________
A-9
<PAGE> 10
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of this Global Signature of
decrease in in Principal Note following authorized officer
Principal Amount Amount of such decrease of Trustee or
Date of Exchange of this Global Note this Global Note (or increase) Custodian
- ---------------- ------------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-10
<PAGE> 1
EXHIBIT 4.5
Execution Copy
================================================================================
ZILOG, INC.
$280,000,000
9 1/2% SENIOR SECURED NOTES DUE 2005
----------------
INDENTURE
Dated as of February 27, 1998
----------------
----------------
STATE STREET BANK AND TRUST COMPANY
----------------
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C>
310 (a)(1).............................................................................7.10
(a)(2) ................................................................................7.10
(a)(3).................................................................................N.A.
(a)(4).................................................................................N.A.
(a)(5).................................................................................7.10
(i)(b).................................................................................7.10
(ii)(c)................................................................................N.A.
311(a).................................................................................7.11
(b) ...................................................................................7.11
(iii(c)................................................................................N.A.
312 (a)................................................................................2.05
(b) ..................................................................................11.03
(iv)(c)...............................................................................11.03
313(a).................................................................................7.06
(b)(1)................................................................................10.03
(b)(2).................................................................................7.07
(v)(c).................................................................................7.06;
11.02
(vi)(d)................................................................................7.06
314(a).................................................................................4.03;
11.02
(A)(b)................................................................................10.02
(c)(1)................................................................................11.04
(c)(2)................................................................................11.04
(c)(3).................................................................................N.A.
(d) ..................................................................................10.03,
10.04, 10.05
(vii)(e)..............................................................................11.05
(f) ................................................................................... NA
315 (a)................................................................................7.01
(b) ...................................................................................7.05,
11.02
(A)(c).................................................................................7.01
(d) ...................................................................................7.01
(e) ...................................................................................6.11
316 (a)(last sentence).................................................................2.09
(a)(1)(A)..............................................................................6.05
(a)(1)(B)..............................................................................6.04
(a)(2).................................................................................N.A.
(b)................................................................................... 6.07
(B)(c).................................................................................2.12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
317 (a)(1).............................................................................6.08
(a)(2).................................................................................6.09
(b) ...................................................................................2.04
318 (a)................................................................................11.01
(b) ...................................................................................N.A.
(c) ...................................................................................11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
</TABLE>
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................................1
Section 1.01. Definitions.................................................................1
Section 1.02. Other Definitions..........................................................17
Section 1.03. Trust Indenture Act Definitions............................................18
Section 1.04. Rules of Construction......................................................18
ARTICLE 2. THE NOTES........................................................................19
Section 2.01. Form and Dating...........................................................19
Section 2.02. Execution and Authentication...............................................19
Section 2.03. Registrar and Paying Agent.................................................20
Section 2.04. Paying Agent to Hold Money in Trust........................................20
Section 2.05. Holder Lists...............................................................21
Section 2.06. Transfer and Exchange......................................................21
Section 2.07. Replacement Notes..........................................................32
Section 2.08. Outstanding Notes..........................................................32
Section 2.09. Treasury Notes.............................................................33
Section 2.10. Temporary Notes............................................................33
Section 2.11. Cancellation...............................................................33
Section 2.12. Defaulted Interest.........................................................34
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................................34
Section 3.01. Notices to Trustee.........................................................34
Section 3.02. Selection of Notes to Be Redeemed..........................................34
Section 3.03. Notice of Redemption.......................................................35
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 3.04. Effect of Notice of Redemption.............................................35
Section 3.05. Deposit of Redemption Price................................................35
Section 3.06. Notes Redeemed in Part.....................................................36
Section 3.07. Optional Redemption........................................................36
Section 3.08. Mandatory Redemption.......................................................37
Section 3.09. Offer to Purchase by Application of Excess Proceeds........................37
ARTICLE 4. COVENANTS........................................................................38
Section 4.01. Payment of Notes...........................................................38
Section 4.02. Maintenance of Office or Agency............................................39
Section 4.03. Reports....................................................................39
Section 4.04. Compliance Certificate.....................................................40
Section 4.05. Taxes......................................................................41
Section 4.06. Stay, Extension and Usury Laws.............................................41
Section 4.07. Restricted Payments........................................................41
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.............43
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................44
Section 4.10. Asset Sales, Collateral Asset Sales And Events Of Loss.....................46
Section 4.11. Transactions with Affiliates...............................................48
Section 4.12. Liens......................................................................49
Section 4.13. Loans to Subsidiaries......................................................49
Section 4.14. Corporate Existence........................................................50
Section 4.15. Offer to Repurchase Upon Change of Control.................................50
Section 4.16. Limitation on Sale and Leaseback Transactions..............................51
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries.............................................................51
</TABLE>
ii
<PAGE> 6
<TABLE>
<S> <C>
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness......................52
Section 4.19. Payments for Consent.......................................................52
Section 4.20. Additional Note Guarantees.................................................52
Section 4.21. Collateral Documents.......................................................52
ARTICLE 5. SUCCESSORS.......................................................................53
Section 5.01. Merger, Consolidation, or Sale of Assets...................................53
Section 5.02. Successor Corporation Substituted..........................................53
ARTICLE 6. DEFAULTS AND REMEDIES............................................................54
Section 6.01. Events of Default..........................................................54
Section 6.02. Acceleration...............................................................55
Section 6.03. Other Remedies.............................................................56
Section 6.04. Waiver of Past Defaults....................................................56
Section 6.05. Control by Majority........................................................57
Section 6.06. Limitation on Suits........................................................57
Section 6.07. Rights of Holders of Notes to Receive Payment..............................57
Section 6.08. Collection Suit by Trustee.................................................58
Section 6.09. Trustee May File Proofs of Claim...........................................58
Section 6.10. Priorities.................................................................58
Section 6.11. Undertaking for Costs......................................................59
ARTICLE 7. TRUSTEE..........................................................................59
Section 7.01. Duties of Trustee..........................................................59
Section 7.02. Rights of Trustee..........................................................60
Section 7.03. Individual Rights of Trustee...............................................61
Section 7.04. Trustee's Disclaimer.......................................................61
</TABLE>
iii
<PAGE> 7
<TABLE>
<S> <C>
Section 7.05. Notice of Defaults.........................................................61
Section 7.06. Reports by Trustee to Holders of the Notes.................................61
Section 7.07. Compensation and Indemnity.................................................62
Section 7.08. Replacement of Trustee.....................................................63
Section 7.09. Successor Trustee by Merger, etc...........................................64
Section 7.10. Eligibility; Disqualification..............................................64
Section 7.11. Preferential Collection of Claims Against Company..........................64
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................................64
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................64
Section 8.02. Legal Defeasance and Discharge.............................................64
Section 8.03. Covenant Defeasance........................................................65
Section 8.04. Conditions to Legal or Covenant Defeasance.................................65
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions.................................................67
Section 8.06. Repayment to Company.......................................................67
Section 8.07. Reinstatement..............................................................67
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................................68
Section 9.01. Without Consent of Holders of Notes........................................68
Section 9.02. With Consent of Holders of Notes...........................................68
Section 9.03. Compliance with Trust Indenture Act........................................70
Section 9.04. Revocation and Effect of Consents..........................................70
Section 9.05. Notation on or Exchange of Notes...........................................70
Section 9.06. Trustee to Sign Amendments, etc............................................71
ARTICLE 10. COLLATERAL AND SECURITY.........................................................71
Section 10.01. Collateral and Security...................................................71
</TABLE>
iv
<PAGE> 8
<TABLE>
<S> <C>
Section 10.02. Recording and Opinions....................................................71
Section 10.03. Release of Collateral.....................................................72
Section 10.04. Certificates of the Company...............................................73
Section 10.05. Certificates of the Trustee...............................................73
Section 10.06. Authorization of Actions to Be Taken by the Trustee Under the Collateral
Document................................................................73
Section 10.07. Authorization of Receipt of Funds by the Trustee Under the Collateral
Document................................................................74
Section 10.08. Termination of Security Interest..........................................74
ARTICLE 11. NOTE GUARANTEES.................................................................74
Section 11.01. Guarantee.................................................................74
Section 11.02. Limitation on Guarantor Liability.........................................75
Section 11.03. Execution and Delivery of Note Guarantee..................................75
Section 11.04. Guarantors May Consolidate, etc., on Certain Terms........................76
Section 11.05. Releases Following Sale of Assets.........................................77
ARTICLE 12. MISCELLANEOUS...................................................................77
Section 12.01. Trust Indenture Act Controls..............................................77
Section 12.02. Notices...................................................................77
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.............78
Section 12.04. Certificate and Opinion as to Conditions Precedent........................78
Section 12.05. Statements Required in Certificate or Opinion.............................79
Section 12.06. Rules by Trustee and Agents...............................................79
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders..79
Section 12.08. Governing Law.............................................................79
Section 12.09. No Adverse Interpretation of Other Agreements.............................80
Section 12.10. Successors................................................................80
</TABLE>
v
<PAGE> 9
<TABLE>
<S> <C>
Section 12.11. Severability..............................................................80
Section 12.12. Counterpart Originals.....................................................80
Section 12.13. Table of Contents, Headings, etc..........................................80
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF NOTE GUARANTEE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
Exhibit F FORM OF COLLATERAL DOCUMENTS
Exhibit G FORM OF SUBSIDIARY INTERCOMPANY NOTE
</TABLE>
vi
<PAGE> 10
INDENTURE dated as of February 27, 1998 between Zilog, Inc., a
Delaware corporation (the "Company"), the Guarantors named therein and State
Street Bank and Trust Company, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 9 1/2%
Series A Senior Secured Notes due 2005 (the "Series A Notes") and the 9 1/2%
Series B Senior Secured Notes due 2005 (the "Series B Notes" and, together with
the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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 purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease (other than an operating
lease), conveyance or other disposition of any assets or rights (including,
without limitation, by way of a sale and leaseback) other than in the ordinary
course of business consistent with past practices (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole will be governed by the
provisions of Section 4.15 and/or 5.01 of this Indenture and not by the
provisions of Section 4.10 hereunder, and (ii) the sale by the Company and the
<PAGE> 11
issue or sale by any of its Subsidiaries of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions that have a fair market
value (as determined in good faith by the Board of Directors) in excess of $1.0
million or for net cash proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Guarantor or by a
Guarantor to the Company or to another Guarantor, (ii) an issuance of Equity
Interests by a Guarantor to the Company or to another Guarantor, (iii) a
Restricted Payment that is permitted by Section 4.07 hereunder, (iv) a
Collateral Asset Sale and (v) the sale and leaseback of any assets within 90
days of the acquisition of such assets, will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company,
or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or unconditionally
and fully guaranteed or insured by the full faith and credit of the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (ii) obligations issued or
unconditionally and fully guaranteed by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to a Credit Facility
or with any domestic commercial bank having capital and surplus in excess of
$250.0 million, (iv) repurchase obligations with a term of not more than
2
<PAGE> 12
seven days for underlying securities of the types described in clauses (i) and
(iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having one
of the two highest ratings obtainable from either Moody's or S&P and in each
case maturing within one year after the date of acquisition and (vi) investments
in funds investing exclusively in investments of the types described in clauses
(i) through (v) above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principal and its Affiliates, (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that (A) any "person" (as defined above),
other than the Principal and its Affiliates, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of 40% or more of the Voting Stock of the Company
(measured by voting power rather than number of shares) and (B) the Principal
and its Affiliates beneficially own, directly or indirectly, in the aggregate a
lesser percentage of the Voting Stock of the Company than such other "person",
(iv) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors or (v) the Company consolidates
with, or merges with or into, any Person, or any Person consolidates with, or
merges with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (A) the Voting Stock of the Company outstanding immediately
prior to such transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person and (B) either
(1) the "beneficial owners" (as defined above) of the Voting Stock of the
Company immediately prior to such transaction own, directly or indirectly
through one or more subsidiaries, not less than a majority of the total Voting
Stock of the surviving or transferee corporation immediately after such
transaction or (2) if, immediately prior to such transaction the Company is a
direct or indirect subsidiary of any other Person (such other Person, the
"Holding Company"), then the "beneficial owners" (as defined above) of the
Voting Stock of such Holding Company immediately prior to such transaction own,
directly or indirectly through one or more subsidiaries, not less than a
majority of the Voting Stock of the surviving or transferee corporation
immediately after such transaction.
"Collateral" means all property and assets, tangible and
intangible, that from time to time secure the Notes pursuant to the applicable
Collateral Documents, including any Replacement Collateral.
"Collateral Agent" shall have the meaning set forth in the Pledge
Agreement.
"Collateral Asset Sale" means the sale, lease (other than an
operating lease), conveyance or other disposition of any Collateral (including,
without limitation, by means of an amalgamation, merger, consolidation or
similar transaction (each, a "Disposition")) (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its
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<PAGE> 13
Subsidiaries taken as a whole will be governed by the provisions of Sections
4.15 and/or 5.01 of this Indenture and not by the provisions of Section 4.10
hereunder), or a series of related Dispositions by the Company or any of its
Subsidiaries involving the Collateral, other than (i) the sale for fair market
value of machinery, equipment, furniture, apparatus, tools or implements or
other similar property that may be defective or may have become worn out or
obsolete or no longer used or useful in the operations of the Company or (ii)
the sale or exchange of equipment at the Company's operating facilities with an
aggregate value not to exceed $5.0 million at any one time provided such
equipment has been replaced by equipment of equal or greater value within 180
days of such sale or exchange. A Collateral Asset Sale shall not include the
requisition of title to or the seizure, condemnation, forfeiture or casualty of
any Collateral.
"Collateral Documents" means, collectively, the Deed of Trust,
the Security Agreements, the Pledge Agreement and any other agreements,
instruments, financing statements or other documents that evidence, set forth or
limit the Lien of the Collateral Agent in the Collateral.
"Company" means Zilog, Inc., a Delaware corporation, and any and
all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation
and amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) Recapitalization Related
Special Charges of such Person and its Subsidiaries for such period, to the
extent any such expense was deducted in computing Consolidated Net Income of
such Person for such period, plus (vi) deferred compensation expense of such
Person and its Subsidiaries for such period (provided, however, that any
payments actually made with respect to the liabilities for which such charges
were created shall be deducted from Consolidated Cash Flow in the period when
made), to the extent any such expense was deducted in computing Consolidated Net
Income of such Person for such period, plus (vii) the impact on Consolidated
Cash Flow of such Person for such period, in an aggregate amount not to exceed
$5.0 million since the Issue Date, of the deferral of recognition of revenue by
the Company until products are
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<PAGE> 14
shipped by the Company's distributors, minus (viii) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such 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 that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof that is a
Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the amortization of (A) any premiums, fees or expenses incurred in connection
with the Recapitalization and related financings, or (B) any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets, in each
case arising in connection with the Recapitalization) and 17 (including non-cash
charges relating to intangibles and goodwill arising in connection with the
Recapitalization) shall be excluded.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors immediately after consummation of the Recapitalization or
(ii) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election, or any successor Continuing
Directors appointed by such Continuing Directors (or their successors).
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 12.02 hereof or such other address as to
which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the Revolving Credit
Facility) or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated,
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<PAGE> 15
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time. Indebtedness under Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under this Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (i) of the definition of Permitted Debt.
"Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Deed of Trust" means the deed of trust by which the Collateral
consisting of interest in real property and improvements thereon is pledged to
the Collateral Agent.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date on which the Notes mature; provided,
however, that a class of Capital Stock shall not be Disqualified Stock hereunder
solely as the result of any maturity or redemption that is conditioned upon, and
subject to, compliance with Section 4.07 hereunder; and provided further, that
Capital Stock issued to any plan for the benefit of employees of the Company or
its Subsidiaries or by any such plan to such employees shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Company in order to satisfy applicable statutory or regulatory obligations.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Loss" means (i) the loss or destruction of or damage to
any Collateral, (ii) the condemnation, seizure, confiscation, requisition of the
use or taking by exercise of the power of eminent domain or otherwise of any
Collateral or (iii) any consensual settlement in lieu of any event listed in
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<PAGE> 16
clause (ii), in each case whether in a single event or a series of related
events, that results in Net Proceeds from all sources in excess of $5.0 million.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in
existence on the date of this Indenture, until such Indebtedness is repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense (net of
interest income) of such Person and its Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations);
provided, however, that in no event shall any amortization of deferred financing
costs incurred in connection with the Recapitalization be included in Fixed
Charges, (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness of another Person that is Guaranteed by such Person or one of
its Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) (without duplication) (1) all dividends paid or accrued in
respect of Disqualified Stock which are not treated as interest for tax purposes
and (2) all cash dividend payments, on any series of preferred stock of such
Person or any of its Subsidiaries, other than dividend payments on Equity
Interests payable solely in Equity Interests (other than Disqualified Stock) of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, Guarantees, repays or redeems any Indebtedness
(other than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption,
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<PAGE> 17
Guarantee, repayment or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income and shall
reflect any pro forma expense and cost reductions attributable to such
acquisitions, (to the extent such expense and cost reduction would be permitted
by the SEC to be reflected in pro forma financial statements included in a
registration statement filed with the SEC) and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture;
provided, however, that all reports and other financial information provided by
the Company to the Holders, the Trustee and/or the SEC shall be prepared in
accordance with GAAP, as in effect on the date of such report or other financial
information.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means each direct and indirect domestic Subsidiary
of the Company existing on the Issue Date and each of the Subsidiaries of the
Company that executes a Note Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
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<PAGE> 18
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or the value of foreign currencies.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Purchasers" means Goldman, Sachs & Co., BancBoston
Securities Inc. and Citicorp Securities, Inc.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means February 27, 1998.
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<PAGE> 19
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any option or other agreement to give a
security interest).
"Liquidated Damages" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale or Collateral
Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring
gain (but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale or Collateral
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale or
Collateral Asset Sale), net of the direct costs relating to such Asset Sale or
Collateral Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale or Collateral Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
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<PAGE> 20
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of
the Company by two Officers of the Company, one of whom must be the principal
executive officer, a principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Sections 12.04
and 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Investments" means (a) any Investment in the Company
or in a Subsidiary; (b) any Investment in cash and Cash Equivalents; (c) any
Investment by the Company or any Subsidiary in a Person, if as a result of such
Investment (i) such Person becomes a Subsidiary or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Subsidiary; (d)
any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 or a transaction not constituting an Asset Sale by reason of
the $1.0 million threshold contained in the definition thereof; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (f) Hedging Obligations entered
into in the ordinary course of business by the Company or its Subsidiaries and
otherwise in accordance with this Indenture; (g) loans and advances to employees
and officers of the Company and its Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $5.0 million at any
one time outstanding; (h) Investments in securities of trade creditors or
customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and (i) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed $25.0 million.
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<PAGE> 21
"Permitted Liens" means (i) Liens existing as of the Issue Date
to the extent and in the manner such Liens are in effect on the Issue Date; (ii)
Liens on Collateral securing the Notes, the Exchange Notes and the Note
Guarantees; (iii) Liens of the Company or a Guarantor on assets of any
Subsidiary of the Company; (iv) Liens securing Permitted Refinancing
Indebtedness which is incurred to refinance any Indebtedness which has been
secured by a Lien permitted under this Indenture and which has been incurred in
accordance with the provisions of this Indenture; provided, however, that such
Liens (A) are not materially less favorable to the Holders and are not
materially more favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being refinanced and (B) do not extend to
or cover any property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so refinanced; (v) Liens for taxes, assessments or
governmental charges or claims either (A) not delinquent or (B) contested in
good faith by appropriate proceedings and as to which the Company or its
Subsidiaries shall have set aside on its books such reserves as may be required
pursuant to GAAP; (vi) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent for a period of more than 60 days or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof; (vii) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or
similar obligations, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (viii) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (ix) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Subsidiaries; (x)
any interest or title of a lessor under any lease, whether or not characterized
as capital or operating; provided that such Liens do not extend to any property
or assets which is not leased property subject to such lease; (xi) Liens
securing Capital Lease Obligations and purchase money Indebtedness incurred in
accordance with clause (iv) of the definition of Permitted Debt; provided,
however, that in the case of purchase money Indebtedness (A) the Indebtedness
shall not exceed the cost of such property or assets being acquired or
constructed and shall not be secured by any property or assets of the Company or
any Subsidiary of the Company other than the property and assets being acquired
or constructed and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition or construction; (xii) Liens upon specific
items of inventory or other goods and proceeds of any Person securing such
Person's obligations in respect of bankers' acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods; (xiii) Liens securing reimbursement obligations
with respect to letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof; (xiv)
Liens encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual, or warranty requirements of the Company or any of its
Subsidiaries, including rights of offset and set-off; (xv) Liens securing
Hedging Obligations which Hedging Obligations relate to Indebtedness that is
otherwise permitted under this Indenture; (xvi) Liens securing Acquired Debt
incurred in accordance with clause (x) of the definition of Permitted Debt;
provided that
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<PAGE> 22
(A) such Liens secured such Acquired Debt at the time of and prior to the
incurrence of such Acquired Debt by the Company or a Subsidiary of the Company
and were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Debt by the Company or a Subsidiary of the Company and (B) such
Liens do not extend to or cover any property or assets of the Company or of any
of its Subsidiaries other than the property or assets that secured the Acquired
Debt prior to the time such Indebtedness became Acquired Debt of the Company or
a Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Debt prior to the incurrence of such Acquired Debt
by the Company or a Subsidiary of the Company; (xvii) leases or subleases
granted to others not interfering in any material respect with the business of
the Company or its Subsidiaries; (xviii) Liens arising out of consignment or
similar arrangements for the sale of goods entered into by the Company or any
Subsidiary in the ordinary course of business; (xix) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary and (xx) Liens on
inventory, accounts receivable and the proceeds thereof securing working capital
Indebtedness of the Company and liens on cash collateral constituting proceeds
of accounts receivable or inventory securing letters of credit or mandatory
prepayments of working capital Indebtedness secured thereby, which Indebtedness
is, in each case, incurred in compliance with this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, prepay, retire, renew, replace,
defease or refund Indebtedness of the Company or any of its Subsidiaries (other
than such Indebtedness described in clauses (i), (vi), (vii), (viii), (ix),
(xi), (xii) or (xiii) of the definition of "Permitted Debt" provided that: (i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, prepaid, retired, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, prepaid, retired, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, prepaid, retired, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, prepaid,
retired, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, prepaid, retired, renewed, replaced,
defeased or refunded.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
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<PAGE> 23
"Pledge Agreement" means the Pledge Agreements dated as of the
date of this Indenture and substantially in the form attached as Exhibit F
hereto, as such agreements may be amended, modified or supplemented from time to
time.
"Pledged Collateral" means any assets of the Company defined as
Pledged Collateral in the Pledge Agreement.
"Preferred Stock" of any corporation means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends, or as to the distribution of assets upon voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation.
"Principal" means TPG Partners II, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten public offering of
common stock (other than Disqualified Stock) of the Company, pursuant to an
effective registration statement filed with the SEC in accordance with the
Securities Act, other than an offering pursuant to Form S-8 (or any successor
thereto).
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Proceeds" means any of the following or any
combination of the following: (i) cash, (ii) Cash Equivalents, (iii) long-term
assets that are used or useful in the business of the Company or its
subsidiaries on the Issue Date or businesses reasonably related thereto (the
"Permitted Business"), (iv) the Capital Stock of any Person engaged primarily in
a Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of the Company of such Capital Stock, (a) such Person
becomes a Wholly-Owned Subsidiary and a Guarantor or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or any Wholly-Owned
Subsidiary of the Company that is a Guarantor.
"Recapitalization" means, collectively, the offering of the
Series A Notes, the merger of TPG Zeus Acquisition Corporation, a Delaware
corporation, with and into the Company, and the cash investment by TPG Partners
II, L.P., a Delaware corporation, and certain other investors of $117.5 million
in TPG Zeus Acquisition Corporation.
"Recapitalization Related Special Charges" means (i) up to $10.0
million of retention bonuses paid to employees of the Company within six months
following the Issue Date, (ii) up to $5.0 million of (x) severance costs paid by
the Company within six months following the Issue Date and (y) bonuses paid by
the Company to members of management of the Company retained effective on or
after January 1, 1998 and paid within six months following the Issue Date, (iii)
expense incurred by the
14
<PAGE> 24
Company as a result of (x) payments made by the Company on the Issue Date in
respect of options to purchase common stock of the Company outstanding on the
Issue Date and (y) the grant by the Company on the Issue Date, or within 6
months following the Issue Date, of options to purchase common stock of the
Company and (iv) consulting fees, not exceeding $1.5 million, paid by the
Company within six months following the Issue Date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 27, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a global Note bearing the
Private Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Replacement Collateral" means, at any relevant date in
connection with a Collateral Asset Sale or Event of Loss, assets used in the
Company's business other than the Collateral, which on such date (i) constitute
similar assets to Collateral disposed of or destroyed and do not constitute
Capital Stock of any Person, (ii) are acquired by the Company at a purchase
price which does not exceed the fair market value of such Replacement Collateral
(as determined in the case of each of (i) and (ii), in good faith by the Board
of Directors of the Company), and made available to the Collateral Agent, (iii)
are free and clear of all Liens other than Permitted Liens, and (iv) are subject
to the Collateral Documents.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as defined
in Regulation S.
"Revolving Credit Facility" means that certain revolving credit
facility, dated as of February 27, 1998, by and among the Company, Goldman Sachs
Credit Partners L.P. and BankBoston, N.A., as agents and lenders, providing for
up to $25.0 million of revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection
15
<PAGE> 25
therewith, and in each case as amended, extended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date of
this Indenture.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the
form of Exhibit A attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
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<PAGE> 26
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or a
combination thereof.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction".........................................4.11
"Asset Sale Offer"..............................................4.10
"Authentication Order"..........................................2.02
"Change of Control Offer".......................................4.15
"Change of Control Payment".....................................4.15
"Change of Control Payment Date" ...............................4.15
"Covenant Defeasance"...........................................8.03
"Event of Default"..............................................6.01
"Excess Proceeds"...............................................4.10
"incur".........................................................4.09
"Legal Defeasance" .............................................8.02
"Offer Amount"..................................................3.09
"Partial Collateral Asset Sale".................................4.10
"Offer Period"..................................................3.09
"Paying Agent"..................................................2.03
"Permitted Debt"................................................4.09
"Purchase Date".................................................3.09
"Registrar".....................................................2.03
"Restricted Payments"...........................................4.07
</TABLE>
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<PAGE> 27
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes and the Note Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the Notes and
the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. 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) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
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<PAGE> 28
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial
interests in the Regulation S Global Notes that are held by Participants through
Euroclear or Cedel.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
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<PAGE> 29
The Trustee shall, upon a written order of the Company signed by
two Officers (an "Authentication Order"), authenticate Notes for original issue
up to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
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 an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Registrar or Paying Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
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<PAGE> 30
SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
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 the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary, (ii)
the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee or (iii) requested by a Holder, and there
shall have occurred and be continuing an Event of Default or any event which
after notice or lapse of time or both would be an Event of Default with respect
to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or
(iii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Note other than as provided
in this Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in
the Regulation S Global Note may not be made
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<PAGE> 31
to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Beneficial interests in any Unrestricted Global Note
may be transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance
with the Applicable Procedures directing the Depositary to cause to be
issued a Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon consummation of an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this Indenture
and the Notes or otherwise applicable under the Securities Act, the Trustee
shall adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be transferred
to a Person who takes delivery thereof in the form of a beneficial interest
in another Restricted Global Note if the transfer complies with the
requirements of Section 2.06(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an
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<PAGE> 32
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
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(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)(d) thereof,
if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Company shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. Any Definitive Note issued in
exchange for a
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beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest
shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
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(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests
in Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above,
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<PAGE> 36
a certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by
item (3)(d) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note and in all other cases, the
Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or transfer
such Restricted Definitive Note to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
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<PAGE> 37
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
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(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
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(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and upon receipt of an Authentication Order the
Trustee shall authenticate and deliver to the Persons designated by the Holders
of Definitive Notes so accepted Definitive Notes in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
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(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF
THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon receipt of the Company's Authentication Order.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
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(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on such Notes
and for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section
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as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes 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 considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in
an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
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<PAGE> 44
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) 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 Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on
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all Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to March 1, 2002. Thereafter, the Company shall have the option to redeem
the Notes, at any time in whole or in part, upon not less than 30 nor more than
60 days notice at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002......................................................104.750%
2003......................................................102.375%
2004 and thereafter.......................................100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time and from time to time on or prior to March 1, 2001, the
Company may (but shall not have the obligation to) redeem up to an aggregate of
35% of the aggregate principal amount of Notes issued under this Indenture at a
redemption price equal to 109.50% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with all or a portion of the net cash proceeds of one or more Public
Equity Offerings; provided that at least $100 million in aggregate principal
amount of Notes remain outstanding (and held by Persons other than the Company
and its Subsidiaries) immediately after the occurrence of such redemption; and
provided further, that such redemption shall occur within 90 days of the date of
the closing of such Public Equity Offering.
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(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
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<PAGE> 47
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a
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Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports, in each case within the time
periods set forth in the SEC's rules and regulations. In addition, whether or
not required by the rules and regulations of the SEC, following the consummation
of the
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<PAGE> 49
Exchange Offer contemplated by the Registration Rights Agreement, the
Company will file a copy of all such information and reports with the SEC for
public availability within the time periods set forth in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Trustee and the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Collateral Documents, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and the Collateral Documents
and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture or the Collateral Documents (or, if
a Default or Event of Default shall have occurred, describing all such Defaults
or Events of Default of which he or she may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
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<PAGE> 50
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, 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 has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Subsidiaries'
Equity Interests (including, without limitation, any such dividend, distribution
or other payment in connection with any merger or consolidation involving the
Company or any Subsidiary) or to the direct or indirect holders of the Company's
or any of its Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or dividends or distributions payable to the
Company or any Wholly Owned Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, any such
purchase, redemption, acquisition or retirement for value in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company (other than any such Equity Interests owned by the Company or any Wholly
Owned Subsidiary of the Company); (iii) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
a payment of principal at Stated Maturity for such payment; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and immediately after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.09; and
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(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Subsidiaries after the
date of this Indenture (excluding Restricted Payments permitted by clauses (ii),
(iii), (iv) and (viii) of the next succeeding paragraph), is less than the sum
(without duplication) of (i) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate Qualified Proceeds received by the
Company from contributions to capital or the issue or sale since the date of
this Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of this Indenture is sold for
Qualified Proceeds or otherwise liquidated or repaid the lesser of (A) the
Qualified Proceeds with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (iv) $5.0 million.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or any Guarantor in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase, retirement or other acquisition of
subordinated Indebtedness in exchange for, or with the net cash proceeds from,
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend (or the making of any similar distribution or redemption) by a
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; (v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management, employees or consultants pursuant to any management, employee or
consultant equity subscription agreement or stock option agreement in effect as
of the date of this Indenture; provided that (x) the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed the sum of (A) $5.0 million and (B) the aggregate cash proceeds received
by the Company from any reissuance of Equity Interests (other than Disqualified
Stock) by the Company to members of management of the Company and its
Subsidiaries (provided that the cash proceeds referred to in this clause (B)
shall be excluded from clause (c)(ii) of the preceding paragraph) and (y) no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; (vi) cash payments in lieu of fractional shares issuable
as dividends on preferred securities of the Company or any of its Subsidiaries;
provided that such cash payments shall not exceed $20,000 in the aggregate in
any twelve-month period and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction; (vii) the declaration and
payment of dividends to holders of any class or series of Disqualified Stock of
the Company or a Guarantor issued
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after the date of this Indenture in accordance with Section 4.09 hereof;
provided, that no Default or Event of Default shall have occurred and be
continuing immediately after making such declaration or payment; and (viii) from
and after January 1, 1999 so long no Default or Event of Default has occurred
and is continuing, payments by the Company not exceeding $35.0 million in the
aggregate since the Issue Date in respect of the redemption of shares of
Preferred Stock outstanding on the Issue Date (or shares of Preferred Stock
issued as dividends thereon) if both before and after giving effect to any such
payment, the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date of such payment would be at least 2.5 to 1.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by Section 4.07 hereof were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall 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
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or participation in, or measured by, its profits, or (b)
pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make
loans or advances to the Company or any of its Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of this Indenture, (b) the
Revolving Credit Facility as in effect as of the date of this Indenture and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Facility as in effect on the date of this Indenture, (c) this Indenture,
the Notes and the Collateral Documents, (d) applicable law, rule, regulation or
order, (e) any agreement or instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such agreement or instrument
was entered into in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person and its Subsidiaries,
or the property or assets of the Person and its Subsidiaries, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred, (f) by reason of customary
non-assignment provisions in leases, licenses, encumbrances, contracts or
similar assets entered into or acquired in the ordinary course of
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business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced or (i) contracts for the sale of assets containing customary
restrictions with respect to a Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company will not issue any Disqualified Stock and will not permit
any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and the Guarantors may incur Indebtedness or
issue shares of preferred stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by the
Guarantors) of Indebtedness under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and the Guarantors thereunder) outstanding under all Credit
Facilities after giving effect to such incurrence, including all
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (i), does not exceed an amount equal to
$25.0 million;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Note Guarantees;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
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improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
$25.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to exist or
be incurred;
(vi) the incurrence by the Company or any of the Guarantors of
intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results
in any such Indebtedness being held by a Person other than the Company or a
Guarantor and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Guarantor shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Guarantor, as the case may be;
(vii) the incurrence by the Company or any of the Guarantors of Hedging
Obligations that are incurred for the purpose of fixing or hedging (i)
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding or (ii) the value
of foreign currencies purchased or received by the Company in the ordinary
course of business;
(viii) Indebtedness incurred in respect of worker's compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company in the ordinary course of
business;
(ix) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Guarantor that was permitted to be incurred
by another provision of this covenant;
(x) the incurrence by the Company or any of its Subsidiaries of Acquired
Debt in an aggregate principal amount at any time outstanding not to exceed
$5.0 million;
(xi) Indebtedness 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, however, that such Indebtedness is
extinguished within five business days of incurrence;
(xii) the incurrence by the Company or any of the Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (xii), not to exceed $25.0 million; and
(xiii) Indebtedness arising from guarantees of Indebtedness of the
Company or any Subsidiary or the agreements of the Company or a Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
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disposition of any business, assets or Capital Stock of the Company or any
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of
the Company or any Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received by
the Company and its Subsidiaries in connection with such disposition.
For purposes of determining compliance with this Section 4.09, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xiii) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant.
SECTION 4.10 ASSET SALES, COLLATERAL ASSET SALES AND EVENTS OF LOSS.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration therefor received by the Company
or such Subsidiary is in the form of (A) cash or Cash Equivalents or (B)
Qualified Proceeds, provided that the aggregate fair market value of Qualified
Proceeds (other than cash or Cash Equivalents), which may be received in
consideration for asset sales pursuant to this clause (ii)(B) shall not exceed
$5.0 million since the Issue Date; provided further that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Subsidiary from such transferee that are converted by
the Company or such Subsidiary into cash (to the extent of the cash received)
within 90 days, shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or any Subsidiary may apply such Net Proceeds to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other property or assets, in each case
which is used or useable in the business of the Company or its Subsidiaries on
the Issue Date or businesses reasonably related thereto. Pending the final
application of any such Net Proceeds, the Company or such Subsidiary may
temporarily reduce amounts available under revolving credit facilities or invest
such Net Proceeds in any manner that is not prohibited by this Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.5 million,
the Company will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to
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purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company or its Subsidiaries may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, engage in a Collateral Asset Sale unless (a) such Collateral
Asset Sale involves the Collateral in its entirety, or, if such Collateral Asset
Sale involves less than all of the Collateral (a "Partial Collateral Asset
Sale"), such Partial Collateral Asset Sale involves a single Collateral Asset
Sale with a fair market value at the time of consummation of such Collateral
Asset Sale not exceeding $50.0 million and is not part of a series of Collateral
Asset Sales in any eighteen month period with an aggregate value (measured as of
the time of consummation of such sales) exceeding $50.0 million in the
aggregate; (b) the Company receives consideration in respect of and concurrently
with such Collateral Asset Sale at least equal to the fair market value of such
Collateral; (c) with respect to each such Collateral Asset Sale, the Company
delivers an Officers' Certificate to the Trustee dated no more than 15 days
prior to the date of consummation of the relevant Collateral Asset Sale,
certifying that (i) such sale complies with clauses (a) and (b) above and (ii)
if the fair market value of the Collateral being sold exceeds $10.0 million, the
fair market value of such Collateral was determined in good faith by the Board
of Directors of the Company (whose determination, if the Collateral Asset Sale
involves Collateral with a fair market value in excess of $50.0 million, was
based on the opinion of a nationally recognized qualified independent appraiser
prepared contemporaneously with such Collateral Asset Sale and which opinion, in
such case, will be attached to the Officers' Certificate) as evidenced by copies
of a resolution of the Board of Directors of the Company adopted in respect of
and concurrently with such Collateral Asset Sale; (d) 100% of such consideration
is in cash or Cash Equivalents; and (e) the Net Proceeds therefrom shall be paid
directly by the purchaser thereof to the Collateral Agent, pursuant to the
applicable security document, as additional Collateral. In the case of a Partial
Collateral Asset Sale, the Company, within 360 days from the date of
consummation of a Partial Collateral Asset Sale, may apply all of the Net
Proceeds therefrom to purchase or otherwise invest in Replacement Collateral.
Any such Net Proceeds not so applied shall constitute "Excess Proceeds" and
shall be applied to make an Asset Sale Offer, in accordance with the terms of
the second paragraph of Section 4.10(a) hereof. In the case of a Collateral
Asset Sale other than a Partial Collateral Asset Sale all of the Net Proceeds
therefrom shall constitute "Excess Proceeds" and shall be applied to make an
Asset Sale Offer in accordance with the terms described above.
(c) If the Company suffers an Event of Loss, (a) the Net Proceeds
therefrom shall be paid directly by the party providing such Net Proceeds to the
Collateral Agent, pursuant to the applicable Collateral Document, as additional
Collateral and (b) the Company shall take such actions, at its sole expense, as
may be required to ensure that the Collateral Agent, pursuant to the applicable
security document, has from the date of such deposit a first ranking Lien
(subject to Permitted Liens) on such Net Proceeds pursuant to the terms of the
applicable Collateral Document. As any portion or all of the Net Proceeds from
any such Event of Loss are received by the Collateral Agent, the Company may
apply all
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of such amount or amounts, as received, together with all interest earned
thereon, individually or in combination, (i) to purchase or otherwise invest in
Replacement Collateral or (ii) to restore the relevant Collateral. In the event
that the Company elects to restore the relevant Collateral pursuant to the
foregoing clause (ii), within six months of receipt of such Net Proceeds from an
Event of Loss, the Company shall (x) give the Trustee irrevocable written notice
of such election and (y) enter into a binding commitment to restore such
Collateral, a copy of which shall be supplied to the Trustee, and shall have 12
months (and up to an additional 6 months in the event the Board of Directors
reasonably determines by written resolution that the restoration will be
completed at the end of such additional six months) from the date of such
binding commitment to complete such restoration, which shall be carried out with
due diligence. Any such Net Proceeds not so applied shall constitute "Excess
Proceeds" and shall be applied to make an Asset Sale Offer in accordance with
the terms of the second paragraph of Section 4.10(a) hereof.
In the event that the Company decides pursuant to the foregoing
provisions to apply any portion of the Net Proceeds from a Collateral Asset Sale
or an Event of Loss to purchase or otherwise invest in Replacement Collateral,
(i) the Company shall deliver an Officers' Certificate to the Trustee dated no
more than 30 days prior to the date of consummation of the relevant investment
in Replacement Collateral, certifying that the purchase price for the amount of
the investment in Replacement Collateral does not exceed the fair market value
of such Replacement Collateral and, if the fair market value of such Replacement
Collateral exceeds $10.0 million, certifying that the fair market value of such
Replacement Collateral was determined in good faith by the Board of Directors of
the Company and, in the event the fair market value of such Replacement
Collateral exceeds $50.0 million, was based on the opinion of a nationally
recognized qualified independent appraiser attached to the Officers'
Certificate, as evidenced by copies of a resolution of the Board of Directors of
the Company adopted in respect of and concurrently with the investment in such
Replacement Collateral; (ii) the Trustee will instruct the Collateral Agent to
release such certified purchase price to the Company, free of the Lien of the
Collateral Documents; and (iii) the Company shall take such actions, at its sole
expense, as shall be required to permit the Collateral Agent, pursuant to the
applicable Collateral Document, to release such Net Proceeds, together with any
interest thereon, from the Lien of the applicable Collateral Document and to
ensure that the Collateral Agent has, from the date of such purchase or
investment, a first ranking Lien (subject to Permitted Liens on such Collateral)
on such Replacement Collateral under the applicable Collateral Document.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any payment to or Investment in, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above
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and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (u) payments of fees and expenses (including any such
payments to the Principal and its Affiliates in connection with the
Recapitalization, (v) contracts, agreements, understandings or other
arrangements existing on the Issue Date, (w) transactions with suppliers or
other purchasers or sales of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in accordance with the terms of this Indenture which
are fair to the Company, in the good faith determination of the Board of
Directors of the Company or the senior management of the Company, and are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party, (x) any employment agreements, stock option or other
compensation agreements or plans (and the payment of amounts or the issuance of
securities thereunder) and other reasonable fees, compensation, benefits and
indemnities paid or entered into by the Company or any of its Subsidiaries with
the officers, directors or employees of the Company or its Subsidiaries in the
ordinary course of business, (y) transactions between or among the Company
and/or its Subsidiaries and (z) Restricted Payments (other than Restricted
Investments) that are permitted by the provisions of Section 4.07 of this
Indenture, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom for purposes of security, except Permitted
Liens.
SECTION 4.13 LOANS TO SUBSIDIARIES.
All loans to Subsidiaries made by the Company from time to time
after the date hereof shall be evidenced by unsecured Subsidiary Intercompany
Notes in favor of the Company that will be pledged to the Collateral Agent
pursuant to the Pledge Agreement as Collateral to secure the Notes. All loans by
the Company to any Subsidiary outstanding on the date hereof shall be evidenced
by an unsecured Subsidiary Intercompany Note that will be pledged to the
Collateral Agent pursuant to the Pledge Agreement as Collateral for the Notes;
provided, however, that a Subsidiary Intercompany Note of a foreign Subsidiary
shall not be pledged to the Collateral Agent in the event the result would be a
materially adverse tax consequence to the Company. Each Subsidiary Intercompany
Note will be payable upon demand and will bear interest at a market rate. A form
of Subsidiary Intercompany Note is attached hereto as Exhibit G. Repayments of
principal with respect to any Subsidiary Intercompany Note will be required to
be pledged to the Collateral Agent pursuant to the Pledge Agreement as
Collateral to secure the Notes until such amounts are repaid.
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SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer (a "Change of Control Offer") to each Holder to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
stating: (1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no later than 30 days (or
such shorter time period as may be permitted under applicable laws, rules and
regulations) and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (3) that any Note not tendered will continue
to accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed or transfer by book-entry transfer, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (6) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes in connection with a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture relating to such
Change of Control Offer, the Company will comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
hereunder by virtue thereof.
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(b) On the Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
tendering Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any sale and leaseback transaction with respect to
any property or asset of the Company or any of its Subsidiaries; provided that
the Company may enter into such a sale and leaseback transaction if (i) the
Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant
to Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is excluded from the definition of Asset Sale pursuant to
clause (v) thereof, or is permitted by, and the Company applies the proceeds of
such transaction in compliance with, the covenant described in Section 4.10
hereof.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Subsidiary of the Company to any Person
(other than to the Company or to a Wholly Owned Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
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necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or to a Wholly Owned Subsidiary.
SECTION 4.18 LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not (i) permit any of its Subsidiaries that is
not a Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness and (ii) and shall not permit any of its
Subsidiaries to pledge any intercompany notes representing obligations of any of
its Subsidiaries, to secure the payment of any Indebtedness, in each case unless
such Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional guarantee by such Subsidiary, on a senior basis, of the Notes).
The form of Notation of such Guarantee is attached as Exhibit D hereto.
SECTION 4.19 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.20 ADDITIONAL NOTE GUARANTEES.
If (i) the Company or any of its subsidiaries shall acquire or
create another subsidiary after the date of this Indenture or (ii) any
subsidiary guarantees any indebtedness of the Company or any other subsidiary of
the Company, then such newly acquired or created subsidiary or such subsidiary
delivering a guarantee shall become a Guarantor by executing a Supplemental
Indenture in the form attached hereto as Exhibit E and deliver an Opinion of
Counsel to the Trustee to the effect that such Supplemental Indenture has been
duly authorized, executed and delivered by such subsidiary and constitutes a
valid and binding obligation of such subsidiary, enforceable against such
subsidiary in accordance with its terms (subject to customary exceptions). The
provisions of this Section 4.20 shall not apply to any subsidiary organized
outside of the United States and its territories.
SECTION 4.21 COLLATERAL DOCUMENTS.
Neither the Company nor any of its Subsidiaries shall amend,
waive or modify, or take or refrain from taking any action that has the effect
of amending, waiving or modifying, any provision of the Collateral Documents to
which the Company or any of its Subsidiaries is a party to the extent that such
amendment, waiver, modification or action could have an adverse effect on the
rights of the Collateral Agent, the Trustee or the Holders, provided that: (i)
the Collateral may be released or replaced as expressly provided in this
Indenture and in the Collateral Documents and (ii) this Indenture and any of the
Collateral Documents may be otherwise amended, waived or modified as set forth
in Article 9 hereof.
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ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person unless (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation or limited liability company organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes, this Indenture and the Collateral
Documents pursuant to a supplemental indenture or other documents or instruments
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists under this Indenture or the
Collateral Documents; and (iv) except in the case of a merger of the Company
with or into a Wholly Owned Subsidiary of the Company, the Company or the Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.09 hereof. The foregoing clause (iv) will not
prohibit (a) a merger between the Company and a Person that owns all of the
Capital Stock of the Company created for the purpose of holding the Capital
Stock of the Company, (b) a merger between the Company and a Wholly Owned
Subsidiary of the Company or (c) a merger between the Company and an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
State of the United States so long as, in the case of each of clause (a), (b)
and (c), the amount of Indebtedness of the Company and its Subsidiaries is not
increased thereby.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
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ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Each of the following shall constitute an "Event of Default":
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes;
(b) default in payment when due of the principal of, or premium, if
any, on the Notes;
(c) failure by the Company or any of its Subsidiaries for 30 days
after notice by the Trustee or by the Holders of at least 25% of Notes then
outstanding to comply with any of its other agreements in this Indenture or
Notes;
(d) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of this Indenture, which default (i) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness after giving effect to any
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its stated maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $15.0 million or more;
(e) failure by the Company or any of its Subsidiaries to pay final
judgments (net of any amounts with respect to which a reputable and creditworthy
insurance company has acknowledged liability in writing) aggregating in excess
of $15.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days;
(f) except as permitted by this Indenture, any Note Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Note Guarantee;
(g) material breach by the Company of any representation or warranty
set forth in the Collateral Documents, or a material default by the Company in
the performance of any covenant set forth in the Collateral Documents, or
repudiation by the Company of its obligations under the Collateral Documents or
the unenforceability of the Collateral Documents against the Company for any
reason, which in any such case materially impairs the Trustee's lien on or the
value of the Collateral, taken as a whole;
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(h) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; and
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default specified
in clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration the Notes shall become due and payable.
Notwithstanding the foregoing, if an Event of Default specified in clause (h) or
(i) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or
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premium that has become due solely because of the acceleration) have been cured
or waived. In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in clause (d) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (d) of the preceding paragraph
have rescinded the declaration of acceleration in respect of such Indebtedness
within 30 days of the date of such declaration and if (a) the annulment of the
acceleration of such Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived.
If an Event of Default occurs on or after March 1, 2002 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to March 1, 2002
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on March 1 of the years
set forth below, as set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1998.........................................................9.50%
1999.........................................................8.31%
2000.........................................................7.13%
2001.........................................................5.94%
2002.........................................................4.75%
</TABLE>
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, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes, this Indenture or the Collateral Documents.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount
of the then outstanding Notes by notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
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the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture, the Notes or the Collateral Documents only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture or the Collateral
Documents to prejudice the rights of another Holder of a Note or to obtain a
preference or priority over another Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), 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.
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SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and 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 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 to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
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Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
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 a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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 its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Collateral Documents and the Trustee
need perform only those duties that are specifically set forth in this
Indenture and the Collateral Documents and no others, and no implied
covenants or obligations shall be read into this Indenture or the Collateral
Documents against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (e) and (f) of this Section and Section 7.02.
(e) No provision of this Indenture or the Collateral Documents shall
require the Trustee to expend or risk its own funds or incur any liability. The
Trustee shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) In connection with the Trustee's rights and duties under this
Indenture or the Collateral Documents, the Trustee may conclusively rely upon
any document believed by it to be genuine and to have been signed or presented
by the proper Person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting under this
Indenture or the Collateral Documents, it may require an Officers' Certificate
or an Opinion of Counsel or both. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder or pursuant to the Collateral
Documents thereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture or the Collateral Documents.
(e) Unless otherwise specifically provided in this Indenture or the
Collateral Documents, any demand, request, direction or notice from the Company
shall be sufficient if signed by an Officer of the Company.
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(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture or the Collateral Documents at
the request or direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
(g) To the extent any provisions of the Collateral Documents conflict
with or are silent with respect to those matters covered by this Article 7, such
document shall be deemed to include such provisions set forth herein as if
stated therein.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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 Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice
of the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
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A copy of each report at the time of its mailing to the Holders
of Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and the Collateral Documents
and services hereunder. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services, except any disbursement, advance or expense as may be attributable
to the Trustee's negligence or bad faith. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture and the
Collateral Documents, including the costs and expenses of enforcing this
Indenture against the Company (including this Section 7.07) and defending itself
against any claim (whether asserted by the Company or any Holder 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 any such loss, liability or
expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Company promptly of 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 or under the Collateral Documents. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture and the Collateral
Documents.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture and the Collateral Documents.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, 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
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
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SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of Notes
of a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company,
or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, 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 Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
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SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee; provided that such corporation shall be otherwise qualified
and eligible under the Indenture, without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b). If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, it shall resign immediately
in the manner and with the effect set forth in Section 7.08 of this Indenture.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the
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Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium and Liquidated Damages, if any, and
interest on such Notes when such payments are due, (b) the Company's obligations
with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, and 4.21 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(e) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants or investment bank, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be;
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(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) 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 Counsel (which may be subject to customary exceptions
and assumptions) shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal 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 Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel (which may be subject
to customary exceptions and assumptions) in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions and assumptions) to the
effect that on the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its
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obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees, the Notes or the Collateral Documents without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) to allow any Guarantor to execute a supplemental indenture and/or
a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.15 hereof), the Note Guarantees, the Notes and the Collateral Documents
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and
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6.07 hereof, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of the principal of, premium, Liquidated
Damages, if any, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any provision
of this Indenture, the Note Guarantees, the Notes and the Collateral Documents
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes). Section 2.08 hereof shall determine which Notes are considered
to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority
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in aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration of the Notes);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of , or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 4.15 or 4.10 hereof);
(h) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture;
(i) release the Lien of the Collateral Agent in any of the Collateral
other than pursuant to the terms hereof or the Collateral Documents; or
(j) make any change to the amendment and waiver provisions set forth in
this Section 9.02.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
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SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
COLLATERAL AND SECURITY
SECTION 10.01 COLLATERAL AND SECURITY.
The due and punctual payment of the principal of and interest and
Liquidated Damages, if any, on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest and Liquidated Damages (to the extent permitted by law), if any, on
the Notes and performance of all other obligations of the Company to the Holders
of Notes or the Trustee under this Indenture and the Notes, according to the
terms hereunder or thereunder, shall be secured as provided in the Collateral
Documents which the Company has entered into simultaneously with the execution
of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and
agrees to the terms of the Collateral Documents (including, without limitation,
the provisions providing for foreclosure and release of the Collateral
Documents) as the same may be in effect or may be amended from time to time in
accordance with its terms and authorizes and directs the Collateral Agent to
enter into the Collateral Documents and to perform its obligations and exercise
its rights thereunder in accordance therewith. The Company shall deliver to the
Trustee copies of all documents delivered to the Collateral Agent pursuant to
the Collateral Documents, and shall do or cause to be done all such acts and
things as may be necessary or proper, or as may be required by the provisions of
the Collateral Documents, to assure and confirm to the Trustee and the
Collateral Agent the security interest in the Collateral Documents contemplated
hereby, by the Collateral Documents or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Notes secured hereby, according to the intent and
purposes herein expressed. The Company shall take, or shall cause its
Subsidiaries to take, upon request of the Trustee, any and all actions
reasonably required to cause the Collateral Documents to create and maintain, as
security for the Obligations of the Company hereunder, a valid and enforceable
perfected first priority Lien in and on all the Collateral, in favor of the
Collateral Agent for the benefit of the Holders of Notes, superior to and prior
to the rights of all third Persons and subject to no other Liens than Permitted
Liens.
SECTION 10.02 RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee simultaneously with
the execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all
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action has been taken with respect to the recording, registering and filing of
this Indenture, financing statements or other instruments necessary to make
effective the Lien intended to be created by the Collateral Document, and
reciting with respect to the security interests in the Collateral, the details
of such action, or (ii) stating that, in the opinion of such counsel, no such
action is necessary to make such Lien effective.
(b) The Company shall furnish to the Collateral Agent and the
Trustee on March 1 in each year beginning with March 1, 1999, an Opinion of
Counsel, dated as of such date, either (i) (A) stating that, in the opinion of
such counsel, action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and refiling of all supplemental
indentures, financing statements, continuation statements or other instruments
of further assurance as is necessary to maintain the Lien of the Collateral
Document and reciting with respect to the security interests in the Collateral
the details of such action or referring to prior Opinions of Counsel in which
such details are given, (B) stating that, based on relevant laws as in effect on
the date of such Opinion of Counsel, all financing statements and continuation
statements have been executed and filed that are necessary as of such date and
during the succeeding 12 months fully to preserve and protect, to the extent
such protection and preservation are possible by filing, the rights of the
Holders of Notes and the Collateral Agent and the Trustee hereunder and under
the Collateral Document with respect to the security interests in the
Collateral, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien and assignment.
SECTION 10.03 RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section
10.03, Collateral may be released from the Lien and security interest created by
the Collateral Document at any time or from time to time in accordance with the
provisions of the Collateral Document or as provided hereby. In addition, upon
the request of the Company pursuant to an Officers' Certificate certifying that
all conditions precedent hereunder have been met and stating whether or not such
release is in connection with an Asset Sale and (at the sole cost and expense of
the Company) the Collateral Agent shall release (i) Collateral that is sold,
conveyed or disposed of in compliance with the provisions of this Indenture;
provided, that if such sale, conveyance or disposition constitutes a Collateral
Asset Sale, the Company shall apply the Net Proceeds in accordance with Section
4.10 hereof. Upon receipt of such Officers' Certificate the Collateral Agent
shall execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral
permitted to be released pursuant to this Indenture or the Collateral Document.
(b) No Collateral shall be released from the Lien and security
interest created by the Collateral Document pursuant to the provisions of the
Collateral Document unless there shall have been delivered to the Collateral
Agent the certificate required by this Section 10.03.
(c) At any time when a Default or Event of Default shall have
occurred and be continuing and the maturity of the Notes shall have been
accelerated (whether by declaration or otherwise) and the Trustee shall have
delivered a notice of acceleration to the Collateral Agent, no release of
Collateral pursuant to the provisions of the Collateral Document shall be
effective as against the Holders of Notes.
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(d) The release of any Collateral from the terms of this
Indenture and the Collateral Document shall not be deemed to impair the security
under this Indenture in contravention of the provisions hereof if and to the
extent the Collateral is released pursuant to the terms of the Collateral
Document and to the terms hereof. To the extent applicable, the Company shall
cause TIA Section 313(b), relating to reports, and TIA Section 314(d), relating
to the release of property or securities from the Lien and security interest of
the Collateral Document and relating to the substitution therefor of any
property or securities to be subjected to the Lien and security interest of the
Collateral Document, to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of the Company except in cases
where TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee and the Collateral Agent in the
exercise of reasonable care.
SECTION 10.04 CERTIFICATES OF THE COMPANY.
The Company shall furnish to the Trustee and the Collateral
Agent, prior to each proposed release of Collateral pursuant to the Collateral
Document, (i) all documents required by TIA Section 314(d) and (ii) an Opinion
of Counsel, which may be rendered by internal counsel to the Company, to the
effect that such accompanying documents constitute all documents required by TIA
Section 314(d). The Trustee may, to the extent permitted by Sections 7.01 and
7.02 hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
SECTION 10.05 CERTIFICATES OF THE TRUSTEE.
In the event that the Company wishes to release Collateral in
accordance with the Collateral Document and has delivered the certificates and
documents required by the Collateral Document and Sections 10.03 and 10.04
hereof, the Trustee shall reasonably determine whether it has received all
documentation required by TIA Section 314(d) in connection with such release
and, based on such reasonable determination and the Opinion of Counsel delivered
pursuant to Section 10.04(b), shall deliver a certificate to the Collateral
Agent setting forth such determination.
SECTION 10.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
COLLATERAL DOCUMENT.
Subject to the provisions of Section 7.01 and 7.02 hereof, the
Trustee may, in its sole discretion and without the consent of the Holders of
Notes, direct, on behalf of the Holders of Notes, the Collateral Agent to, take
all actions it deems necessary or appropriate in order to (a) enforce any of the
terms of the Collateral Document and (b) collect and receive any and all amounts
payable in respect of the Obligations of the Company hereunder. The Trustee
shall have power to institute and maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Collateral by any acts that may
be unlawful or in violation of the Collateral Document or this Indenture, and
such suits and proceedings as the Trustee may deem expedient to preserve or
protect its interests and the interests of the Holders of Notes in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such
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enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders of Notes or of the Trustee).
SECTION 10.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
COLLATERAL DOCUMENT.
The Trustee is authorized to receive any funds for the benefit of
the Holders of Notes distributed under the Collateral Document, and to make
further distributions of such funds to the Holders of Notes according to the
provisions of this Indenture.
SECTION 10.08 TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all Obligations of the Company under
this Indenture and the Notes, or upon Legal Defeasance, the Trustee shall, at
the request of the Company, deliver a certificate to the Collateral Agent
stating that such Obligations have been paid in full, and instruct the
Collateral Agent to release the Liens pursuant to this Indenture and the
Collateral Document.
ARTICLE 11.
NOTE GUARANTEES
SECTION 11.01 GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately. Each Guarantor agrees that
this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this
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Note Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, this
Note Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect.
Each Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.02 LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Note
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Note Guarantee. To effectuate the foregoing intention,
the Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of such Guarantor under its Note Guarantee and this Article 11 shall
be limited to the maximum amount as will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under this
Article 11, result in the obligations of such Guarantor under its Note Guarantee
not constituting a fraudulent transfer or conveyance.
SECTION 11.03 EXECUTION AND DELIVERY OF NOTE GUARANTEE.
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit D shall be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
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If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.20 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Note Guarantees in accordance with Section 4.20
hereof and this Article 11, to the extent applicable.
SECTION 11.04 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person) another Person whether or not
affiliated with such Guarantor unless:
(a) subject to Section 11.05 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture, the Note Guarantee and the Collateral
Document on the terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no
Default or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Note Guarantee endorsed upon the Notes and the due and punctual performance of
all of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor Person shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor Person thereupon may cause to be signed any or all of the Note
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Note Guarantees so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
all of such Note Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and
notwithstanding clauses (a) and (b) above, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
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SECTION 11.05 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee. Upon delivery
by the Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by the
Company in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 12.02 NOTICES.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008
Telecopier No.: 408-374-5354
Attention: General Counsel
If to the Trustee:
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State Street Bank and Trust Company
Corporate Trust Administration
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Telecopier No.: 860-244-1897
Attention: Steven Cimalore
The Company, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
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(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
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 satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Note Guarantees, this Indenture or the Collateral Documents or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SECTION 12.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES 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.
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SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
SECTION 12.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12 COUNTERPART 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.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
DATED AS OF FEBRUARY 27, 1998
ZILOG, INC.
By: /s/ ROBERT E. COLLINS
-------------------------------------
Name: Robert E. Collins
Title: Vice President and Chief
Financial Officer
ZILOG EUROPE
By: /s/ ROBERT E. COLLINS
-------------------------------------
Name: Robert E. Collins
Title: Vice President
ZILOG TOA COMPANY
By: /s/ ROBERT E. COLLINS
-------------------------------------
Name: Robert E. Collins
Title: Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ STEVE CIMALORE
-------------------------------------
Name: Steve Cimalore
Title: Vice President
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<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
ZILOG, INC.
9 1/2% SENIOR SECURED NOTES DUE MARCH 1, 2005
PURCHASE AGREEMENT
February 23, 1998
Goldman, Sachs & Co.
BancBoston Securities Inc.
Citicorp Securities, Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Zilog, Inc., a Delaware corporation (the "Company"), has entered
into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of July
20, 1997, as amended by Amendments Number One, Number Two and Number Three,
dated as of November 18, 1997, December 10, 1997 and January 26, 1998,
respectively, by and among the Company and the parties listed on the signature
pages thereto, pursuant to which TPG Zeus Acquisition Corporation, a Delaware
corporation, will be merged with and into the Company (the "Acquisition"). The
Acquisition is to be financed in part through (i) the Company's issuance of
voting and non voting common stock and preferred stock to TPG Partners II, L.P.
(and other investors) in exchange for $117.5 million in cash (the "Equity
Investment"), (ii) the issuance of the Notes (as defined herein). The Merger
Agreement, together with each of the other agreements among the parties to the
Merger Agreement referred to in the Merger Agreement are collectively referred
to herein as the "Acquisition Documents." The Company proposes, subject to the
terms and conditions stated herein, to issue and sell to Goldman, Sachs & Co.,
BancBoston Securities Inc. and Citicorp Securities, Inc. (the "Initial
Purchasers") an aggregate of $280,000,000 principal amount of the Company's
9-1/2% Senior Secured Notes due 2005 (the "Notes"), a portion of which is for
resale by the Initial Purchasers to qualified institutional buyers (within the
meaning of Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended
(the "Securities Act")) ("QIBs") in reliance upon Rule 144A, and the remainder
of which is being offered by Goldman, Sachs & Co. (through Goldman Sachs
International, as selling agent), BancBoston Securities Inc. and Citicorp
Securities, Inc. outside the United States in reliance on Regulation S under the
Securities Act. The Notes and the Exchange Notes (as defined below) will be
fully and unconditionally guaranteed (the "Guarantees") as to payment of
principal, interest, liquidated damages, if any, and premium, if any, on a
senior secured basis, jointly and severally by each of the Guarantors listed on
Annex II hereto and certain future Subsidiaries of the Company (each a
"Guarantor," and collectively, the "Guarantors").
Capitalized terms used herein and not otherwise defined are used as
defined in the Offering Circular (as defined below). The obligations of the
Initial Purchasers under this Agreement are several and not joint.
<PAGE> 2
1. The Company and each of the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Initial Purchasers
that:
(a) A preliminary offering circular, subject to completion dated
February 9, 1998 (the "Preliminary Offering Circular") and an offering circular,
dated February 23, 1998 (the "Offering Circular"), have been prepared in
connection with the offering of the Notes. Any reference to the Preliminary
Offering Circular or the Offering Circular shall be deemed to refer to and
include any Additional Issuer Information (as defined in Section 5(f)) furnished
by the Company prior to the completion of the distribution of the Notes. Neither
the Preliminary Offering Circular nor the Offering Circular nor any amendments
or supplements thereto did or will, as of their respective dates, contain an
untrue statement of a material fact or omit to state a material fact, necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company or any Guarantor by or on behalf of the Initial Purchasers through
Goldman, Sachs & Co. expressly for inclusion in the Preliminary Offering
Circular or the Offering Circular or any amendments or supplements thereto;
(b) No registration of the Notes under the Securities Act, and no
qualification of an indenture under the Trust Indenture Act with respect
thereto, is required for the offer, sale and initial resale of the Notes by the
Initial Purchasers in the manner contemplated by this Agreement;
(c) Subsequent to the date of the most recent audited financial
statements included in the Offering Circular, except as set forth in the
Offering Circular on the dates as of which such information is provided, (i)
neither the Company nor any Guarantor has incurred any liabilities or
obligations, direct or contingent, which are material, individually or in the
aggregate, to the Company and the Guarantors, taken as a whole, nor entered into
any transaction not in the ordinary course of business, (ii) there has not been
any change in the Company's or any Guarantor's capital stock (except for the
issuance of shares of Common Stock upon exercise of stock options outstanding on
December 31, 1997) or increase in long-term debt or any payment of or
declaration to pay any dividends or other distribution with respect to the
capital stock of the Company or any Guarantor, (iii) neither the Company nor any
Guarantor has sustained any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
otherwise than as set forth in or contemplated by the Offering Circular and (iv)
there has not been any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, business, properties, results of operations, prospects or condition
(financial or otherwise), or stockholders' equity of the Company and the
Guarantors, taken as a whole, nor have any events occurred which, singly or in
the aggregate, have a material adverse effect on the issue or sale of the Notes
or the consummation of the transactions contemplated hereby (any change or event
described in (ii)-(iv) of this clause (c), a "Material Adverse Effect");
(d) The Company and each Guarantor has good and marketable title to all
real property and good and marketable title to all material personal property
owned respectively by each of them, in each case free and clear of all liens,
encumbrances and defects except such as
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<PAGE> 3
are described in the Offering Circular (including, without limitation, the
financial statements of the Company included therein) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of the
Guarantors; and any real property and buildings held under lease by the Company
or any of the Guarantors are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company or any of the Guarantors;
(e) The Company has no subsidiaries other than the Guarantors. The
Company and each of the Guarantors has been duly incorporated and is validly
existing in good standing under the laws of its respective jurisdiction of
incorporation, with power and authority to own its properties and conduct its
business as described in the Preliminary Offering Circular and the Offering
Circular, and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions where the ownership of its
properties or the conduct of its business requires such qualification except
where the failure to be so qualified would not have a Material Adverse Effect on
the Company and the Guarantors taken as a whole. The jurisdictions on Annex III
hereto are the material jurisdictions in which the Company operates;
(f) The Company and each of the Company's subsidiaries, as applicable,
has all requisite corporate power and authority to execute, deliver and perform
their obligations under this Agreement, the Indenture (as defined below), the
Notes, the Guarantees, the Registration Rights Agreement (as defined below), the
Exchange Notes, the Collateral Documents (as defined below) and the Pledge
Agreements (as defined below) (collectively, the "Operative Documents") and the
Acquisition Documents to which they are, or will be, a party and to consummate
the transactions contemplated hereby and thereby, including without limitation
the corporate power and authority to issue, sell and deliver the Notes and the
Exchange Notes and to issue the Guarantees of the Notes and the Exchange Notes,
as applicable, as provided herein and therein;
(g) Each of the Preliminary Offering Circular and the Offering Circular,
as of their respective dates, contains the information specified in Rule
144A(d)(4) under the Securities Act;
(h) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable; and all of the issued shares of capital stock of each of the
Guarantors have been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares and as otherwise
required under applicable laws) are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims, except as described in the
Offering Circular;
(i) The Notes have been duly authorized and, when issued and delivered
pursuant to this Agreement and the Indenture, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
Indenture to be dated the Time of Delivery (as defined below) (the "Indenture")
among the Company, the Guarantors and State Street Bank and Trust Company, as
trustee (the "Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Indenture has been
duly authorized and, when executed
3
<PAGE> 4
and delivered by the Company, the Guarantors and the Trustee, the Indenture will
constitute a valid and legally binding instrument of the Company and each of the
Guarantors, enforceable against the Company and each of the Guarantors in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (whether considered in a
proceeding in equity or at law); and the Notes and the Indenture will conform in
all material respects to the descriptions thereof in the Offering Circular and
will be in substantially the form previously delivered to you;
(j) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors;
(k) The registration rights agreement (the "Registration Rights
Agreement"), to be dated the Time of Delivery, has been duly authorized by the
Company and each of the Guarantors and, when duly executed and delivered by the
Company and each of the Guarantors, will be the valid and legally binding
obligation of the Company and each of the Guarantors, enforceable against the
Company and each of the Guarantors in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law)
or, with respect to provisions thereto relating to indemnification and
contribution, by applicable federal and state securities laws or principles of
public policy;
(l) The Exchange Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance with
the terms of the Indenture and the Registration Rights Agreement, will be the
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture, subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general principles of equity (whether considered in a proceeding in
equity or at law);
(m) The Guarantees of the Notes have been duly authorized by each of the
Guarantors and, when executed and delivered in accordance with the terms of the
Indenture and when the Notes have been issued and authenticated in accordance
with the terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be the valid and
legally binding obligations of the Guarantors, enforceable against the
Guarantors in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity (whether
considered in a proceeding in equity or at law). The Guarantees of the Notes,
when issued, will conform in all material respects to the description thereof in
the Offering Circular;
(n) The Guarantees of the Exchange Notes have been duly authorized by
each of the Guarantors and, when executed and delivered in accordance with the
terms of the Indenture and when the Exchange Notes are issued and authenticated
in accordance with the terms of the Indenture and the Registration Rights
Agreement, will be the valid and legally binding obligation of the Guarantors,
enforceable against the Guarantors in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
4
<PAGE> 5
applicability relating to or affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law).
The Guarantees of the Exchange Notes, when issued, will conform in all material
respects to the description thereof in the Offering Circular;
(o) Each of the Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing dated the Time of Delivery among the Company and the Trustee.
as beneficiary (the "Deed of Trust"), the Company Security Agreement dated the
Time of Delivery between the Company and the Trustee (the "Company Security
Agreement"), the Subsidiary Security Agreement dated the Time of Delivery
between the Company, the Trustee and the other parties named therein (the
"Subsidiary Security Agreement"), the Copyright Security Agreement dated the
Time of Delivery between the Company, the Trustee and the other parties named
therein (the "Copyright Security Agreement"), and the Company and Subsidiary
Patent and Trademark Security Agreement dated the Time of Delivery among the
Company, the Trustee and each of the other parties named therein (the "Company
and Subsidiary Patent and Trademark Security Agreement" and, together with the
Deed of Trust, the Company Security Agreement, the Subsidiary Security Agreement
and the Copyright Security Agreement, the "Collateral Documents") and the
Company Pledge Agreement dated the Time of Delivery between the Company and the
Trustee (the "Company Pledge Agreement") and the Subsidiary Pledge Agreement
dated the Time of Delivery between the Company, each subsidiary of the Company
and the Trustee (the "Subsidiary Pledge Agreement" and, together with the
Company Pledge Agreement, the "Pledge Agreements"), has been duly authorized by
the Company and the subsidiaries of the Company named therein and when duly
executed and delivered by the Company and each of the Company's subsidiaries
named therein, will be the valid and legally binding obligation of the Company
and each of Company's subsidiaries named therein, enforceable against the
Company and each of the Company's subsidiaries named therein in accordance with
their terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general principles of equity (whether considered in a proceeding in
equity or at law). The security interests in the Collateral and Pledge under the
Collateral Documents and Pledge Agreements will conform in all material respects
to the description thereof in the Offering Circular;
(p) Except as disclosed in the Preliminary Offering Circular and the
Offering Circular, there are no outstanding (A) securities or obligations of the
Company or any of the Guarantors convertible into or exchangeable for any
capital stock of the Company or any such Guarantor, (B) warrants, rights or
options to subscribe for or purchase from the Company or any of the Guarantors
any such capital stock or any such convertible or exchangeable securities or
obligations, or (C) obligations of the Company or any of the Guarantors to issue
any shares of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options;
(q) There are no holders of securities of the Company or any of the
Guarantors who, by reason of the execution of this Agreement or any other
Operative Document or Acquisition Document by the Company or the Guarantors, as
the case may be, or the consummation of the transactions contemplated hereby and
thereby, have the right to request or demand the Company or any of the
Guarantors to register under the Securities Act or analogous
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<PAGE> 6
foreign laws and regulations any securities held by them (other than pursuant to
the Registration Rights Agreement);
(r) None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Notes) will
violate or result in a violation of Section 7 of the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any regulation
promulgated thereunder, including, without limitation, Regulations G, T, U, and
X of the Board of Governors of the Federal Reserve System;
(s) Prior to the date hereof, none of the Company, the Guarantors or any
of their affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company in
connection with the offering of the Notes;
(t) The issue and sale of the Notes and the compliance by the Company
and the Guarantors with all of the provisions of this Agreement and each of the
other Operative Documents and the consummation of the transactions herein and
therein contemplated (including consummation of the Acquisition and the
financing thereof) will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, (A) any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of the Guarantors is a party or by which
the Company or any of the Guarantors is bound or to which any of the property or
assets of the Company or any of the Guarantors is subject, (B) the provisions of
the Certificate of Incorporation or By-laws of the Company or any of the
Guarantors or (C) (assuming compliance with all applicable state securities or
Blue Sky laws and assuming the accuracy of the representations and warranties of
the Initial Purchasers contained herein) any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of the Guarantors or any of their properties, and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale of
the Notes or the consummation by the Company and the Guarantors of the
transactions contemplated by this Agreement, the Acquisition Documents or any
other Operative Document, except for the filing of a registration statement by
the Company and the Guarantors with the Commission pursuant to the Securities
Act pursuant to Section 5(k) hereof and such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Notes by the Initial Purchasers;
(u) Neither the Company nor any of the Guarantors is in violation of its
Certificate of Incorporation or By-laws or is in default in the performance or
observance of any material obligation, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other material
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
(v) The statements set forth in the Offering Circular under the captions
"Description of Notes" and "Certain United States Federal Tax Considerations for
Non-United States Holders" insofar as they purport to constitute a summary of
the terms of the Notes and
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<PAGE> 7
insofar as they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
(w) Other than as set forth in the Offering Circular, there are no legal
or governmental proceedings pending to which the Company or any of the
Guarantors is a party or of which any property of the Company or any of the
Guarantors is the subject which individually or in the aggregate is reasonably
likely to have a Material Adverse Effect; and, to the Company's knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(x) When the Notes are issued and delivered pursuant to this Agreement,
the Notes will not be of the same class (within the meaning of Rule 144A under
the Securities Act) as securities of the Company which are listed on a national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system;
(y) Neither the Company nor any of the Guarantors (A) is or (after
giving effect to the offering and sale of the Notes and the application of net
proceeds therefrom) will be an "investment company", or an entity "controlled"
by an "investment company", as such terms are defined in the United States
Investment Company Act of 1940, as amended (the "Investment Company Act") or (B)
is a "holding company," a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utilities Holding Company Act
of 1935, as amended (the "Public Utilities Act"), or is a "public utility," as
such term is defined in the Federal Power Act, as amended (the "Federal Power
Act");
(z) None of the Company, the Guarantors or any person acting on its or
their behalf has offered or sold the Notes by means of any general solicitation
or general advertising within the meaning of Rule 502(c) under the Securities
Act or, with respect to Notes sold outside the United States to non U.S. persons
(as defined in Rule 902 under the Act), by means of any directed selling efforts
within the meaning of Rule 902 under Securities Act and the Company, any
affiliate of the Company and any person acting on its or their behalf has
complied with and will implement the "offering restriction" within the meaning
of such Rule 902, it being understood that the Company and the Guarantors make
no representation in this clause (z) as to the Initial Purchasers;
(aa) Within the preceding six months, none of the Company, the Guarantors
or any other person acting on behalf of the Company or any of the Guarantors has
offered or sold to any person any Notes, or any securities of the same or a
similar class as the Notes, other than the Notes offered or sold to the Initial
Purchasers hereunder. The Company and the Guarantors agree to take reasonable
precautions designed to insure that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902 under the
Securities Act) of any Notes or any substantially similar security issued by the
Company or the Guarantors, within six months subsequent to the date on which the
distribution of the Notes has been completed (as notified to the Company by
Goldman, Sachs & Co.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the Notes
in the United States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Securities Act.
Neither the Company nor any of its affiliates or any person acting on its behalf
has engaged or will engage in any directed selling
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<PAGE> 8
efforts within the meaning of Regulation S under the Securities Act with respect
to the Notes or the Guarantees, it being understood that the Company and the
Guarantors make no representation in this clause (aa) as to the Initial
Purchasers;
(ab) None of the Company, the Guarantors or their respective affiliates
does business with the Government of Cuba or with any person or any affiliate
located in Cuba within the meaning of the provisions of Florida H.B. 1771,
codified as Section 517.075 of the Florida Statutes, and any regulations
promulgated thereunder;
(ac) The consolidated historical financial statements, together with
related schedules and notes, set forth in the Preliminary Offering Circular and
the Offering Circular comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the
Securities Act and fairly present the consolidated financial position of the
Company and each of its Subsidiaries and the respective dates indicated and the
results of their operations and their cash flows for the respective periods
indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods (except as otherwise disclosed
therein). The pro forma financial statements contained in the Offering Circular
have been prepared on a basis consistent with such historical statements, except
for the pro forma adjustments specified therein, and give effect to assumptions
made on a reasonable basis and present fairly the historical and proposed
transactions contemplated by this Agreement, the other Operative Documents and
the Acquisition Documents. The other financial and statistical information and
data included in the Preliminary Offering Circular and the Offering Circular,
historical and pro forma, are, in all material respects, prepared on a basis
consistent with such financial statements and the books and records of the
Company and the Guarantors;
(ad) Ernst & Young LLP, who have certified certain financial statements
of the Company, are independent public auditors as required by the Securities
Act and the rules and regulations of the Commission thereunder;
(ae) The Company and each of the Guarantors has complied in all material
respects with all material laws, regulations and orders applicable to it or its
businesses, except as set forth in the Offering Circular;
(af) (i) The Company and each of the Guarantors has all certificates,
consents, exemptions, orders, permits, licenses, authorizations, or other
approvals (each, an "Authorization") of and from, and has made all declarations
and filings with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals, necessary
or required to engage in the business currently conducted by it in the manner
described in the Offering Circular, except to the extent that a failure to hold
or to have obtained any such Authorization will not have a Material Adverse
Effect on the Company and Guarantors taken as a whole; (ii) all such
Authorizations are valid and in full force and effect and (iii) the Company and
each of the Guarantors is in compliance in all material respects with the terms
and conditions of all such Authorizations and with the rules and regulations of
the regulatory authorities and governing bodies having jurisdiction with respect
thereto;
(ag) Except as set forth in the Offering Circular, the Company and each
of the Guarantors owns or possesses or has the right to use the patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or
8
<PAGE> 9
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "Intellectual
Property") presently employed by it in connection with, and material to, the
operation of the businesses now operated by it, and neither the Company nor any
of the Guarantors has received any notice of infringement of or conflict with
asserted rights of others with respect to the foregoing which, individually or
in the aggregate, would be reasonably likely to result in a Material Adverse
Effect. Except as set forth in the Offering Circular, to the knowledge of the
Company, the use of such Intellectual Property in connection with the business
and operations of the Company and the Guarantors does not infringe on the rights
of any person;
(ah) All material tax returns required to be filed by the Company or any
of the Guarantors in all jurisdictions have been timely and duly filed, other
than those filings being contested in good faith. There are no tax returns of
the Company or any of the Guarantors that are currently being audited by state,
local or federal taxing authorities or agencies (and with respect to which the
Company or any of the Guarantors has received notice). All material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided or those currently payable without penalty or interest;
(ai) The Company and each of the Guarantors maintains insurance covering
its properties, operations, personnel and businesses which insures against such
losses and risks as are adequate in accordance with its reasonable business
judgment to protect the Company and the Guarantors and their businesses. Neither
the Company nor the Guarantors has received notice from any insurer or agent of
such insurer that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding and
duly in force at the Time of Delivery;
(aj) Except as disclosed in the Preliminary Offering Circular and the
Offering Circular (including, without limitation, the documents incorporated by
reference therein), there are no business relationships or related party
transactions which would be required to be disclosed therein by Item 404 of
Regulation S-K of the Commission and each business relationship or related party
transaction described therein is a fair and accurate description of the
relationships and transactions so described in all material respects;
(ak) The Company and each of the Guarantors is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any Guarantor would have any liability; neither
the Company nor any of the Guarantors has incurred or expects to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Section 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or any
Guarantor would have any liability that is intended to be qualified
9
<PAGE> 10
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or by failure to act, which would cause the loss of such
qualification;
(al) There is (i) no material unfair labor practice complaint pending
against the Company or any of the Guarantors, or, to the knowledge of the
Company, threatened against any of them, before the National Labor Relations
Board or any state or local labor relations board, and no significant grievance
or significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of the Guarantors,
or, to the knowledge of the Company, threatened against any of them, (ii) no
material strike, labor dispute, slowdown or stoppage pending against the Company
or any of the Guarantors nor, to the knowledge of the Company, threatened
against the Company or any of the Guarantors and (iii) to the knowledge of the
Company, no union representation question existing with respect to the employees
of the Company or any of the Guarantors and, to the knowledge of the Company, no
union organizing activities are taking place;
(am) The Company and each of the Guarantors reviews from time to time the
effect of Environmental Laws (as defined below) and the disposal of hazardous or
toxic substances, wastes, pollutants and contaminants on the business, assets,
operations and properties of the Company and each of the Guarantors, as
applicable, and identifies and evaluates associated costs and liabilities
(including, without limitation, any material capital and operating expenditures
required for clean-up, closure of properties and compliance with environmental,
safety or similar laws or regulations applicable to it or its business or
property relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), all permits, licenses and approvals, all related
constraints on operating activities and all potential liabilities to third
parties). On the basis of such reviews, the Company has reasonably concluded
that such associated costs and liabilities would not have a Material Adverse
Effect. Except as set forth in the Offering Circular, the Company and the
Guarantors have been in compliance in all material respects with all material
Environmental Laws, permits, licenses and approvals required of them under
applicable Environmental Laws;
(an) None of the Company, the Guarantors or, to the Company's knowledge,
any director, officer, agent, employee or other person associated with or acting
on behalf of the Company or any of the Guarantors, has used any corporate funds
during the last five years for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any unlawful payment
to any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment;
(ao) The Company and each of the Guarantors maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect thereto;
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<PAGE> 11
(ap) Other than as contemplated by or described in this Agreement, any
other Operative Document, the Preliminary Offering Circular, the Offering
Circular or the Proxy Statement Prospectus furnished to the Company Stockholders
requesting approval of the Acquisition, there is no broker, finder or other
party that is entitled to receive from the Company or any of the Guarantors any
brokerage or finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement, any of the Operative Documents or
any Acquisition Document;
(aq) The Company has delivered or will deliver at Closing to the Initial
Purchasers true and correct, executed copies of each of (i) the Operative
Documents (other than the Exchange Notes and the guarantees relating thereto),
in each case, which has been executed prior to or on the date hereof, (ii) the
Credit Agreement dated as of February 27, 1998 among the Company, as Borrower,
the banks and other lenders from time to time party thereto and Bank Boston,
N.A., as Administrative Agent (the "New Credit Facility"), and (iii) the other
Acquisition Documents (collectively, the documents described in items (ii) of
this clause (aq), the "Transaction Documents"), and there have been no
amendments, alterations, modifications or waivers to any of the foregoing
documents or in the exhibits or schedules thereto other than those as to which
the Initial Purchasers shall previously have been advised and shall not have
reasonably objected after being furnished a copy thereof;
(ar) The Company is subject to Section 13 or 15(d) of the Exchange Act;
and
(as) Each of the Acquisition Documents has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company,
will be the valid and legally binding obligation of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditor's rights, to general principles of equity
(whether considered in a proceeding in equity or at law);
(at) Subject to the terms and conditions of this Agreement, the security
interest granted by the Company and its subsidiaries under the Collateral
Documents and the Pledge Agreements will constitute a valid and perfected
security interest in (i) the Collateral (as defined in the Collateral
Documents), (ii) all of the Company's right, title and interest in the
outstanding capital stock of all of its directly and indirectly owned domestic
Subsidiaries, 65% of the capital stock of its foreign subsidiaries and all
subsidiary intercompany notes owed to the Company or any of its domestic
subsidiaries (the "Pledge") and (iii) all distributions or allocations of
distributable cash, property, securities, or other assets from the Pledge
together with all substitutes and replacements for and proceeds of the
foregoing, subject to no equal or prior security interest other than Permitted
Liens of any other creditor of the Company, in each case, securing payment and
performance of the Company's obligations under the Notes, the Indenture, the
Collateral Documents and the Pledge Agreements to which the Company or any of
its subsidiaries is a party. On the Closing Date, such security interest will
constitute a first priority lien and security interest with respect to the
Collateral and Pledge, subject to no security interests of any other person
other than Permitted Liens and those that have been released from or
subordinated to the Collateral and Pledge, and no filings, registrations,
recordings, deliveries or other actions will be required in order to perfect (or
maintain the perfection or priority of) the security interest in such Collateral
or Pledge created under the Collateral Documents and Pledge Agreements, other
than filings, recordings, deliveries or other actions which, at or prior to the
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<PAGE> 12
Time of Delivery, will have been made by or on behalf of the Company and such
continuation statements and other Uniform Commercial Code filings as may be
necessary in the future with respect to the personal property included within
the Deed of Trust. All taxes, fees and other governmental charges due in
connection with such filings, recordings, deliveries or other actions will have
been paid.
(au) Subject to the terms and conditions of this Agreement, the execution
by the Company of the Pledge Agreements and delivery to the Trustee of the
Pledge pursuant thereto, shall cause the Trustee, for the ratable benefit of the
holders of Notes, to have, as security for the payment of the obligations under
the Indenture and the Notes, a valid, duly perfected security interest (as to
the creation of which no consent is required by a third party or such consents
have been obtained) in the Pledge and the actions described in this section (au)
are the only actions, recordings and filings necessary to establish the validity
of such security interest in the Pledge. From and after the date hereof, the
liens or security interests created by the Pledge will be duly perfected,
creating a first priority interest subject to Permitted Liens in the Trustee for
the ratable benefit of the holders of the Notes in the Pledge over all other
liens and security interests in respect of the Pledge, whether now existing or
hereafter created.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Initial Purchasers, and each of the
Initial Purchasers agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 97.0% of the principal amount thereof, plus
accrued interest, if any, from February 27, 1998 to the Time of Delivery
hereunder, the principal amount of the Notes set forth opposite the name of such
Initial Purchaser in Schedule I hereto.
3. Upon authorization by you of the release of the Notes, the Initial
Purchasers propose to offer the Notes for sale upon the terms and conditions set
forth in this Agreement and the Offering Circular and each Initial Purchaser
hereby represents and warrants, and agrees with the Company and the Guarantors,
that:
(a) It will offer and sell the Notes only (i) to persons who it
reasonably believes are QIBs in transactions meeting the requirements of Rule
144A or (ii) upon the terms and conditions set forth in Annex I to this
Agreement;
(b) It is an institutional "Accredited Investor" (within the meaning of
Rule 501 of the Securities Act); and
(c) It has not offered and will not offer or sell the Notes by any form
of general solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Securities Act.
4. (a) The Notes to be purchased by each Initial Purchaser hereunder
will be represented by one or more definitive global Notes in book-entry form
which will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian; provided, however, that such Notes,
if any, as Goldman, Sachs & Co. may request upon at least forty-eight hours'
prior to notice to the Company (such request to include the authorized
denominations and the names in which they are to be registered), shall be
delivered in definitive certificated form. The Company will deliver the Notes to
Goldman, Sachs & Co., for
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<PAGE> 13
the account of each Initial Purchaser, against payment by or on behalf of such
Initial Purchaser of the purchase price therefor by wire transfer of Federal
(same day) funds by causing DTC to credit the Notes to the account of Goldman,
Sachs & Co. at DTC. The Company will cause the certificates representing the
Notes to be made available to Goldman, Sachs & Co. for checking at least
twenty-four hours prior to the Time of Delivery. The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on February 27,
1998 or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date are herein called the "Time of
Delivery."
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Notes and any additional documents requested by the
Initial Purchasers pursuant to Section 7(m) hereof, will be delivered at such
time and date at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000,
New York, New York 10022 (the "Closing Location"). A meeting will be held at the
Closing Location at 4:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to be closed.
5. The Company and the Guarantors agree with each of the Initial
Purchasers:
(a) To prepare the Preliminary Offering Circular and the Offering
Circular in a form approved by you; to make no amendment or any supplement to
the Preliminary Offering Circular or the Offering Circular unless you have been
given reasonable notice thereof and shall not have objected after being
furnished with copies of such proposed amendment or supplement; and to furnish
you with copies of such amendment or supplement;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Notes for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Notes, provided that in connection therewith neither the Company nor any of
the Guarantors shall be required to qualify as a foreign corporation, to file a
general consent to service of process or to subject itself to taxation in excess
of a nominal dollar amount in any jurisdiction;
(c) To furnish the Initial Purchasers, by 10:00 a.m. on the day
after the date thereof, date with copies of the Preliminary Offering Circular,
the Offering Circular and each amendment or supplement thereto with the
independent accountants' report(s) in the Offering Circular, and any amendment
or supplement containing amendments to the financial statements covered by such
report(s), signed by the accountants, and additional copies thereof in such
quantities as you may from time to time reasonably request, and if, at any time
prior to the expiration of nine months after the date of the Offering Circular,
any event shall have occurred as a result of which the Offering Circular as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when such
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<PAGE> 14
Offering Circular is delivered, not misleading, or, if for any other reason it
shall be necessary or desirable during such same period to amend or supplement
the Offering Circular, to notify you and upon your request to prepare and
furnish without charge to each Initial Purchaser and to any dealer in securities
as many copies as you may from time to time reasonably request of an amended
Offering Circular or a supplement to the Offering Circular which will correct
such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and
continuing until the date six months after the Time of Delivery, not to offer,
sell contract to sell or otherwise dispose of, except as provided hereunder and
under the Registration Rights Agreement, any securities of the Company that are
substantially similar to the Notes, without your prior written consent;
(e) Not to be or become, at any time prior to the expiration of
three years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, for the benefit of holders from time to time of the
Notes, to furnish at its expense, upon request, to holders of the Notes and
prospective purchasers of Notes information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Securities Act;
(g) If requested by you, to use its best efforts to cause such
Notes to be eligible for the PORTAL trading system of the National Association
of Securities Dealers, Inc.;
(h) Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, to furnish to the Holders of
Notes (i) definitive reports containing all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K, if the Company or the Guarantors were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and the Guarantors and their consolidated Subsidiaries
and, with respect to the annual information only, a report thereon by the
Company's and the Guarantor's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K, if the Company were required to file such reports, in each case within the
time periods set forth in the Commission's rules and regulations.
(i) During a period of five years from the date of the Offering
Circular (so long as any of the Notes or Exchange Notes remain outstanding),
during any period in which the Company is required to have common stock
registered under Section 12 of the Exchange Act, to furnish to you copies of all
reports or other communications (financial or other) furnished to shareholders
of the Company, and to deliver to you (i) as soon as they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any securities exchange on which the Notes or any class of
securities of the Company or any Guarantor is listed; and (ii) such additional
information concerning the business and financial condition of the Company or
any Guarantor as you may from time to time reasonably request (such financial
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<PAGE> 15
statements to be on a consolidated basis to the extent the accounts of the
Company and the Guarantors are consolidated in reports furnished to shareholders
of the Company generally or to the Commission);
(j) During the period ending two years after the Time of Delivery,
not to and not to permit any of its "affiliates" (as defined in Rule 144 under
the Securities Act) to, resell any of the Notes which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them other than
in compliance with Rule 144;
(k) To use the net proceeds received by it from the sale of the
Notes pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds;" and
(l) To use their best efforts to effect the completion of the
Acquisition as described in the Offering Circular and the Transaction Documents
in all material respects.
(m) To comply with the agreements in the Operative Documents.
(n) To use their best efforts to do all things necessary to
perfect, to the extent permitted by law, a first priority security interest
subject to Permitted Liens in favor of the Trustee for the benefit of the
holders of Notes, in the Collateral and the Pledge.
6. The Company and the Guarantors covenant and agree with each Initial
Purchaser that the Company will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of the Company's and the Guarantors' counsel
and accountants in connection with the issue of the Notes and all other expenses
in connection with the preparation and printing of the Preliminary Offering
Circular and the Offering Circular and any amendments and supplements thereto
and the mailing and delivering of copies thereof to the Initial Purchasers and
dealers; (ii) the cost of printing or producing any agreement among Initial
Purchasers, this Agreement, the Indenture, the Collateral Documents, the Pledge
Agreements, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Notes; (iii) all expenses in
connection with the qualification of the Notes for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Initial Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Notes; (v)
the cost of preparing the Notes; (vi) the fees and expenses of the Trustee and
any agent of the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the Indenture and the Notes; (vii) any cost incurred
in connection with the designation of the Notes for trading in PORTAL; (viii) to
the extent required under the Collateral Documents and Pledge Agreements, fees
and expenses related to the filing and recording or otherwise creating and
perfecting all necessary security interests pursuant to the Collateral Documents
and Pledge Agreements, including any title, lien or judgment searches conducted
to confirm the priority of the Collateral, or any title or other insurance
obtained with respect to the Collateral and (ix) all other costs and expenses
incident to the performance of its obligations hereunder and under the
Indenture, Registration Rights Agreement and each other Operative Document which
are not otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section 6, and Sections 8 and 11
hereof, the Initial Purchasers will pay all of
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their own costs and expenses, including the fees of their counsel and transfer
taxes on resale of any of the Notes by them.
7. The obligations of the Initial Purchasers hereunder shall be
subject, in their discretion, to the condition that all representations and
warranties and other statements of the Company and the Guarantors herein are, at
and as of the Time of Delivery, true and correct, the condition that the Company
and the Guarantors shall have performed all of their respective obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) Latham & Watkins, counsel for the Initial Purchasers, shall have
furnished to you such opinion or opinions, dated the Time of Delivery, with
respect to such matters as you may reasonably request, and Latham & Watkins
shall have received such papers and information as they may reasonably request
to enable them to pass upon such matters.
(b) Pillsbury Madison & Sutro LLP and as to matters of enforceability
under New York law and under the captions "Description of the Notes," "The
Recapitalization," and "Description of Revolving Credit Facility," Cleary,
Gottlieb, Steen & Hamilton, and as to matters under Idaho law, independent Idaho
Counsel to the Company, in each case, counsel for the Company, shall have
furnished to you their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
i. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Offering Circular, including the issuance of the Notes as
contemplated in the Offering Circular;
ii. Each of the Guarantors has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and all of the issued shares of capital stock of
each of the Guarantors have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned of record by the Company or another
Guarantor (such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel or the Company's General Counsel and in
respect of matters of fact upon certificates of officers of the Company or the
Guarantors, provided that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions and certificates);
iii. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Offering Circular, and all of the issued shares
of capital stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of the Company's General
Counsel and in respect of matters of fact upon certificates of officers of the
Company or the Guarantors, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such opinions and
certificates);
iv. The Company and each of the Guarantors has been duly qualified
as a foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction set forth on Annex III;
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<PAGE> 17
v. To the counsel's knowledge and other than as set forth in the
Offering Circular, there are no legal or governmental proceedings pending to
which the Company or any of the Guarantors is a party or of which any property
of the Company or any of the Guarantors is the subject which, if determined
adversely to the Company or any of the Guarantors, would individually or in the
aggregate have a material adverse effect on the consolidated financial position
or results of operations of the Company;
vi. This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
vii. The Notes have been duly authorized, executed and delivered by
the Company, and (assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the Notes by the
Trustee in accordance with the terms of the Indenture and this Agreement)
constitute valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture and enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (whether considered in a
proceeding in equity or at law);
viii. The Guarantees of the Notes by each Guarantor listed on
Annex II hereto have been duly authorized, executed and delivered by the
Guarantors, and (assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the Notes by the
Trustee in accordance with the terms of the Indenture and this Agreement)
constitute valid and legally binding obligations of the Guarantors enforceable
against the Guarantors in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(whether considered in a proceeding in equity or at law);
ix. The Indenture has been duly authorized, executed and delivered
by the Company and the Guarantors and (assuming the due authorization, execution
and delivery thereof by the Trustee) constitutes a valid and legally binding
instrument, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(whether considered in a proceeding in equity or at law);
x. The Registration Rights Agreement has been duly authorized by
the Company and the Guarantors and is the valid and legally binding obligation
of the Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity (whether
considered in a proceeding in equity or at law) and with respect to provisions
thereto relating to indemnification and contribution, to applicable federal and
state securities laws and principles of public policy;
xi. The Exchange Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance with
the terms of the Indenture, will be the valid and legally binding obligations of
the Company, enforceable
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<PAGE> 18
against the Company in accordance with their terms and entitled to the benefits
of the Indenture, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (whether considered in a proceeding
in equity or at law);
xii. The Guarantees of the Exchange Notes by each of the Guarantors
listed on Annex II hereto have been duly and validly authorized by the
Guarantors, and when the Exchange Notes are issued and authenticated in
accordance with the terms of the Indenture, will be the valid and legally
binding obligations of the Guarantors, enforceable against the Guarantors in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (whether considered in a
proceeding in equity or at law);
xiii. Each of the Collateral Documents and the Pledge Agreements has
been duly authorized by the Company and the Guarantors of the Company named
therein and when duly executed and delivered by the Company and each of the
Guarantors named therein, will be the valid and legally binding obligation of
the Company and the Guarantors named therein, enforceable against the Company
and the Guarantors named therein in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law).
The Collateral Documents and the Pledge Agreements will conform in all material
respects with the descriptions thereof in the Offering Circular;
xiv. The issue and sale of the Notes, the execution and delivery of
this Agreement , the Collateral Documents and the Pledge Agreements and each of
the other Transaction Documents by the Company and the Guarantors and the
performance by each of them of their respective obligations hereunder and
thereunder will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, (A) any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
required to be filed as a material contract exhibit to the Company's Form 10-K
for the year ended December 31, 1996 or Forms 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997 to which the Company or any of
the Guarantors is a party or by which the Company or any of the Guarantors is
bound or to which any of the property or assets of the Company or any of the
Guarantors is subject, (B) the Certificate of Incorporation or By-laws of the
Company or any of the Guarantors or (C) to such counsel's knowledge, any statute
or any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Guarantors or any of their
properties;
xv. No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Notes or the consummation by the Company
and the Guarantors of the transactions contemplated by this Agreement and each
of the other Operative Documents, except that such counsel need not express any
opinion in such paragraph as to federal or state securities or Blue Sky laws;
xvi. Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or to such counsel's
knowledge in default in the
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<PAGE> 19
performance or observance of any material obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
the properties may be bound;
xvii. The statements set forth in the Offering Circular under the
captions "Description of Notes," "Description of Revolving Credit Facility,"
"The Recapitalization" and "Certain United States Federal Tax Considerations for
Non-United States Holders" insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and fair;
xviii. The Exchange Act Reports (other than the financial statements
and related schedules therein, as to which such counsel need express no such
opinion), when they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act, and the rules and
regulations of the Commission thereunder;
xix. Assuming the accuracy of the representations of the Initial
Purchasers and Company contained herein, the offer, sale and delivery of the
Notes to the Initial Purchasers, and the initial resales by the Initial
Purchasers in the manner contemplated by the Purchase Agreement and the Offering
Circular, do not require registration under the Securities Act, and the
Indenture is not required to be qualified under the Trust Indenture Act of 1939,
as amended;
xx. The Offering Circular, as of its date, and each amendment or
supplement thereto, as of its date, if any, contains the information specified
in Rule 144A(d)(4) under the Securities Act;
xxi. Neither the issuance or sale of the Notes or the Guarantees
nor the application of the proceeds thereof by the Company as set forth in the
Offering Circular will violate Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System or analogous foreign laws and
regulations;
xxii. Neither the Company nor any of the Guarantors (A) is or (after
giving effect to the offering and sale of the Notes and the application of net
proceeds therefrom) will be an "investment company," or an entity "controlled"
by an "investment company," as such terms are defined in the Investment Company
Act or (B) is a "holding company," a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," as such terms are defined in the Public Utilities Act or
is a "public utility," as such term is defined in the Federal Power Act; and
xxiii. Each of the Acquisition Documents has been duly authorized,
executed and delivered by the Company, and constitutes a valid and legally
binding obligation of the Company enforceable against the Company in accordance
with their terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (whether considered in a proceeding
in equity or at law).
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<PAGE> 20
xxiv. The financing statements naming the Company as debtor and the
Trustee as secured party, together with all schedules and exhibits thereto (the
"Financing Statements") to be filed with the California Secretary of State, the
Santa Clara Recorder's Officer, the Idaho Secretary of State, and the Texas
Secretary of State and (the "Filing Offices") are in appropriate forms for
filing in the Filing Offices. Upon the proper filing of the Financing Statements
in the Filing Offices, the security interest subject to Permitted Liens in favor
of the Trustee in the Collateral will be perfected to the extent a security
interest in such Collateral can be perfected by filing a financing statement
under the provisions of Division 9 of the California Commercial Code and the
analogous provisions of the Idaho Commercial Code and Texas Commercial Code.
xxv. The provisions of the Pledge Agreements, together with
delivery to the Trustee in the State of New York of the certificates
representing the shares identified on Schedule I to each of the Pledge
Agreements (the "Pledged Shares") and blank stock powers with respect thereto
signed by the Company, are sufficient to create in favor of the Trustee a valid
and perfected security interest under the New York UCC in all right, title and
interest of the Company and the relevant subsidiaries in the Pledged Shares.
Upon such delivery and assuming that the Trustee acquires in security interest
in the Pledged Shares without knowledge of any adverse claims, the Trustee will
acquire its security interest free of adverse claims (including other consensual
security interests). No government filings or recordings are required in order
to perfect (or maintain the perfection or priority of) the security interests
created in the Pledged Shares.
xxvi. The execution and delivery by the Company of each of the
Collateral Documents, and the performance of the Company thereunder, will not
violate any provision of existing Idaho law or regulation applicable to the
Company or conflict with the result in the breach of any order, writ,
injunction, ordinance, resolution or decrees of any Idaho governmental authority
which is binding on the Company or its properties.
xxvii. The Deed of Trust is in form satisfactory for recording and
for filing as a fixture filing under the Idaho UCC. The recording of the Deed of
Trust in the office of Canyon County, Idaho is the only recording necessary to
publish notice of and establish record of the rights of the parties thereto and
to perfect the lien and security interest granted by the parties thereto and to
perfect the lien and security interest granted by the Company pursuant to the
Deed of Trust in the real property (including fixtures) covered thereby. Upon
the execution and delivery of the Deed of Trust, such lien and security interest
shall be created and upon the recording of the Deed of Trust as aforesaid, such
lien and security interest shall be perfected as security for the Notes.
xxviii.The Deed of Trust creates a valid lien as security for the
Notes in favor of the Trustee in the Trust Estate (as defined therein) to the
extent the UCC Idaho UCC is applicable thereto.
xxix. Except for nominal filing fees, no recording, filing,
privilege or other tax must be paid in connection with the execution, delivery,
recordation or enforcement of the Deed of Trust in the State of Idaho.
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<PAGE> 21
xxx. No further action is required for the due execution and
delivery or performance or recording of the Collateral Documents or for the
validity or enforcement of any Lien created thereunder or for the perfection of
the security interests of the Trustee in the Collateral, except as that
performed by the Company.
xxxi. It is not necessary for the Trustee, solely in connection with
the transactions contemplated by the Collateral Documents to qualify to do
business in the States of Idaho, Texas or California in order to carry out the
transactions contemplated hereby; it being understood that with respect to
matters covered by Texas law, California law will be assumed to apply.
Such counsel has no reason to believe that (A) the Offering Circular, as
of its date, and any amendment or supplement thereto, as of its date, contain an
untrue statement of material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances in which they were
made, not misleading, or (B) the Offering Circular, as amended or supplemented
as of the Time of Delivery, contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young LLP shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance reasonably satisfactory to you and your counsel.
(d) Neither the Company nor any of the Guarantors shall have sustained
(i) since the date of the latest audited financial statements included in the
Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock (except for the issuance of
shares of Common Stock upon exercise of stock options outstanding on December
31, 1997) or long-term debt of the Company or any of the Guarantors or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, shareholders' equity or results
of operations of the Company and the Guarantors, otherwise than as set forth or
contemplated in the Offering Circular, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the Initial Purchasers so
material and adverse as to make it impracticable or inadvisable to proceed with
the offering or the delivery of the Notes on the terms and in the manner
contemplated in this Agreement and in the Offering Circular.
(e) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no
such organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities.
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(f) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the Nasdaq National Market
("NASDAQ"); (ii) a suspension or material limitation in trading in the Company's
securities listed on the New York Stock Exchange; (iii) a general moratorium on
commercial banking activities declared by either federal or New York State
authorities; (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or war,
if the effect of any such event specified in this clause (iv) in the judgment of
the Initial Purchasers makes it impracticable or inadvisable to proceed with the
offering of the Notes on the terms and in the manner contemplated hereby and in
the Offering Circular; or (v) the occurrence of any material adverse change in
the existing financial, political or economic conditions in the United States or
elsewhere which, in the judgment of the Initial Purchasers, would materially and
adversely affect the financial markets or the market for the Notes.
(g) The Notes shall have been designated for trading on PORTAL.
(h) The Company and the Guarantors shall have furnished or caused to be
furnished to you at the Time of Delivery certificates of officers of the Company
and the Guarantors reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Guarantors herein at and
as of such Time of Delivery, as to the performance by the Company and the
Guarantors of all of their respective obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in the first
paragraph of this Section 7 and in subsections (d) and (e) of this Section 7 and
as to such other matters as you may reasonably request.
(i) The Company, the Guarantors and the Trustee shall have entered into
the Indenture and the Initial Purchasers shall have received counterparts,
conformed as executed thereof.
(j) The Company, the Guarantors and the Initial Purchasers shall have
entered into the Registration Rights Agreement and the Initial Purchasers shall
have received counterparts, conformed as executed thereof.
(k) The Company, the Trustee and the other parties named therein shall
have entered into the Collateral Documents and the Pledge Agreements and the
Initial Purchasers shall have received counterparts, conformed as executed
thereof, which shall be reasonably satisfactory to the Initial Purchasers and
their counsel.
(l) At and as of the Time of Delivery, (1) each of the Transaction
Documents shall be in full force and effect, and there have been no material
amendments, alterations, modifications or waivers to any of them or in the
exhibits or schedules thereto (other than those as to which the Initial
Purchasers shall previously have been advised and shall not have reasonably
objected after being furnished a copy thereof) and (2) there shall exist no
conditions that would constitute a default (or an event that with notice or the
lapse of time, or both would constitute a default) under the New Credit
Facility.
(m) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to
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review or pass upon the matters referred to in this Section 7 and in order to
evidence the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions herein contained.
(n) Prior to the closing date, the Company and the Guarantors shall have
furnished to the Initial Purchasers (1) certified copies of each of the
Transaction Documents and (2) such further information, certificates and
documents as the Initial Purchasers may reasonably request.
(o) The Company shall have entered into and furnished to the Initial
Purchasers certified copies of the executed Acquisition Documents, which shall
be reasonably satisfactory to the Initial Purchasers and their counsel.
(p) The Acquisition (including the financing thereof) shall have been
consummated simultaneously with the release of the Notes to the satisfaction of
the Initial Purchasers and their counsel.
(q) The Initial Purchasers shall have received evidence reasonably
satisfactory to the Initial Purchasers of the taking of all actions with respect
to the Collateral Documents, the Pledge Agreements and such other security
documents as may be necessary to cause the perfection of the liens and security
interests created, or purported to be created, by the Collateral Documents and
the Pledge Agreements.
(r) Subject to Permitted Liens, the Company shall have caused a valid,
perfected first priority lien and security interest in all of the right title
and interest of the Company in and to the Collateral and the Pledge to be
granted to the Trustee for the equal and ratable benefit of the holder of the
Notes. The Company and its applicable subsidiaries shall have duly executed and
delivered to the Trustee, for the equal and ratable benefit of the holders of
Notes, the Collateral Documents and Pledge Agreements to which the Company or
any of its subsidiaries is a party and other appropriate instruments, in form
and substance satisfactory to the Initial Purchasers, for the purpose of
securing the payment and performance of the obligations under the Indenture and
such documents shall have been recorded and filed as required by applicable law
or reasonably required by the Initial Purchasers in order to record and perfect
the first priority lien and security interest created by the Collateral
Documents and Pledge Agreements to which the Company and any of its subsidiaries
is a party in the Collateral and the Pledge and all taxes, fees and other
governmental charges payable in connection with said recording and filing shall
have been paid by the Company.
(s) The Company shall have delivered to the Trustee evidence
satisfactory to the Initial Purchasers that (i) all insurance policies of the
Company covering the Collateral provide that the insurance company issuing such
policies will give the Trustee at least 30 days prior written notice of its
cancellation, non-renewal or other material change in coverage thereunder, (ii)
the Trustee for the benefit of the holders of the Notes, has been named
mortgagee and loss payee under a standard mortgage clause with respect to the
insurance policies covering the Collateral to the extent required by the
Collateral Documents and (iii) the Trustee shall be named as additional named
insured under the Company's liability insurance policies.
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8. (a) The Company and the Guarantors will, jointly and severally,
indemnify and hold harmless each Initial Purchaser against any losses, claims,
damages or liabilities, joint or several, to which it may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, 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, and will reimburse each Initial Purchaser for any legal
or other expenses reasonably incurred by it in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that neither the Company nor any of the Guarantors shall be liable in
any such case to any Initial Purchaser to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Offering Circular or the Offering Circular or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company or any of the Guarantors by such Initial Purchaser through Goldman,
Sachs & Co. expressly for inclusion in the Preliminary Offering Circular or the
Offering Circular.
(b) Each Initial Purchaser will, severally and not jointly,
indemnify and hold harmless the Company and the Guarantors against any losses,
claims, damages or liabilities to which the Company or any of the Guarantors may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Circular or the Offering Circular, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Preliminary Offering Circular or
the Offering Circular or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such Initial
Purchaser through Goldman, Sachs & Co. expressly for inclusion in the
Preliminary Offering Circular or the Offering Circular and will reimburse the
Company and the Guarantors for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the
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indemnifying party shall be entitled to participate therein and, to the extent
that it shall 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
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim), unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Initial Purchasers on the other from the offering of the Notes. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and Initial Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand and Initial
Purchasers on the other hand shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Notes (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Initial Purchasers, in each case as set forth in the Offering
Circular. The relative fault 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 and the Guarantors on the one hand or the Initial
Purchasers on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in 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 such action or claim. Notwithstanding the
provisions of this subsection (d), no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Notes underwritten by it and distributed to investors were offered to
investors exceeds the amount of any damages which such Initial Purchaser has
otherwise been
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<PAGE> 26
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Initial Purchasers' obligations in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 8 shall be in addition to any liability which the Company and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Initial Purchaser within
the meaning of the Securities Act; and the obligations of the Initial Purchasers
under this Section 8 shall be in addition to any liability which the respective
Initial Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and the Guarantors and
to each person, if any, who controls the Company and the Guarantors within the
meaning of the Securities Act. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
indemnification from any person who was not guilty of such fraudulent
misrepresentation.
9. (a) If any Initial Purchaser shall default in its obligation to
purchase the Notes which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Notes on the terms contained herein. If within thirty-six hours after such
default by any Initial Purchaser you do not arrange for the purchase of such
Notes, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Notes on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Notes, or the Company notifies you that it has so arranged for
the purchase of such Notes, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Initial Purchaser" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Notes.
(b) If, after giving effect to any arrangements for the purchase
of the Notes of a defaulting Initial Purchaser or Initial Purchasers by you and
the Company as provided in subsection (a) above, the aggregate principal amount
of such Notes which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Notes, then the Company shall have the
right to require each non-defaulting Initial Purchaser to purchase the principal
amount of Notes which such Initial Purchaser agreed to purchase hereunder and,
in addition, to require each non-defaulting Initial Purchaser to purchase its
pro rata share (based on the principal amount of Notes which such Initial
Purchaser agreed to purchase hereunder) of the Notes of such defaulting Initial
Purchaser or Initial Purchasers for which such arrangements have not been made;
but nothing herein shall relieve a defaulting Initial Purchaser from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Notes of a defaulting Initial Purchaser or Initial Purchasers by you and
the Company as provided in subsection (a) above, the aggregate principal amount
of Notes which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Notes, or if the Company shall
26
<PAGE> 27
not exercise the right described in subsection (b) above to require
non-defaulting Initial Purchasers to purchase Notes of a defaulting Initial
Purchaser or Initial Purchasers, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Initial Purchaser or the
Company, except for the expenses to be borne by the Company and the Initial
Purchasers as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Initial Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantors and the Initial Purchasers,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Initial Purchaser or any controlling person of any Initial
Purchaser, or the Company or any Guarantor or any officer or director or
controlling person of the Company or any Guarantor, and shall survive delivery
of and payment for the Notes.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company and the Guarantors shall not then be under any liability to any
Initial Purchaser except as provided in Sections 6 and 8 hereof; but if for any
other reason the Notes are not delivered by or on behalf of the Company and the
Guarantors as provided herein, the Company and the Guarantors will reimburse the
Initial Purchasers through you for all out-of-pocket expenses approved in
writing by you, including fees and disbursements of counsel, reasonably incurred
by the Initial Purchasers in making preparations for the purchase, sale and
delivery of the Notes, but the Company and the Guarantors shall then be under no
further liability to any Initial Purchaser except as provided in Sections 6 and
8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Initial Purchasers, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Initial
Purchaser made or given by you jointly or by Goldman, Sachs & Co. on behalf of
you as the representative of the Initial Purchasers.
13. All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Initial Purchasers shall be delivered or sent by mail,
telex or facsimile transmission to Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004, Attention: Registration Department; and if to the Company
or the Guarantors shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company or the Guarantor, as the case may be,
set forth in the Offering Circular, provided, however, that any notice to an
Initial Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Initial Purchaser at its address
set forth in its Initial Purchasers' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by Goldman, Sachs &
Co. upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the Initial Purchasers, the Company, the Guarantors and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and the Guarantors and each person who controls the Company, any of the
Guarantors or any Initial Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any
27
<PAGE> 28
right under or by virtue of this Agreement. No purchaser of any of the Notes
from any Initial Purchaser shall be deemed a successor or assign by reason
merely of such purchase.
15. Time shall be of the essence of this Agreement.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
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<PAGE> 29
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
ZILOG, INC.
By: /s/ EDGAR A. SACK
-----------------------------------
Name: Edgar A. Sack
Title Chairman, CEO & President
ZILOG EUROPE
By: /s/ EDGAR A. SACK
-----------------------------------
Name: Edgar A. Sack
Title President
ZILOG TOA COMPANY
By: /s/ EDGAR A. SACK
-----------------------------------
Name: Edgar A. Sack
Title President
GOLDMAN, SACHS & CO.
BANCBOSTON SECURITIES INC.
CITICORP SECURITIES, INC.
By: GOLDMAN, SACHS & CO.
/s/ GOLDMAN, SACHS & CO.
----------------------------------------
(Goldman, Sachs & Co.)
<PAGE> 1
EXHIBIT 4.7
Execution Copy
REGISTRATION RIGHTS AGREEMENT
Dated as of February 27, 1998
by and among
Zilog, Inc.
as Issuer
The Guarantors listed on Annex I hereto
as Guarantors
and
Goldman, Sachs & Co.
BancBoston Securities Inc.
Citicorp Securities, Inc.
as Initial Purchasers
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of February 27, 1998, by and among Zilog, Inc., a Delaware
corporation (the "Company"), the Guarantors listed on Annex I hereto (each a
"Guarantor" and collectively, the "Guarantors"), and Goldman, Sachs & Co.,
BancBoston Securities Inc. and Citicorp Securities, Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 9 1/2% Senior Secured Notes due 2005 (the
"Subordinated Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
February 23, 1998, (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Subordinated Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the Corporate Trust Office (as defined in the
Indenture) of the Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Subordinated
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Subordinated Notes
acquired directly from the Company or any of its affiliates).
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Exchange Notes in the same aggregate principal amount as the
aggregate principal amount of Subordinated Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Target Date: As defined in Section 5.
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<PAGE> 3
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Company's 9 1/2% Senior Secured Notes due 2005 to
be issued pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Subordinated Notes (i) to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act or (ii) in an offshore
transaction complying with Rule 903 or 904 of Regulation S under the Act.
Global Noteholder: As defined in the Indenture.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Subordinated Notes and the Exchange Notes.
Person: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: For each Interest Payment Date, each Person who is a
Holder of Notes on the record date in respect of such Interest Payment Date.
Registration Default: As defined in Section 5 hereof.
Registration Default Period: As defined in Section 5 hereof.
3
<PAGE> 4
Registration Statement: Any registration statement of the Company or the
Company and one or more of the Guarantors relating to (a) an offering of
Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale
of Transfer Restricted Securities pursuant to the Shelf Registration Statement,
in each case, (i) which is filed pursuant to the provisions of this Agreement
and (ii) including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
4
<PAGE> 5
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause to be filed with
the Commission as soon as practicable after the Closing Date, but in no event
later than 60 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use its best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 135 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Exchange Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the
Subordinated Notes that are Transfer Restricted Securities and to permit sales
of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously until the Exchange Offer has been Consummated, and shall keep the
Exchange Offer open for not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company and the Guarantors shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other than
the Notes shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their respective best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 180 days after the Closing Date.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Subordinated Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Subordinated Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
5
<PAGE> 6
The Company and the Guarantors shall use their respective best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms with the requirements of
this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer is Consummated.
The Company and the Guarantors shall promptly provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than one day after
such request, at any time during such one-year period in order to facilitate
such sales.
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Exchange Notes because
the Exchange Offer is not permitted by applicable law (after the procedures set
forth in Section 6(a)(i) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Subordinated Notes acquired directly from the Company or one of its
affiliates, then the Company and the Guarantors shall (x) cause to be filed on
or prior to 60 days after the date on which the Company determines that it is
not required to file the Exchange Offer Registration Statement pursuant to
clause (i) above or 60 days after the date on which the Company receives the
notice specified in clause (ii) above a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement) (in either event, the "Shelf Registration Statement"),
relating to all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof, and shall (y)
use their respective best efforts to cause such Shelf Registration Statement to
become effective on or prior to 135 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement. The Company and the
Guarantors shall use their respective best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by and subject to the provisions of Sections 6(b) and (c) hereof to the
extent necessary to ensure that it is available for sales of Transfer Restricted
Securities by the Holders thereof entitled to the benefits as provided under
this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the Closing Date or such shorter period
that will terminate when all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a
6
<PAGE> 7
request therefor, such information specified in item 507 of Regulation S-K under
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 180 days after the Closing Date
or (iv) subject to the provisions of Section 6(c)(i) below, any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default" and each period during which a Registration Default has
occurred and is continuing, a "Registration Default Period"), then the Company
and the Guarantors hereby jointly and severally agree to pay to each Holder of
Transfer Restricted Securities affected thereby liquidated damages in an amount
equal to $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues for the first 90-day period immediately following
the occurrence of such Registration Default. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.25 per week per $1,000 in principal amount of
Transfer Restricted Securities; provided that the Company and the Guarantors
shall in no event be required to pay liquidated damages for more than one
Registration Default at any given time. All accrued liquidated damages shall be
paid by the Company by wire transfer of immediately available funds or by
federal funds check on the next succeeding June 15 or December 15, as the case
may be, to the Holders of record on the relevant record dates for the payment of
interest as provided in the Indenture.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations set forth in the preceding
paragraph with respect to such security shall have been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:
(i) If, following the date hereof there has been published a
change in
7
<PAGE> 8
Commission policy with respect to exchange offers such as the Exchange
Offer, such that in the reasonable opinion of counsel to the Company
there is a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the Guarantors
hereby agree to either (A) seek a no-action letter or other favorable
decision from the Commission allowing the Company and the Guarantors to
Consummate an Exchange Offer for such Subordinated Notes or (B) file the
Shelf Registration Statement and take all other actions required by
Section 4(a) hereof. In the event that the Company elects to seek a
no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer,
the Company and the Guarantors hereby agree to pursue the issuance of
such a decision to the Commission staff level and to take all such other
actions as are requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution by the Commission
staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate
in, a distribution of the Exchange Notes to be issued in the Exchange
Offer and (C) it is acquiring the Exchange Notes in its ordinary course
of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988), as interpreted in
the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a secondary
resale transaction must be covered by an effective registration
statement (which may be the Exchange Offer Registration Statement)
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K if the resales are of Exchange
Notes obtained by such Holder in exchange for Subordinated Notes
acquired by such Holder directly from the Company or an affiliate
thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991)
and, if applicable, any no-action letter obtained pursuant to clause (i)
above, (B) including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding with any
Person to distribute the Exchange Notes to be
8
<PAGE> 9
received in the Exchange Offer and that, to the best of the Company's
and each Guarantor's information and belief, each Holder participating
in the Exchange Offer is acquiring the Exchange Notes in its ordinary
course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes received
in the Exchange Offer and (C) any other undertaking or representation
required by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities, the Company and the Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation
thereunder, financial statements of the Guarantors) for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement
or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by
this Agreement, the Company and the Guarantors shall file promptly an
appropriate amendment to such Registration Statement, (1) in the case of
clause (A), correcting any such misstatement or omission, and (2) in the
case of clauses (A) and (B) use their respective best efforts to cause
such amendment to be declared effective and such Registration Statement
and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter. Notwithstanding anything
to the contrary set forth in this Agreement, the Company's and the
Guarantor's obligations to use their respective best efforts to keep the
Shelf Registration Statement continuously effective, supplemented and
amended shall be suspended in the event continued effectiveness of the
Shelf Registration Statement would, in the written opinion of counsel to
the Company, require the Company to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors
shall have determined in good faith that such disclosure is not in the
best interests of the Company, but in no event will any such suspension,
individually or in the aggregate, exceed ninety (90) days since the
Closing Date.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for applicable
period set forth in Section 3 or 4 hereof, or such shorter period as
will terminate on the earlier of (A) when all Transfer Restricted
Securities covered
9
<PAGE> 10
by such Registration Statement have been sold and (B) when, in the
written opinion of counsel to the Company, all outstanding Transfer
Restricted Securities held by persons who are not affiliates of the
Company may be resold without registration under the Act pursuant to
Rule 144(A) under the Act or any successor provision thereto; cause the
Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Act, and
to comply fully with Rules 424, 430A and 462, as applicable, under the
Act in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the method or methods of distribution by the sellers thereof as provided
above and as set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirming such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities or Broker-Dealer Transfer Restricted
Securities, as applicable, for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D)
of the existence of any fact or the happening of any event that makes
any statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to
make the statements therein not misleading, or that requires the making
of any additions to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, including, without limitation, under
circumstances described in Section 6(c)(i) above. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities or
Broker-Dealer Transfer Restricted Securities, as applicable, under state
securities or Blue Sky laws, the Company and the Guarantors shall use
their respective best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) furnish to the Initial Purchasers, each selling Holder named
in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement) and will provide such Holders and underwriters, if any, a
reasonable opportunity to review copies of all such documents for a
period of at least five Business Days and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement
to any such Registration Statement or Prospectus (including all such
documents incorporated by reference) to which the selling Holders of the
Transfer Restricted Securities or a Holder of Broker-Dealer
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<PAGE> 11
Transfer Restricted Securities, as applicable, covered by such
Registration Statement or the underwriter(s) in connection with such
sale, if any, shall reasonably object within a reasonable period of
time, which shall be at least five (5) Business Days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply
with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
and the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Company and the Guarantors and cause the Company's and
the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement or
any post-effective amendment thereto subsequent to the filing thereof
and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s)
in connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities or
Broker-Dealer Transfer Restricted Securities, as applicable, information
with respect to the principal amount of Transfer Restricted Securities
or Broker-Dealer Transfer Restricted Securities, as applicable, being
sold to such underwriter(s), the purchase price being paid therefor and
any other terms of the offering of the Transfer Restricted Securities or
Broker-Dealer Transfer Restricted Securities, as applicable, to be sold
in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and the
Guarantors hereby consent to the use of the Prospectus and any
11
<PAGE> 12
amendment or supplement thereto by each of the selling Holders and each
of the underwriter(s), if any, in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement as
may be reasonably requested by any Holder of Transfer Restricted
Securities or underwriter in connection with any sale or resale pursuant
to any Registration Statement contemplated by this Agreement, and in
such connection, whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten
Registration, the Company and the Guarantors shall:
(A) furnish, or in the case of paragraphs (2) and (3),
use its best efforts to furnish, to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker Dealer upon
Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, signed
on behalf of the Company and each Guarantor by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of the Company and such
Guarantor, containing certifications substantially
similar, as of the date thereof, to the matters set forth
in paragraphs (d) and (e) of Section 7 of the Purchase
Agreement and such other additional certifications as are
customarily delivered in a public offering of debt
securities;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of
counsel for the Company and the Guarantors covering
matters similar to those set forth in paragraph (b) of
Section 7 of the Purchase Agreement and such other matter
as the Holders, underwriters and/or Restricted Broker
Dealers may reasonably request (it being agreed that the
matters subject to such opinion may be subject to
customary qualifications and exceptions), and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and the Guarantors and
representatives of the independent public accountants for
the Company and the Guarantors and have considered the
matters required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to
materiality to a certain extent upon facts provided to
such counsel by officers and other representatives of the
Company and the Guarantors and without independent check
or verification), no facts came to such counsel's
attention that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto
12
<PAGE> 13
became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation,
contained an untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of
the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes
no responsibility for, has not independently verified and
expresses no opinion with respect to, the accuracy,
completeness or fairness of the financial statements,
notes and schedules and other financial data included in
any Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated as of the
date of effectiveness of the Shelf Registration Statement
or the date of Consummation of the Exchange Offer, as the
case may be, from the Company's and the Guarantors'
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with primary
underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section
7 of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions
and procedures of Section 8 hereof with respect to all parties
to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may
be reasonably requested by the selling Holders, the
underwriter(s), if any, and Restricted Broker Dealers, if any,
to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement or
other agreement entered into by the Company and the Guarantors
pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the Company and the Guarantors
contemplated in (A)(1) above cease to be true and correct, the Company and the
Guarantors shall so advise the underwriter(s), if any, the selling Holders and
each Restricted Broker-Dealer promptly and if requested by such Persons, shall
confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities, as applicable, under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may request and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to
13
<PAGE> 14
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as
the Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiii) use their respective best efforts to cause the disposition
of the Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities, as applicable, covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to consummate the
disposition of such Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities, as applicable, subject to the proviso
contained in clause (xi) above;
(xiv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities or
Broker-Dealer Transfer Restricted Securities, as applicable, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee
under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvi) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter"),
if any, that is required to be retained in accordance with the rules and
regulations of the NASD, and use their respective best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xvii) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the
14
<PAGE> 15
Act);
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders of Notes to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner; and
(xix) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company (the "Advice") that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company
and the Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel) that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
and (v) all fees and disbursements of independent certified public accountants
of the Company and the Guarantors (including the expenses of any special audit
and comfort letters required by or incident to such performance).
15
<PAGE> 16
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins or
such other counsel chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration Statement
is being prepared.
8. INDEMNIFICATION
(a) The Company and the Guarantors will, jointly and severally, agree to
indemnify and hold harmless each Holder against any losses, claims, damages or
liabilities, joint or several, to which it may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of material fact contained in any Registration Statement or
Prospectus, or any amendment or supplement thereto, 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, and will reimburse each Holder
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that neither the Company nor any of the Guarantors
shall be liable in any such case to any such Holder to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Registration Statement or Prospectus, or any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company or any of the Guarantors by or on behalf of such Holder expressly
for inclusion therein.
(b) Each Holder will, severally and not jointly, indemnify and hold
harmless the Company and the Guarantors against any losses, claims, damages or
liabilities to which the Company or any of the Guarantors may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of material fact contained in any
Registration Statement or Prospectus, or any amendment or supplement thereto, 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, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Registration Statement or Prospectus, or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company or any of the Guarantors by such Holder expressly for use therein; and
will reimburse the Company and the Guarantors for any legal or other expenses
reasonably incurred by the Company or the Guarantors in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of
16
<PAGE> 17
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall 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 the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party (such consent not to be unreasonably withheld), effect
the settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought (whether or not the indemnified
party is an actual or potential party to such action or claim) thereunder unless
such settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors from the Company's sale of the Subordinated
Notes, on the one hand, and any Holder, on the other, from such Holder's sale of
Transfer Restricted Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Guarantors, on the one hand, and of such Holder, on the other, in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and any Holder, on the other, shall be deemed to be
in the same proportion as the total net proceeds from the sale of the
Subordinated Notes (before deducting expenses) received by the Company bear to
the total proceeds received by such Holder upon its sale of Subordinated Notes.
The relative fault 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 and the Guarantors on the one hand or the Holders on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Guarantors and each Holder of Transfer Restricted Securities agree that it would
not be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the
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equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in 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 such action or claim. Notwithstanding the provisions of this subsection (d),
no Holder shall be required to contribute any amount in excess of the amount by
which the total received by such Holder with respect to the sale of its
Subordinated Notes pursuant to a Registration Statement exceeds the sum of (a)
the amount paid by such Holder for such Subordinated Notes plus (b) the amount
of any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. The
Holders' obligations in this subsection (d) to contribute are several in
proportion to the respective principal amount of Notes held by each of the
Holders hereunder and not joint.
(e) The obligations of the Company and the Guarantors under this Section
8 shall be in addition to any liability which the Company and the Guarantors may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of such Holder, if any, and to each person, if any, who
controls any Holder within the meaning of the Act. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to indemnification from any person who was not
guilty of such fraudulent misrepresentation.
9. RULE 144A
The Company and each Guarantor hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act, to make available to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any such Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering. Such investment bankers and managers are referred to herein as
the "underwriters."
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12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantors agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by them of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor is party to any currently effective
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantors' securities under any agreement in effect on the
date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any
Guarantor will take any action, or voluntarily permit any change to occur, with
respect to the Notes that would materially and adversely affect the ability of
the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
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<PAGE> 20
(ii) if to the Company or the Guarantors:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
Telecopier No.: (408) 370-8000
Attention: Chief Financial Officer
(iii) If to the Initial Purchasers:
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Telecopier No.: (212) 902-3000
Attention: Registration Department
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities.
(g) 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that 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 provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no
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<PAGE> 21
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
[signature page follows]
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<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ZILOG, INC.
By: /s/ ROBERT E. COLLINS
-----------------------------------------
Name: Robert E. Collins
Title: Vice President & Chief
Financial Officer
ZILOG EUROPE
By: /s/ ROBERT E. COLLINS
-----------------------------------------
Name: Robert E. Collins
Title: Vice President
ZILOG TOA COMPANY
By: /s/ ROBERT E. COLLINS
-----------------------------------------
Name: Robert E. Collins
Title: Vice President
<PAGE> 23
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
GOLDMAN, SACHS & CO.
BANCBOSTON SECURITIES INC.
CITICORP SECURITIES, INC.
By: /s/ GOLDMAN, SACHS & CO.
-----------------------------
(Goldman, Sachs & Co.)
<PAGE> 1
EXHIBIT 4.8
COMPANY SECURITY AGREEMENT
This COMPANY SECURITY AGREEMENT (this "AGREEMENT") is dated as of
February 27, 1998 and entered into by and between ZILOG, INC., a Delaware
corporation ("GRANTOR"), and STATE STREET BANK AND TRUST COMPANY, a chartered
trust company, in its capacity as Trustee under the Indenture referred to below
(in such capacity herein called "SECURED PARTY") for its benefit and the benefit
of the Holders (as defined in the Indenture).
PRELIMINARY STATEMENTS
A. Secured Party has entered into an Indenture dated as of
February 27, 1998 (said Indenture, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "INDENTURE", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Grantor and certain subsidiaries of Grantor as Guarantors,
pursuant to which Grantor has issued 9 1/2% Senior Secured Notes Due 2005 in the
original principal amount of $280,000,000 (the "NOTES").
B. It is a condition precedent to the initial purchase of the
Notes under the Indenture that Grantor shall have granted the security interests
and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the initial Holders to purchase the Notes, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
1. GRANT OF SECURITY. Grantor hereby assigns to Secured Party,
and hereby grants to Secured Party a security interest in, all of Grantor's
right, title and interest in and to the following, in each case whether now or
hereafter existing or in which Grantor now has or hereafter acquires an interest
and wherever the same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof
and all accessions thereto (any and all such equipment, parts and accessions
being the "EQUIPMENT");
(b) all agreements to which Grantor is a party, as each
such agreement may be amended, supplemented or otherwise modified from time to
time (said agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "ASSIGNED AGREEMENT" and collectively as
the "ASSIGNED AGREEMENTS"), including (i) all rights of Grantor to receive
moneys due or to become due under or pursuant to the Assigned Agreements but
specifically excluding accounts receivable, (ii) all rights of Grantor to
receive proceeds of any insurance, indemnity, warranty or guaranty with respect
to the Assigned Agreements, (iii) all claims of Grantor for damages arising out
of any breach of or default under the Assigned Agreements, and (iv) all rights
of Grantor to terminate, amend, supplement, modify
<PAGE> 2
or exercise rights or options under the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder;
(c) all cash, money, currency and all deposit accounts,
including demand, time, savings, passbooks or similar accounts maintained with
Lender or other banks, savings and loan associations, or other financial
institutions;
(d) all trademarks, tradenames, tradesecrets,
formulations, manufacturing procedures, quality control procedures, product
specifications, business names, patents, patent applications, licenses,
copyrights, registrations and franchise rights, and all goodwill associated with
any of the foregoing;
(e) to the extent not included in any other paragraph of
this Section 1, all other general intangibles (including tax refunds, rights to
payment or performance, choses in action and judgments taken on any rights or
claims included in the Collateral);
(f) all plant fixtures, business fixtures and other
fixtures and storage and office facilities, and all accessions thereto and
products thereof;
(g) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection thereof or
realization thereupon; and
(h) all proceeds, products, rents and profits of or from
any and all of the foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, the Collateral
shall not include (i) any (a) Inventory or (b) Accounts or Related Contracts as
defined in that certain Company Security Agreement, dated as of February 27,
1998, by and between Grantor and BankBoston, N.A., as Administrative Agent, or
any proceeds of such Inventory or Accounts or (ii) any cash collateral pledged
by Grantor pursuant to that certain Collateral Account Agreement, dated as of
February 27, 1998, by and between Grantor and BankBoston, N.A., as
Administrative Agent.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Grantor now or hereafter existing under or
arising out of or in connection with the Indenture and the Notes and all
extensions or renewals thereof, whether for principal, interest
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<PAGE> 3
(including interest that, but for the filing of a petition in bankruptcy with
respect to Grantor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT") and all obligations of every nature of
Grantor now or hereafter existing under this Agreement (all such obligations of
Grantor, together with the Underlying Debt, being the "SECURED OBLIGATIONS").
3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted
under the Indenture and except for the security interest created by this
Agreement, Grantor owns the Collateral free and clear of any Lien. Except as
permitted in the Indenture, and except such as may have been filed in favor of
Secured Party relating to this Agreement, no effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any filing or recording office.
(b) Location of Equipment . All of the Equipment is, as of
the date hereof, located at the places specified in Schedule 1 annexed hereto.
(c) Office Locations; Other Names. The chief place of
business, the chief executive office and the office where Grantor keeps its
records is, and has been for the four month period preceding the date hereof,
located at 210 East Hacienda Avenue, Campbell, CA. Grantor has not in the past
done, and does not now do, business under any other name (including any
trade-name or fictitious business name).
(d) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of Collateral have
been delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
3
<PAGE> 4
(e) Perfection. This Agreement, together with the filing
of UCC financing statements describing the Collateral with the filing offices
indicated on Schedule 2 annexed hereto, creates a valid and perfected first
priority lien (subject to Permitted Liens) in all Collateral in which a security
interest may be perfected by the filing of a financing statement, securing the
payment of the Secured Obligations.
5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense
of Grantor, Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will: (i)
at the request of Secured Party, deliver and pledge to Secured Party hereunder
all promissory notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party, (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iii) promptly after the acquisition by Grantor
of any item of Equipment which is covered by a certificate of title under a
statute of any jurisdiction under the law of which indication of a security
interest on such certificate is required as a condition of perfection thereof,
execute and file with the registrar of motor vehicles or other appropriate
authority in such jurisdiction an application or other document requesting the
notation or other indication of the security interest created hereunder on such
certificate of title, (iv) within 30 days after the end of each calendar
quarter, deliver to Agent copies of all such applications or other documents
filed during such calendar quarter and copies of all such certificates of title
issued during such calendar quarter indicating the security interest created
hereunder in the items of Equipment covered thereby, (v) at any reasonable time,
upon not less than two Business Days written notice from Secured Party, exhibit
the Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (vi) at Secured Party's request, appear
in and defend any action or proceeding that may affect Grantor's title to or
Secured Party's security interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of Grantor. Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor will furnish to Secured Party from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
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<PAGE> 5
6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully
or in violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of
any change in Grantor's chief place of business, chief executive office or
residence or the office where Grantor keeps its records;
(d) if Secured Party gives value to enable Grantor to
acquire rights in or the use of any Collateral, use such value for such
purposes; and
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith and
except where any failure to pay would not have a Material Adverse Effect;
provided that Grantor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed against
Grantor or any of the Collateral as a result of the failure to make such
payment.
7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT. Grantor shall:
(a) keep the Equipment at the places therefor specified on
Schedule 1 annexed hereto or, upon 30 days' prior written notice to Secured
Party, at such other places in jurisdictions where all action that may be
necessary or desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby, or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder, with respect to such Equipment shall have been taken; and
(b) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with Grantor's past practices, and shall forthwith
make or cause to be made all repairs, replacements and other improvements in
connection therewith that are necessary or desirable to such end. Grantor shall
promptly furnish to Secured Party a statement respecting any material loss or
damage to any of the Equipment.
8. INSURANCE. Grantor shall, at its own expense, maintain
insurance with respect to the Equipment in accordance with the terms of the
Indenture.
5
<PAGE> 6
9. INTENTIONALLY OMITTED.
10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with Secured Party constituting part of the Collateral.
11. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted by the
Indenture; provided, that in the event Grantor makes an Asset Sale permitted by
the Indenture and the assets subject to such Asset Sale are Collateral, Secured
Party shall release the Collateral that is the subject of such Asset Sale to
Grantor free and clear of the lien and security interest under this Agreement
concurrently with the consummation of such Asset Sale; provided, further, that,
as a condition precedent to such release, the conditions precedent to such
release set forth in subsection 4.10 of the Indenture shall have been satisfied;
or
(b) except for the security interest created by this
Agreement and the Permitted Liens, create or suffer to exist any Lien upon or
with respect to any of the Collateral to secure the indebtedness or other
obligations of any Person.
12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby,
upon the occurrence and during the continuance of an Event of Default,
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including:
(a) to obtain and adjust insurance required to be
maintained by Grantor or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a) and (b)
above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Indenture) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined
6
<PAGE> 7
by Secured Party in its sole discretion, any such payments made by Secured Party
to become obligations of Grantor to Secured Party, due and payable immediately
without demand;
(f) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with documents relating to
the Collateral; and
(g) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
13. SECURED PARTY MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 17.
14. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
15. REMEDIES. If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein, in the Indenture or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "CODE") (whether or not the Code applies to the affected
Collateral), and also may (a) require Grantor to, and Grantor hereby agrees that
it will at its expense and upon request of Secured Party forthwith, assemble all
or part of the Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by Secured Party that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) take possession of Grantor's
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any of Grantor's equipment for the purpose of
completing any work in process, taking any actions described in the preceding
clause (c) and collecting any
7
<PAGE> 8
Secured Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Holder or Holders may be the purchaser of any or all of the Collateral at
any such sale, and Secured Party shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Grantor, and Grantor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Grantor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which any Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Collateral to
more than one offeree. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, Grantor shall be
liable for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency.
16. APPLICATION OF PROCEEDS. All proceeds received by Secured
Party in respect of sale, collection from, or other realization upon all or any
part of the Collateral shall be applied as provided in subsection 4.10 of the
Indenture.
17. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Secured Party from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(ii) the exercise or enforcement of any of the rights of Secured Party
hereunder, or (iii) the failure by Grantor to perform or observe any of the
provisions hereof.
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(c) The provisions of this Section 17 shall survive any
termination of this Agreement.
18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, (b) be binding upon Grantor, its successors and assigns,
and (c) inure, together with the rights and remedies of Secured Party hereunder,
to the benefit of Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to the
provisions of subsection 2.06 of the Indenture, any Holder may assign or
otherwise transfer any Notes held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Holders herein or otherwise. Upon the payment in full of all Secured
Obligations, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Grantor. Upon any such termination Secured
Party will, at Grantor's expense, execute and deliver to Grantor such documents
as Grantor shall reasonably request to evidence such termination.
19. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured
Party hereunder pursuant to the provisions of the Indenture. Secured Party shall
be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including the release or substitution of
Collateral), solely in accordance with this Agreement and the Indenture;
provided that Secured Party, in accordance with subsection 6.05 of the
Indenture, shall exercise, or refrain from exercising, any remedies provided for
hereunder in accordance with the instructions of the Holders of a majority in
principal amount of the then outstanding Notes.
(b) Secured Party shall at all times be the same Person
that is Trustee under the Indenture. Written notice of resignation by Trustee
pursuant to subsection 7.08 of the Indenture shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Trustee pursuant to
subsection 7.08 of the Indenture shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Trustee under subsection 7.08 of the Indenture by a successor
Trustee, that successor Trustee shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be
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discharged from its duties and obligations under this Agreement. After any
retiring or removed Trustee's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
20. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
21. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as provided in
subsection 12.02 of the Indenture.
22. FAILURE OF INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights or remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
23. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
24. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
25. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined
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herein or in the Indenture, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
26. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ZILOG, INC.
By: /s/ ROBERT E. COLLINS
----------------------------------------
Title: Vice President & Chief
Financial Officer
STATE STREET BANK AND TRUST COMPANY, SECURED
PARTY (IN ITS CAPACITY AS TRUSTEE)
By: /s/ STEVEN CIMALORE
----------------------------------------
Title: Vice President
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<PAGE> 1
EXHIBIT 4.9
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (this "AGREEMENT") is dated as
of February 27, 1998 and entered into by and among each of the undersigned
direct and indirect Subsidiaries of Zilog, Inc. ("COMPANY") (each of such
Subsidiaries being a "GRANTOR" and collectively, "GRANTORS"); provided, that
after the Closing Date, the "Grantors" shall include any Additional Grantors (as
hereinafter defined), and STATE STREET BANK AND TRUST COMPANY, a chartered trust
company, as Trustee for and representative of (in such capacity herein called
"SECURED PARTY") for its benefit and for the benefit of the Holders (as defined
in the Indenture).
PRELIMINARY STATEMENTS
A. Secured Party has entered into an Indenture dated as of
February 27, 1998 (said Indenture, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "INDENTURE", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Company and certain subsidiaries of Company as Guarantors pursuant
to which Company has issued 9 1/2% Senior Secured Notes Due 2005 in the original
principal amount of $280,000,000 (the "NOTES").
B. Pursuant to Article 11 of the Indenture, the Grantors have
guarantied the prompt payment and performance when due of all obligations of
Company under the Indenture and the Notes.
C. It is a condition precedent to the initial purchase of the
Notes under the Indenture that Grantors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises, and in order to
induce the initial Holders to purchase the Notes, and for other good and
valuable consideration, each Grantor hereby agrees with Secured Party for
Secured Party's benefit and the ratable benefit of Holders as follows:
1. GRANT OF SECURITY. Each Grantor hereby assigns to Secured
Party, and hereby grants to Secured Party a security interest in, all of such
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which such Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof
and all accessions thereto (any and all such equipment, parts and accessions
being the "EQUIPMENT");
(b) all agreements to which such Grantor is a party, as
each such agreement may be amended, supplemented or otherwise modified from time
to time (said agreements, as so amended, supplemented or otherwise modified,
being referred to herein individually as an "ASSIGNED AGREEMENT" and
collectively as the "ASSIGNED AGREEMENTS"),
<PAGE> 2
including (i) all rights of such Grantor to receive moneys due or to become due
under or pursuant to the Assigned Agreements, but specifically excluding
accounts receivable(ii) all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, (iii) all claims of such Grantor for damages arising out of any
breach of or default under the Assigned Agreements, and (iv) all rights of such
Grantor to terminate, amend, supplement, modify or exercise rights or options
under the Assigned Agreements, to perform thereunder and to compel performance
and otherwise exercise all remedies thereunder;
(c) all cash, money, currency and deposit accounts owned
by such Grantor, including demand, time, savings, passbooks or similar accounts
maintained with Holders or other banks, savings and loan associations, or other
financial institutions;
(d) all trademarks, tradenames, tradesecrets, business
names, patents, patent applications, licenses, copyrights, registrations and
franchise rights, and all goodwill associated with any of the foregoing;
(e) to the extent not included in any other paragraph of
this Section 1, all other general intangibles owned by such Grantor (including
tax refunds, rights to payment or performance, choses in action and judgments
taken on any rights or claims included in the Collateral);
(f) all plant fixtures, business fixtures and other
fixtures and storage and office facilities owned by such Grantor, and all
accessions thereto and products thereof;
(g) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection thereof or
realization thereupon; and
(h) all proceeds, products, rents and profits of or from
any and all of the foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, the Collateral
shall not include any (i) Inventory or (ii) Accounts or Related Contracts as
defined in that certain Subsidiary Security Agreement, dated as of February 27,
1998, by and between Grantors and BankBoston, N.A., as Administrative Agent, or
any proceeds of such Inventory or Accounts.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under
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Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all
obligations and liabilities of every nature of Grantor now or hereafter existing
under or arising out of or in connection with the Indenture and all extensions
or renewals thereof, whether for principal, interest (including interest that,
but for the filing of a petition in bankruptcy with respect to Company, would
accrue on such obligations, whether or not a claim is allowed against Company
for such interest in the related bankruptcy proceeding), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise and all obligations of every
nature of Grantors now or hereafter existing under this Agreement (all such
obligations of Grantors being the "SECURED OBLIGATIONS").
3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Secured
Party of any of its rights hereunder shall not release such Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) Secured Party shall not have any obligation or liability
under any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
4. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants as follows:
(a) Ownership of Collateral. Except for the security
interest created by this Agreement, each Grantor owns the Collateral owned by
such Grantor free and clear of any Lien. Except as permitted in the Indenture,
and except such as may have been filed in favor of Secured Party relating to
this Agreement, no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office.
(b) Location of Equipment . All of the Equipment of such
Grantor is, as of the date hereof, located at the places specified in Schedule 1
annexed hereto.
(c) Office Locations. The chief place of business, the
chief executive office and the office where such Grantor keeps its records is,
and has been for the four month period preceding the date hereof, located at the
locations set forth in Schedule 2 annexed hereto.
(d) Other Names. Such Grantor has not in the past done,
and does not now do, business under any other name (including any trade-name or
fictitious business name) except the names listed on Schedule 3 annexed hereto.
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(e) Perfection. This Agreement, together with the filing
of UCC financing statements describing the Collateral with the filing offices
indicated on Schedule 4 annexed hereto, creates a valid and perfected first
priority lien (subject to Permitted Liens) in all Collateral in which a security
interest may be perfected by the filing of a financing statement, securing the
payment of the Secured Obligations.
(f) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of Collateral have
been delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
5. FURTHER ASSURANCES.
(a) Each Grantor agrees that from time to time, at the
expense of such Grantor, such Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will: (i) at the request of Secured Party, deliver and
pledge to Secured Party hereunder all promissory notes and other instruments
(including checks) and all original counterparts of chattel paper constituting
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Secured Party,
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, (iii) promptly
after the acquisition by such Grantor of any item of Equipment which is covered
by a certificate of title under a statute of any jurisdiction under the law of
which indication of a security interest on such certificate is required as a
condition of perfection thereof, execute and file with the registrar of motor
vehicles or other appropriate authority in such jurisdiction an application or
other document requesting the notation or other indication of the security
interest created hereunder on such certificate of title, (iv) within 30 days
after the end of each calendar quarter, deliver to Secured Party copies of all
such applications or other documents filed during such calendar quarter and
copies of all such certificates of title issued during such calendar quarter
indicating the security interest created hereunder in the items of Equipment
covered thereby, (v) at any reasonable time, upon not less than two Business
Days written notice from Secured Party, exhibit the Collateral to and allow
inspection of the Collateral by Secured Party, or persons designated by Secured
Party, and (vi) at Secured Party's request, appear in and defend any action or
proceeding that may affect such Grantor's title to or Secured Party's security
interest in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of any
Grantor. Each Grantor agrees that a carbon, photographic or other reproduction
of this Agreement or of a financing statement signed by a Grantor shall be
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<PAGE> 5
sufficient as a financing statement and may be filed as a financing statement in
any and all jurisdictions.
(c) Each Grantor will furnish to Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Secured
Party may reasonably request, all in reasonable detail.
6. CERTAIN COVENANTS OF GRANTOR. Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully
or in violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in such Grantor's
name, identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of
any change in such Grantor's chief place of business, chief executive office or
residence or the office where such Grantor keeps its records;
(d) if Secured Party gives value to enable such Grantor to
acquire rights in or the use of any Collateral, use such value for such
purposes; and
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith and
except where any failure to pay would not have a Material Adverse Effect;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment entered or filed
against such Grantor or any of the Collateral as a result of the failure to make
such payment.
7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT. Each Grantor
shall:
(a) keep the Equipment owned by such Grantor at the places
therefor specified on Schedule 1 annexed hereto or, upon 30 days' prior written
notice to Secured Party, at such other places in jurisdictions where all action
that may be necessary or desirable, or that Secured Party may request, in order
to perfect and protect any security interest granted or purported to be granted
hereby, or to enable Secured Party to exercise and enforce its rights and
remedies hereunder, with respect to such Equipment shall have been taken; and
(b) cause the Equipment owned by such Grantor to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with such Grantor's past
practices, and shall forthwith make or cause to be made all repairs,
replacements and other improvements in connection therewith that
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<PAGE> 6
are necessary or desirable to such end. Each Grantor shall promptly furnish to
Secured Party a statement respecting any material loss or damage to any of the
Equipment owned by such Grantor.
8. INSURANCE. Each Grantor shall, at its own expense, maintain
insurance with respect to the Equipment owned by such Grantor in accordance with
the terms of the Indenture.
9. INTENTIONALLY OMITTED.
10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with Secured Party constituting part of the Collateral.
11. TRANSFERS AND OTHER LIENS. No Grantor shall:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted by the
Indenture; provided, that in the event Grantor makes an Asset Sale permitted by
the Indenture and the assets subject to such Asset Sale are Collateral, Secured
Party shall release the Collateral that is the subject of such Asset Sale to
Grantor free and clear of the lien and security interest under this Agreement
concurrently with the consummation of such Asset Sale; provided, further that,
as a condition precedent to such release, the conditions precedent to such
release set forth in subsection 4.10 of the Indenture shall have been satisfied;
or
(b) except for Liens expressly permitted under the
Indenture and the security interest created by this Agreement, create or suffer
to exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person.
12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each Grantor
hereby, upon the occurrence and during the continuance of an Event of Default,
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to obtain and adjust insurance required to be
maintained by such Grantor or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a) and (b)
above;
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(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Indenture) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of such Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with documents relating to
the Collateral; and
(g) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and such Grantor's expense, at
any time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
13. SECURED PARTY MAY PERFORM. If any Grantor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by such Grantor under Section 17.
14. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
15. REMEDIES. If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Collateral), and also may (a) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of Secured Party forthwith, assemble all or part of the Collateral
as directed by Secured Party and make it available to Secured Party at a place
to be designated by Secured Party that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take
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possession thereof with or without judicial process, (c) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) take possession of Grantors'
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any of Grantors' equipment for the purpose of
completing any work in process, taking any actions described in the preceding
clause (c) and collecting any Secured Obligation, and (e) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. Secured Party or any Holder may be the purchaser of any
or all of the Collateral at any such sale, and Secured Party shall be entitled,
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Secured Party at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Grantor, and Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
16. APPLICATION OF PROCEEDS. All proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 4.10 of
the Indenture.
17. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify Secured Party, each
Holder and from and against any and all claims, losses and liabilities in any
way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including enforcement of this Agreement),
except to the extent such claims, losses or liabilities result solely from
Secured Party's or such Holder's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
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(b) Grantors shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(ii) the exercise or enforcement of any of the rights of Secured Party
hereunder, or (iii) the failure by any Grantor to perform or observe any of the
provisions hereof.
(c) The provisions of this Section 17 shall survive any
termination of this Agreement.
18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, (b) be binding upon each Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 2.06 of the Indenture, any Holder may
assign or otherwise transfer any Notes held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantors. Upon any such termination
Secured Party will, at Grantors' expense, execute and deliver to Grantors such
documents as Grantors shall reasonably request to evidence such termination.
19. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured
Party hereunder by Holders. Secured Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Indenture; provided that Secured Party, in accordance with
subsection 6.05 of the Indenture, shall exercise, or refrain from exercising,
any remedies provided for hereunder in accordance with the instructions of the
Holders of a majority in principal amount of the then outstanding notes.
(b) Secured Party shall at all times be the same Person
that is Trustee under the Indenture. Written notice of resignation by Trustee
pursuant to subsection 7.08 of the Indenture shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Trustee pursuant to
subsection 7.08 of the Indenture shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Trustee under subsection 7.08 of the Indenture by a successor
Trustee, that successor Trustee shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this
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Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Trustee's resignation or removal
hereunder as Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
20. ADDITIONAL GRANTORS. The initial Grantors hereunder shall be
the Subsidiary of Company that is a signatory hereto on the date hereof. From
time to time subsequent to the date hereof, additional Subsidiaries of Company
may become parties hereto, as additional Grantors (each an "ADDITIONAL
GRANTOR"), by executing a counterpart of this Agreement substantially in the
form of Schedule 5 annexed hereto. Upon delivery of any such counterpart to
Trustee, notice of which is hereby waived by Grantors, each such Additional
Grantor shall be a Grantor and shall be as fully a party hereto as if such
Additional Grantor were an original signatory hereof. Each Grantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Grantor hereunder, nor by any
election of Trustee not to cause any Subsidiary of Company to become an
Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder.
21. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
any Grantor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
22. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice delivered
to Secured Party.
23. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or
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acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude any other or further exercise thereof or of
any other power, right or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
24. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
25. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
26. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT
TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. Unless otherwise defined herein or in the Indenture, terms used in
Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined. The rules of construction set forth in
subsection 1.3 of the Indenture shall be applicable to this Agreement mutatis
mutandis.
27. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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IN WITNESS WHEREOF, each of the undersigned Grantors and Secured
Party have caused this Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first written
above.
ZILOG EUROPE
By: /s/ ROBERT E. COLLINS
----------------------------------------
Name: Robert E. Collins
--------------------------------------
Its: Vice President & Chief Financial
Officer
---------------------------------------
Notice Address: 210 East Hacienda Avenue
Campbell, CA 95008
ZILOG TOA COMPANY
By: /s/ ROBERT E. COLLINS
----------------------------------------
Name: Robert E. Collins
--------------------------------------
Its: Vice President
---------------------------------------
Notice Address: 210 East Hacienda Avenue
Campbell, CA 95008
STATE STREET BANK AND TRUST COMPANY, SECURED
PARTY (IN ITS CAPACITY AS TRUSTEE)
By: /s/ STEVEN CIMALORE
----------------------------------------
Title: Vice President
-------------------------------------
Notice Address: Goodwin Square
225 Asylum Street
Hartford, CT 06103
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EXHIBIT 4.10
COMPANY PLEDGE AGREEMENT
This COMPANY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
February 27, 1998 and entered into by and between ZILOG, INC., a Delaware
corporation ("PLEDGOR"), and STATE STREET BANK AND TRUST COMPANY, a chartered
trust company, in its capacity as Trustee under the Indenture referred to below
(in such capacity herein called "SECURED PARTY") for its benefit and for the
benefit of the Holders.
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
and issued by the corporations named therein and (ii) the indebtedness (the
"PLEDGED DEBT") described in Part B of said Schedule I and issued by the
obligors named therein.
B. Secured Party has entered into an Indenture dated as of
February 27, 1998 (said Indenture, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "INDENTURE", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Pledgor and certain subsidiaries of Pledgor as Guarantors pursuant
to which Pledgor has issued 9 1/2% Senior Secured Notes Due 2005 in the original
principal amount of $280,000,000 (the "NOTES").
C. It is a condition precedent to the initial purchase of the
Notes that Pledgor shall have granted the security interests and undertaken the
obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the initial Holders to purchase the Notes and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Pledgor hereby agrees with Secured Party as follows:
1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing
the Pledged Shares and any interest of Pledgor in the entries on the books of
any financial intermediary pertaining to the Pledged Shares, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares; provided, however, that to the extent that
the issuer of any of the Pledged Shares is a controlled foreign corporation
(used hereinafter as such term is defined in Section 957(a) (or a successor
provision) of the Internal Revenue Code), Pledgor shall only be required to
pledge Pledged Shares or certificates representing Pledged Shares of, and such
interests pertaining to Pledged Shares of, such issuer possessing up to but not
<PAGE> 2
exceeding 66-2/3% of the voting power of all classes of capital stock entitled
to vote of such issuer, and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the
Pledged Debt, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Pledged Debt;
(c) all additional shares of, and all securities
convertible into and warrants, options and other rights to purchase or otherwise
acquire, stock of any issuer of the Pledged Shares from time to time acquired by
Pledgor in any manner (which shares shall be deemed to be part of the Pledged
Shares), the certificates or other instruments representing such additional
shares, securities, warrants, options or other rights and any interest of
Pledgor in the entries on the books of any financial intermediary pertaining to
such additional shares (all such shares, certificates, warrants, options,
rights, certificates, instruments and interests collectively being "ADDITIONAL
PLEDGED SHARES"), and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Additional
Pledged Shares; provided, however, that to the extent that the issuer of any
Additional Pledged Shares is a controlled foreign corporation, Pledgor shall
only be required to pledge Additional Pledged Shares of such issuer possessing
up to but not exceeding 66-2/3% of the voting power of all classes of capital
stock entitled to vote of such issuer, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to
Pledgor by any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor (which shares shall be deemed to be
part of the Pledged Shares), the certificates or other instruments representing
such shares, securities, warrants, options or other rights and any interest of
Pledgor in the entries on the books of any financial intermediary pertaining to
such shares (all such shares, securities, warrants, options, rights,
certificates, instruments and interests collectively being "NEW PLEDGED
SHARES"), and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such New Pledged
Shares; provided, however, that in the event that any such direct Subsidiary is
a controlled foreign corporation, Pledgor shall only be required to pledge New
Pledged Shares of such Subsidiary possessing up to but not exceeding 66-2/3% of
the voting power of all classes of capital stock entitled to vote of such
issuer, and all dividends,
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cash, warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such New Pledged Shares;
(f) all indebtedness from time to time owed to Pledgor by
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct or indirect Subsidiary of Pledgor, and all interest, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f)
above, all proceeds of any or all of the foregoing Pledged Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Pledged Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes proceeds of any indemnity or guaranty payable to Pledgor or Secured
Party from time to time with respect to any of the Pledged Collateral.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Indenture and the Notes and all
extensions or renewals thereof, whether for principal, interest (including
interest that, but for the filing of a petition in bankruptcy with respect to
Pledgor, would accrue on such obligations), fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature of
Pledgor now or hereafter existing under this Agreement (all such obligations of
Pledgor, together with the Underlying Debt, being the "SECURED OBLIGATIONS").
3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Upon the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right, without notice to Pledgor, to
transfer to or to register in the name of Secured Party or any of its nominees
any or all of the Pledged Collateral, subject only to the revocable rights
specified in Section 7(a). In addition, Secured Party shall have the right at
any time to
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exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of
the Pledged Shares have been duly authorized and validly issued and are fully
paid and non-assessable. The execution and delivery of this Agreement and the
pledge of the Pledged Shares has been duly authorized by all necessary corporate
action. All of the Pledged Debt has been duly authorized, authenticated or
issued, and delivered and is the legal, valid and binding obligation of the
issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares
constitute all of the issued and outstanding shares of stock of each issuer
thereof, except as otherwise set forth in Schedule I annexed hereto, and there
are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
The Pledged Debt constitutes all of the issued and outstanding intercompany
indebtedness evidenced by a promissory note of the respective issuers thereof
owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal,
record and beneficial owner of the Pledged Collateral free and clear of any Lien
except for the security interest created by this Agreement and any Permitted
Liens.
5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
Pledgor shall:
(a) not, except as expressly permitted by the Indenture,
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided, that if the surviving corporation or resulting
corporation upon any such merger or consolidation involving an issuer of Pledged
Shares which is a controlled foreign corporation is a controlled foreign
corporation, then Pledgor shall only be required to pledge outstanding capital
stock of such surviving or resulting corporation possessing up to but not
exceeding 66-2/3% of the voting power of all classes of capital stock of such
issuer entitled to vote; provided, further, that in the event Pledgor makes an
Asset Sale permitted by the Indenture and the assets subject to such Asset Sale
are Pledged Shares, Secured Party shall release the Pledged Shares that are the
subject of such Asset Sale to Pledgor free and clear of the lien and security
interest under this Agreement concurrently with the consummation of such Asset
Sale; provided, further that, as a condition precedent to such release, the
conditions precedent to such release set forth in subsection 4.10 of the
Indenture shall have been satisfied;
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(b) (i) cause each issuer of Pledged Shares not to issue
any stock or other securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each issuer of Pledged Shares,
and (iii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct
Subsidiary of Pledgor; provided, that notwithstanding anything contained in this
subdivision (b), Pledgor shall only be required to pledge the outstanding
capital stock of a controlled foreign corporation possessing up to but not
exceeding 66-2/3% of the voting power of all classes of capital stock of such
controlled foreign corporation entitled to vote;
(c) (i) pledge hereunder, immediately upon their issuance,
any and all instruments or other evidences of additional indebtedness from time
to time owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge
hereunder, immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed to Pledgor by any Person that
after the date of this Agreement becomes, as a result of any occurrence, a
direct or indirect Subsidiary of Pledgor;
(d) keep correct and accurate records of all loans or
advances made by Pledgor to any of its Subsidiaries which shall be evidenced by
an Intercompany Note and shall constitute Pledged Debt; and
(e) pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that Pledgor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment entered or filed
against Pledgor or any of the Pledged Collateral as a result of the failure to
make such payment.
6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
(a) Pledgor agrees that from time to time, at the expense
of Pledgor, Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby and (ii) at
Secured Party's request, appear in and defend any action or proceeding that may
affect Pledgor's title to or Secured Party's security interest in all or any
part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining
any additional shares of stock or other securities required to be pledged
hereunder as provided in Section 5(b) or (c), promptly (and in any event within
five Business Days) deliver to Secured Party a Pledge
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<PAGE> 6
Amendment, duly executed by Pledgor, in substantially the form of Schedule II
annexed hereto (a "PLEDGE AMENDMENT"), in respect of the additional Pledged
Shares or Pledged Debt to be pledged pursuant to this Agreement. Pledgor hereby
authorizes Secured Party to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Shares or Pledged Debt listed on any Pledge Amendment
delivered to Secured Party shall for all purposes hereunder be considered
Pledged Collateral; provided that the failure of Pledgor to execute a Pledge
Amendment with respect to any additional Pledged Shares or Pledged Debt pledged
pursuant to this Agreement shall not impair the security interest of Secured
Party therein or otherwise adversely affect the rights and remedies of Secured
Party hereunder with respect thereto.
7. VOTING RIGHTS; DIVIDENDS; ETC.
(a) PLEDGOR'S RIGHTS. So long as no Event of Default shall
have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Pledged Collateral
or any part thereof for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, that Pledgor shall not exercise
or refrain from exercising any such right if Secured Party shall have notified
Pledgor that, in Secured Party's judgment, such action would have a material
adverse effect on the value of the Pledged Collateral or any part thereof; and
provided, further, that Pledgor shall give Secured Party at least five Business
Days' prior written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right. It is understood,
however, that neither (1) the voting by Pledgor of any Pledged Shares for or
Pledgor's consent to the election of directors at a regularly scheduled annual
or other meeting of stockholders or with respect to incidental matters at any
such meeting nor (2) Pledgor's consent to or approval of any action otherwise
permitted under this Agreement and the Indenture shall be deemed inconsistent
with the terms of this Agreement or the Indenture within the meaning of this
Section 7(a)(i), and no notice of any such voting or consent need be given to
Secured Party;
(ii) Pledgor shall be entitled to receive and
retain, and to utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Pledged Collateral; provided,
however, that any and all
(A) dividends and interest paid or payable
other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect
of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid
or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal or in redemption of or in
exchange for any Pledged Collateral,
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shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Collateral and shall, if received by Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Pledgor and be forthwith delivered to Secured Party as Pledged Collateral in the
same form as so received (with all necessary indorsements); and
(iii) Secured Party shall promptly execute and
deliver (or cause to be executed and delivered) to Pledgor all such proxies,
dividend payment orders and other instruments as Pledgor may from time to time
reasonably request for the purpose of enabling Pledgor to exercise the voting
and other consensual rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest payments
which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) SECURED PARTY'S RIGHTS. Upon the occurrence and during
the continuation of an Event of Default:
(i) upon written notice from Secured Party to
Pledgor, all rights of Pledgor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section
7(a)(i) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to exercise such voting
and other consensual rights;
(ii) all rights of Pledgor to receive the
dividends and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 7(a)(ii) shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest
payments which are received by Pledgor contrary to the provisions of paragraph
(ii) of this Section 7(b) shall be received in trust for the benefit of Secured
Party, shall be segregated from other funds of Pledgor and shall forthwith be
paid over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) IRREVOCABLE PROXY. In order to permit Secured Party to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant to Section 7(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 7(a)(ii) or
Section 7(b)(ii), (i) Pledgor shall promptly execute and deliver (or cause to be
executed and delivered) to Secured Party all such proxies, dividend payment
orders and other instruments as Secured Party may from time to time reasonably
request and (ii) without limiting the effect of the immediately preceding clause
(i), Pledgor hereby grants to Secured Party an IRREVOCABLE PROXY to vote the
Pledged Shares and to exercise all other rights, powers, privileges and remedies
to which a holder of the Pledged Shares would be entitled (including giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or
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any officer or agent thereof), upon the occurrence of an Event of Default and
which proxy shall only terminate upon the payment in full of the Secured
Obligations.
8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including:
(a) to file one or more financing or continuation
statements, or amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of Pledgor;
(b) upon the occurrence and during the continuance of an
Event of Default, to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) upon the occurrence and during the continuance of an
Event of Default, to receive, endorse and collect any instruments made payable
to Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) upon the occurrence and during the continuance of an
Event of Default, to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13(b).
10. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised
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reasonable care in the custody and preservation of Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment substantially equal
to that which Secured Party accords its own property consisting of negotiable
securities.
11. REMEDIES.
(a) If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Pledged Collateral, in
addition to all other rights and remedies provided for herein, in the Indenture,
or otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "CODE") (whether or not the Code applies to the affected
Pledged Collateral), and Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange or
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Secured Party or any Holder may be the purchaser of any or all of
the Pledged Collateral at any such sale and Secured Party, as agent for and
representative of Holders, shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the fullest extent permitted by law, Pledgor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Pledged Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Pledged
Collateral are insufficient to pay all the Secured Obligations, Pledgor shall be
liable for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws, Secured Party may be compelled, with respect to any sale of all or any
part of the Pledged Collateral conducted without prior registration or
qualification of such Pledged Collateral under the Securities Act and/or such
state
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securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable than
those obtainable through a public sale without such restrictions (including a
public offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances, Pledgor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Secured Party shall have no obligation to engage in public sales
and no obligation to delay the sale of any Pledged Collateral for the period of
time necessary to permit the issuer thereof to register it for a form of public
sale requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to
sell any or all of the Pledged Collateral, upon written request, Pledgor shall
and shall cause each issuer of any Pledged Shares to be sold hereunder from time
to time to furnish to Secured Party all such information as Secured Party may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Secured Party in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.
12. APPLICATION OF PROCEEDS. All proceeds received by Secured
Party in respect of any sale of, collection from or other realization upon all
or any part of the Pledged Collateral shall be applied as provided in subsection
4.10 of the Indenture.
13. INDEMNITY AND EXPENSES.
(a) Pledgor agrees to indemnify Secured Party from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Pledgor shall have to pay to Secured Party upon demand
the amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (ii)
the exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by Pledgor to perform or observe any of the provisions hereof.
(c) The provisions of this Section 13 shall survive any
termination of this Agreement.
14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, its
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successors and assigns, and (c) inure, together with the rights and remedies of
Secured Party hereunder, to the benefit of Secured Party and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), but subject to the provisions of subsection 2.06 of the Indenture, any
Holder may assign or otherwise transfer any Notes held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Holders herein or otherwise. Upon the
payment in full of all Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Pledged Collateral shall revert to
Pledgor. Upon any such termination Secured Party will, at Pledgor's expense,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
15. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured
Party hereunder by Holders. Secured Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Indenture; provided that Secured Party, in accordance
with subsection 6.05 of the Indenture, shall exercise, or refrain from
exercising, any remedies provided for hereunder in accordance with the
instructions of the Holders of a majority in principal amount of the then
outstanding notes.
(b) Secured Party shall at all times be the same Person
that is Trustee under the Indenture. Written notice of resignation by Trustee
pursuant to subsection 7.08 of the Indenture shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Trustee pursuant to
subsection 7.08 of the Indenture shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Trustee under subsection 7.08 of the Indenture by a successor
Trustee, that successor Trustee shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Trustee's resignation or removal
hereunder as Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
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16. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
17. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as provided in
subsection 12.02 of the Indenture.
18. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Indenture, terms used in Articles 8 and 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ZILOG, INC.
By: /s/ ROBERT E. COLLINS
----------------------------------------
Title: Vice President & Chief Financial
Officer
STATE STREET BANK AND TRUST COMPANY, SECURED
PARTY (IN ITS CAPACITY AS TRUSTEE)
By: /s/ STEVEN CIMALORE
----------------------------------------
Title: Vice President
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EXHIBIT 4.11
SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
February 27, 1998 and entered into by each of the undersigned direct and
indirect Subsidiaries of ZILOG, INC., a Delaware corporation (each of such
Subsidiaries being a "PLEDGOR" and collectively "PLEDGORS"; provided, that after
the Closing Date, "Pledgors" shall be deemed to include any Additional Pledgors
(as hereinafter defined)), in favor of STATE STREET BANK AND TRUST COMPANY, a
chartered trust company, in its capacity as Trustee under the Indenture referred
to below (in such capacity herein called "SECURED PARTY") for its benefit and
for the benefit of the Holders.
PRELIMINARY STATEMENTS
A. Pledgors are the legal and beneficial owner of (i) the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
and issued by the corporations named therein and (ii) the indebtedness (the
"PLEDGED DEBT") described in Part B of said Schedule I and issued by the
obligors named therein.
B. Secured Party has entered into an Indenture dated as of February
27, 1998 (said Indenture, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "INDENTURE", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with Zilog, Inc., a Delaware corporation (the "Company") and Pledgors pursuant
to which the Company has issued 9 1/2% Senior Secured Notes Due 2005 in the
original principal amount of $280,000,000 (the "NOTES").
C. Pursuant to Article 11 of the Indenture, the Pledgors have
guarantied the prompt payment and performance when due of all obligations of
Company under the Indenture including the obligation of Company to make payments
thereunder in the event of early termination thereof.
D. It is a condition precedent to the initial purchase of the Notes
that Pledgors shall have granted the security interests and undertaken the
obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the initial Holders to purchase the Notes, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Pledgors hereby agree with Secured Party as follows:
1. PLEDGE OF SECURITY. Each Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
such Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
<PAGE> 2
(a) the Pledged Shares owned by such Pledgor and the
certificates representing such Pledged Shares and any interest of such Pledgor
in the entries on the books of any financial intermediary pertaining to such
Pledged Shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Pledged Shares;
provided, however, that to the extent that the issuer of any of the Pledged
Shares is a controlled foreign corporation (used hereinafter as such term is
defined in Section 957(a) (or a successor provision) of the Internal Revenue
Code), such Pledgor shall only be required to pledge Pledged Shares or,
certificates representing Pledged Shares of, and such interests pertaining to,
Pledged Shares of such issuer possessing up to but not exceeding 66-2/3% of the
voting power of all classes of capital stock entitled to vote of such issuer,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Shares;
(b) the Pledged Debt owned by such Pledgor and the
instruments evidencing such Pledged Debt, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Debt;
(c) all additional shares of, and all securities convertible
into and warrants, options and other rights to purchase or otherwise acquire,
stock of any issuer of any Pledged Shares from time to time acquired by such
Pledgor in any manner (which shares shall be deemed to be part of the Pledged
Shares), the certificates or other instruments representing such additional
shares (all such shares, securities, warrants, options, rights, certificates,
instruments and interests collectively being "ADDITIONAL PLEDGED SHARES"), and
all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Additional Pledged Shares;
provided, however, that to the extent that the issuer of any Additional Pledged
Shares is a controlled foreign corporation, such Pledgor shall only be required
to pledge Additional Pledged Shares or such issuer possessing up to but not
exceeding 66-2/3% of the voting power of all classes of capital stock entitled
to vote of such issuer, and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to
such Pledgor by any obligor on any Pledged Debt and the instruments evidencing
such indebtedness, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of such Pledgor (which shares shall be deemed to
be part of the Pledged Shares), the certificates or other instruments
representing such shares, securities, warrants, options or other rights and any
interest of Pledgor in the entries on the books of any financial intermediary
pertaining to such shares (all
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such shares, securities, warrants, options, rights, certificates, instruments
and interests collectively being "NEW PLEDGED SHARES"), and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such New Pledged Shares; provided, however, that in the event that
any such direct Subsidiary is a controlled foreign corporation, such Pledgor
shall only be required to pledge New Pledged Shares of such Subsidiary
possessing up to but not exceeding 66-2/3% of the voting power of all classes of
capital stock entitled to vote of such issuer, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such new Pledged Shares;
(f) all indebtedness from time to time owed to such Pledgor
by any Person that, after the date of this Agreement, becomes, as a result of
any occurrence, a direct or indirect Subsidiary of such Pledgor, and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f)
above, all proceeds of any or all of the foregoing Pledged Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Pledged Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes proceeds of any indemnity or guaranty payable to such Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Indenture and all extensions or
renewals thereof, whether for principal, interest (including interest that, but
for the filing of a petition in bankruptcy with respect to Company, would accrue
on such obligations, whether or not a claim is allowed against Company for such
interest in the related bankruptcy proceeding), fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor being the "SECURED OBLIGATIONS").
3. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of Secured Party pursuant hereto and shall be in suitable form
for transfer by delivery or, as
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applicable, shall be accompanied by the appropriate Pledgor's endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Secured Party. Upon the occurrence and
during the continuation of an Event of Default, Secured Party shall have the
right, without notice to Pledgors, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights specified in Section 7(a). In addition,
Secured Party shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
4. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of
the Pledged Shares have been duly authorized and validly issued and are fully
paid and non-assessable. The execution and delivery of this Agreement and the
pledge of the Pledged Shares has been duly authorized by all necessary corporate
action. All of the Pledged Debt owned by such Pledgor has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares
owned by such Pledgor constitute the percentage of the issued and outstanding
shares of stock of each issuer thereof set forth on Schedule I annexed hereto,
and there are no outstanding warrants, options or other rights to purchase, or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any
Pledged Shares. The Pledged Debt owned by such Pledgor constitutes all of the
issued and outstanding intercompany indebtedness evidenced by a promissory note
of the respective issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Such Pledgor is the
legal, record and beneficial owner of the Pledged Collateral owned by such
Pledgor free and clear of any Lien except for the security interest created by
this Agreement and Permitted Liens.
5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
Each Pledgor shall:
(a) not, except as expressly permitted by the Indenture, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided, that if the surviving corporation or resulting
corporation upon any such merger or consolidation involving an issuer of Pledged
Shares is a controlled foreign corporation, then such Pledgor shall only be
required to pledge outstanding capital stock of such surviving or resulting
corporation possessing up to but not exceeding 66-2/3% of the
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<PAGE> 5
voting power of all classes of capital stock of such issuer entitled to vote;
provided, further, that in the event any Pledgor makes an Asset Sale permitted
by the Indenture and the assets subject to such Asset Sale are Pledged Shares,
Secured Party shall release the Pledged Shares that are the subject of such
Asset Sale to such Pledgor free and clear of the lien and security interest
under this Agreement concurrently with the consummation of such Asset Sale;
provided, further that, as a condition precedent to such release, the conditions
precedent to such release set forth in subsection 4.10 of the Indenture shall
have been satisfied;
(b) (i) cause each issuer of Pledged Shares owned by it not
to issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to such Pledgor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of stock or other securities of each issuer of
Pledged Shares, and (iii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all shares of stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of any Pledgor; provided, that notwithstanding anything
contained in this subdivision (b), such Pledgor shall only be required to pledge
the outstanding capital stock of a controlled foreign corporation possessing up
to but not exceeding 66-2/3% of the voting power of all classes of capital stock
of such controlled foreign corporation entitled to vote;
(c) (i) pledge hereunder, immediately upon their issuance,
any and all instruments or other evidences of additional indebtedness from time
to time owed to such Pledgor by any obligor on the Pledged Debt, and (ii) pledge
hereunder, immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed to such Pledgor by any Person
that after the date of this Agreement becomes, as a result of any occurrence, a
direct or indirect Subsidiary of any Pledgor;
(d) keep correct and accurate records of all Notes or
advances made by such Pledgor to Company or any Subsidiaries of Company which
shall be evidenced by an Intercompany Note and shall constitute Pledged Debt;
and
(e) pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that such Pledgor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against Pledgor or any of the Pledged Collateral as a result of
the failure to make such payment.
6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
(a) Each Pledgor agrees that from time to time, at the
expense of such Pledgor, such Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral. Without limiting the
generality of the foregoing, such Pledgor will:
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<PAGE> 6
(i) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may affect
such Pledgor's title to or Secured Party's security interest in all or any part
of the Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining
any additional shares of stock or other securities required to be pledged
hereunder as provided in Section 5(b) or (c), promptly (and in any event within
five Business Days) deliver to Secured Party a Pledge Amendment, duly executed
by such Pledgor, in substantially the form of Schedule II annexed hereto (a
"PLEDGE AMENDMENT"), in respect of the additional Pledged Shares or Pledged Debt
to be pledged pursuant to this Agreement. Each Pledgor hereby authorizes Secured
Party to attach each Pledge Amendment to this Agreement and agrees that all
Pledged Shares or Pledged Debt listed on any Pledge Amendment delivered to
Secured Party shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of a Pledgor to execute a Pledge Amendment with
respect to any additional Pledged Shares or Pledged Debt pledged pursuant to
this Agreement shall not impair the security interest of Secured Party therein
or otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.
7. VOTING RIGHTS; DIVIDENDS; ETC.
(a) PLEDGOR'S RIGHTS. So long as no Event of Default shall
have occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, that no Pledgor shall exercise or
refrain from exercising any such right if Secured Party shall have notified such
Pledgor that, in Secured Party's judgment, such action would have a material
adverse effect on the value of the Pledged Collateral or any part thereof; and
provided, further, that each Pledgor shall give Secured Party at least five
Business Days' prior written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any such right. It is
understood, however, that neither (1) the voting by a Pledgor of any Pledged
Shares for or a Pledgor's consent to the election of directors at a regularly
scheduled annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (2) a Pledgor's consent to or approval of any
action otherwise permitted under this Agreement and the Indenture shall be
deemed inconsistent with the terms of this Agreement or the Indenture within the
meaning of this Section 7(a)(i), and no notice of any such voting or consent
need be given to Secured Party;
(ii) Pledgors shall be entitled to receive and
retain, and to utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Pledged Collateral; provided,
however, that any and all
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(A) dividends and interest paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid
or payable in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution or in connection with
a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal or in redemption of or in exchange
for any Pledged Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Collateral and shall, if received by a Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of such
Pledgor and be forthwith delivered to Secured Party as Pledged Collateral in the
same form as so received (with all necessary indorsements); and
(iii) Secured Party shall promptly execute and deliver
(or cause to be executed and delivered) to Pledgors all such proxies, dividend
payment orders and other instruments as Pledgors may from time to time
reasonably request for the purpose of enabling Pledgors to exercise the voting
and other consensual rights which they are entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest payments
which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) SECURED PARTY'S RIGHTS. Upon the occurrence and during
the continuation of an Event of Default:
(i) upon written notice from Secured Party to a
Pledgor, all rights of such Pledgor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section
7(a)(i) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to exercise such voting
and other consensual rights;
(ii) all rights of a Pledgor to receive the dividends
and interest payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole right
to receive and hold as Pledged Collateral such dividends and interest payments;
and
(iii) all dividends, principal and interest payments
which are received by a Pledgor contrary to the provisions of paragraph (ii) of
this Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of such Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
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(c) IRREVOCABLE PROXY. In order to permit Secured Party to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant to Section 7(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 7(a)(ii) or
Section 7(b)(ii), (i) each Pledgor shall promptly execute and deliver (or cause
to be executed and delivered) to Secured Party all such proxies, dividend
payment orders and other instruments as Secured Party may from time to time
reasonably request and (ii) without limiting the effect of the immediately
preceding clause (i), each Pledgor hereby grants to Secured Party an IRREVOCABLE
PROXY to vote the Pledged Shares and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Shares would be
entitled (including giving or withholding written consents of shareholders,
calling special meetings of shareholders and voting at such meetings), which
proxy shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Shares on the record books of the issuer
thereof) by any other Person (including the issuer of the Pledged Shares or any
officer or agent thereof), upon the occurrence of an Event of Default and which
proxy shall only terminate upon the payment in full of the Secured Obligations.
8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each Pledgor hereby
irrevocably appoints Secured Party as such Pledgor's attorney-in-fact, with full
authority in the place and stead of such Pledgor and in the name of such
Pledgor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to file one or more financing or continuation
statements, or amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of such Pledgor;
(b) upon the occurrence and during the continuance of an
Event of Default to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) upon the occurrence and during the continuance of an
Event of Default to receive, endorse and collect any instruments made payable to
such Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) upon the occurrence and during the continuance of an
Event of Default to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
9. SECURED PARTY MAY PERFORM. If any Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by such Pledgor under Section 13(b).
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<PAGE> 9
10. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
11. REMEDIES.
(a) If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Pledged Collateral, in
addition to all other rights and remedies provided for herein, in the Indenture,
or otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "CODE") (whether or not the Code applies to the affected
Pledged Collateral), and Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange or
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Secured Party or any Holder may be the purchaser of any or all of
the Pledged Collateral at any such sale and Secured Party, as agent for and
representative of Holders, shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Secured Party may adjourn any public or private sale from
time to time by announcement at the
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time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Pledgor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale, even if
Secured Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgors shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Each Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws, Secured Party may be compelled, with respect to any sale of all or any
part of the Pledged Collateral conducted without prior registration or
qualification of such Pledged Collateral under the Securities Act and/or such
state securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Each Pledgor
acknowledges that any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such restrictions
(including a public offering made pursuant to a registration statement under the
Securities Act) and, notwithstanding such circumstances, such Pledgor agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Secured Party shall have no obligation to engage in
public sales and no obligation to delay the sale of any Pledged Collateral for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Secured Party determines to exercise its right to
sell any or all of the Pledged Collateral, upon written request, each Pledgor
shall and shall cause each issuer of any Pledged Shares owned by such Pledgor to
be sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Secured Party in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
12. APPLICATION OF PROCEEDS. All proceeds received by Secured Party
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral shall be applied as provided in subsection 4.10
of the Indenture.
13. INDEMNITY AND EXPENSES.
(a) Each Pledgor agrees to indemnify Secured Party and each
Holder from and against any and all claims, losses and liabilities in any way
relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including enforcement of this Agreement),
except to the extent such claims, losses or liabilities result
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solely from Secured Party's or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgors shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (ii)
the exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by any Pledgor to perform or observe any of the provisions
hereof.
(c) The provisions of this Section 13 shall survive any
termination of this Agreement.
14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(a) remain in full force and effect until the payment in full of all Secured
Obligations, (b) be binding upon Pledgors, its successors and assigns, and (c)
inure, together with the rights and remedies of Secured Party hereunder, to the
benefit of Secured Party and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), but subject to the
provisions of subsection 2.06 of the Indenture, any Holder may assign or
otherwise transfer any Notes held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Holders herein or otherwise. Upon the payment in full of all Secured
Obligations, the security interest granted hereby shall terminate and all rights
to the Pledged Collateral shall revert to Pledgors. Upon any such termination
Secured Party will, at Pledgors' expense, execute and deliver to Pledgors such
documents as Pledgors shall reasonably request to evidence such termination and
Pledgors shall be entitled to the return, upon its request and at its expense,
against receipt and without recourse to Secured Party, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
15. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Holders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Indenture; provided that Secured Party, in accordance
with subsection 6.05 of the Indenture, shall exercise, or refrain from
exercising, any remedies provided for hereunder in accordance with the
instructions of the Holders of a majority in principal amount of the then
outstanding notes.
(b) Secured Party shall at all times be the same Person that
is Trustee under the Indenture. Written notice of resignation by Trustee
pursuant to subsection 7.08 of the Indenture shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Trustee pursuant to
subsection 7.08 of the Indenture shall also constitute appointment of a
successor Secured Party
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under this Agreement. Upon the acceptance of any appointment as Trustee under
subsection 7.08 of the Indenture by a successor Trustee, that successor Trustee
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this Agreement shall
promptly (i) transfer to such successor Secured Party all sums, securities and
other items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such amendments to financing statements,
and take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Secured Party of the security interests
created hereunder, whereupon such retiring or removed Secured Party shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Trustee's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
16. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
any Pledgor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Secured Party and, in the case of any such amendment or
modification, by any Pledgor; provided, that any Pledge Amendment in the form of
Schedule II annexed hereto shall be effective upon execution by any Pledgor and
Pledgors hereby waive any requirement of notice of or consent to any such Pledge
Amendment. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
17. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice delivered
to Secured Party.
18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
19. ADDITIONAL PLEDGORS. The initial Pledgors hereunder shall be
such of the Subsidiaries of Company as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, additional Subsidiaries
of Company may become parties hereto, as
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additional Pledgors (each an "ADDITIONAL PLEDGOR"), by executing an
acknowledgment to this Agreement substantially in the form of Schedule III
annexed hereto. Upon delivery of any such counterpart to Secured Party, notice
of which is hereby waived by Pledgors, each such Additional Pledgor shall be a
Pledgor were an original signatory hereto. Each Pledgor agrees that its
obligations arising hereunder shall not be affected by or diminished by the
addition or release of any other Pledgor hereunder, nor by any election of
Secured Party not to cause any Subsidiary of Company to become an Additional
Pledgor hereunder. This Agreement shall be fully effective as to any Pledgor
that is or becomes a party hereto regardless of whether any other Person becomes
or fails to become or ceases to be a Pledgor hereunder.
20. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
21. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
22. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT
TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. Unless otherwise defined herein or in the Indenture, terms used in
Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined. The rules of construction set forth in
subsection 1.3 of the Indenture shall be applicable to this Agreement mutatis
mutandis.
23. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the undersigned Pledgors and Secured Party
have caused this Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written above.
ZILOG EUROPE
By: /s/ RICHARD R. PICKARD
---------------------------------
Name: Richard R. Pickard
---------------------------------
Its: Secretary
---------------------------------
Notice Address: 210 East Hacienda Avenue
Campbell, CA 95008
ZILOG TOA COMPANY
By: /s/ RICHARD R. PICKARD
---------------------------------
Name: Richard R. Pickard
---------------------------------
Its: Secretary
---------------------------------
Notice Address: 210 East Hacienda Avenue
Campbell, CA 95008
STATE STREET BANK AND TRUST COMPANY,
SECURED PARTY (IN ITS CAPACITY AS
TRUSTEE)
By: /s/ STEVEN CIMALORE
---------------------------------
Title: Vice President
---------------------------------
Notice Address: Goodwin Square
225 Asylum Street
Hartford, CT 06103
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EXHIBIT 4.12
COMPANY AND SUBSIDIARY PATENT
AND TRADEMARK SECURITY AGREEMENT
This COMPANY AND SUBSIDIARY PATENT AND TRADEMARK SECURITY
AGREEMENT (this "AGREEMENT") is dated as of February 27, 1998 and entered into
by and among ZILOG, INC., a Delaware corporation ("COMPANY"), each of the
undersigned direct and indirect domestic Subsidiaries of Company (each of
Company and such Subsidiaries being a "GRANTOR" and collectively, "GRANTORS";
provided that after the Closing Date, Grantors shall be deemed to include any
Additional Grantors (as hereinafter defined)) and STATE STREET BANK AND TRUST
COMPANY, a chartered trust company, in its capacity as Trustee under the
Indenture referred to below (in such capacity, called "SECURED PARTY").
PRELIMINARY STATEMENTS
A. Secured Party has entered into an Indenture dated as of
February 27, 1998 (said Indenture, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "INDENTURE", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Company and certain subsidiaries of Company pursuant to which
Company has issued 9 1/2% Senior Secured Notes Due 2005 in the original
principal amount of $280,000,000 (the "NOTES"). The Notes are offered pursuant
to the offering circular dated February 23, 1998 (the "Offering Circular").
B. Pursuant to Article 11 of the Indenture, the Grantors which
are Company Subsidiaries have guarantied the prompt payment and performance when
due of all obligations of Company under the Indenture and Notes.
C. Each Grantor owns and uses in its business, and will in the
future adopt and so use, various intangible assets, including trademarks,
service marks, designs, logos, indicia, tradenames, corporate names, company
names, business names, fictitious business names, trade styles and/or other
source and/or business identifiers and applications pertaining thereto
(collectively, the "TRADEMARKS").
D. Secured Party, for its benefit and the ratable benefit of
Holders, desires to become a secured creditor with respect to and, under the
circumstances described herein, an assignee of all of the existing and future
Trademarks, all registrations that have been or may hereafter be issued or
applied for thereon in the United States and any state thereof and in certain
foreign countries (the "REGISTRATIONS"), all common law and other rights in and
to the Trademarks in the United States and any state thereof and in certain
foreign countries (the "TRADEMARK RIGHTS"), all goodwill of each Grantor's
business symbolized by the Trademarks and associated therewith, including,
without limitation, the documents and things described in Section 1(b) (the
"ASSOCIATED GOODWILL"), and all proceeds of the Trademarks, the Registrations,
the Trademark Rights and the Associated Goodwill, and Grantors agree to create a
secured and protected interest in the Trademarks, the Registrations, the
Trademark Rights, the Associated Goodwill and all the proceeds thereof as
provided herein.
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E. Each Grantor has and may in the future have rights, title and
interests in and to various Patents and other related Collateral (as such terms
are hereinafter defined).
F. Pursuant to the Company Security Agreement and the Subsidiary
Security Agreement, Grantors have granted to Secured Party a lien on and
security interest in, among other assets, the machinery, equipment,
formulations, manufacturing procedures, quality control procedures and product
specifications relating to the products and services sold or delivered under or
in connection with the Trademarks and Patents such that, upon the occurrence and
during the continuation of an Event of Default, Secured Party would be able to
exercise its remedies consistent with the Company Security Agreement, Subsidiary
Security Agreement, this Agreement and applicable law to foreclose upon each
Grantor's business and use the Trademarks, the Registrations, the Trademark
Rights and the Patents in conjunction with the continued operation of such
business, maintaining substantially the same product and service specifications
and quality as maintained by such Grantor, and benefit from the Associated
Goodwill.
G. Upon the occurrence and during the continuation of an Event of
Default, and to permit Secured Party to operate each Grantor's business without
interruption and to use the Trademarks, Registrations, Trademark Rights, Patents
and Associated Goodwill in conjunction therewith, each Grantor is willing to
grant to Secured Party the conditional assignment of such Grantor's entire
right, title and interest in and to the Collateral (as hereinafter defined) and
to appoint Secured Party as such Grantor's attorney-in-law and attorney-in-fact
to execute documents and take actions to confirm said assignments.
H. Each Grantor is willing to grant to Secured Party (i) a
security interest in all of the Collateral for the purpose of securing the
complete and timely satisfaction of all of the Secured Obligations (as
hereinafter defined) and (ii) effective upon the occurrence and during the
continuation of an Event of Default, an assignment of such Grantor's entire
right, title and interest in and to all such Collateral.
I. It is a condition precedent to the initial purchase of the
Notes that Grantors shall have granted the security interests and undertaken the
obligations contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises, and in order to
induce the initial Holders to purchase the Notes, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Grantor hereby agrees with Secured Party for Secured Party's
benefit and the ratable benefit of Holders as follows:
SECTION 1. GRANT OF SECURITY. Each Grantor hereby assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
such Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which such Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "Collateral"):
(a) each of the Trademarks and rights and interests in Trademarks
which are presently, or in the future may be, owned, held (whether pursuant to a
license or otherwise) or
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used by such Grantor, in whole or in part (including, without limitation, the
Trademarks specifically identified in Schedule I annexed hereto, as the same may
be amended pursuant hereto from time to time), and including all Trademark
Rights with respect thereto and all federal, state and foreign Registrations
therefor heretofore or hereafter granted or applied for, the right (but not the
obligation) to register claims under any state or federal trademark law or
regulation or any trademark law or regulation of any foreign country and to
apply for, renew and extend the Trademarks, Registrations and Trademark Rights,
the right (but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of such Grantor or in the name of Secured Party or
otherwise for past, present and future infringements of the Trademarks,
Registrations or Trademark Rights and all rights (but not obligations)
corresponding thereto in the United States and any foreign country, and the
Associated Goodwill; it being understood that the rights and interests included
herein shall include, without limitation, all rights and interests pursuant to
licensing or other contracts in favor of such Grantor pertaining to the
Trademarks, Registrations or Trademark Rights presently or in the future owned
or used by third parties but, in the case of third parties which are not
Affiliates of such Grantor, only to the extent permitted by such licensing or
other contracts and, if not so permitted, only with the consent of such third
parties;
(b) the following documents and things in such Grantor's
possession, or subject to such Grantor's right to possession, related to (1) the
production, sale and delivery by such Grantor, or by any Affiliate, licensee or
subcontractor of such Grantor, of products or services sold or delivered by or
under the authority of such Grantor in connection with the Trademarks,
Registrations or Trademark Rights (which products and services shall, for
purposes of this Agreement, be deemed to include, without limitation, products
and services sold or delivered pursuant to merchandising operations utilizing
any Trademarks, Registrations or Trademark Rights); or (2) any retail or other
merchandising operations conducted under the name of or in connection with the
Trademarks, Registrations or Trademark Rights by such Grantor or any Affiliate,
licensee or subcontractor of such Grantor:
(i) all lists and ancillary documents that identify and
describe any of such Grantor's customers, or those of its Affiliates, licensees
or subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including, without
limitation, any lists and ancillary documents that contain a customer's name and
address, the name and address of any of its warehouses, branches or other places
of business, the identity of the Person or Persons having the principal
responsibility on a customer's behalf for ordering products or services of the
kind supplied by such Grantor, or the credit, payment, discount, delivery or
other sale terms applicable to such customer, together with information setting
forth the total purchases, by product, part number, packaging, voltage or other
criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or delivery of
products and services sold or delivered under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of
any source of
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supply, and any terms of purchase and delivery, for any and all materials,
components and services used in the production of products and services sold or
delivered under or in connection with the Trademarks or Trademark Rights; and
(iv) all documents constituting or concerning the then
current or proposed advertising and promotion by such Grantor or its Affiliates,
licensees or subcontractors of products and services sold or delivered under or
in connection with the Trademarks or Trademark Rights including, without
limitation, all documents which reveal the media used or to be used and the cost
for all such advertising conducted within the described period or planned for
such products and services;
(c) all patents and patent applications and rights and interests
in patents and patent applications under any domestic law that are presently, or
in the future may be, owned by such Grantor and all patents and patent
applications and rights and interests in patents and patent applications under
any domestic law that are presently, or in the future may be, held or used by
such Grantor in whole or in part (including, without limitation, the patents and
patent applications listed in Schedule II annexed hereto, as the same may be
amended pursuant hereto from time to time), all rights (but not obligations)
corresponding thereto (including, without limitation, the right (but not the
obligation) to sue for past, present and future infringements in the name of
such Grantor or in the name of Secured Party or Holders), and all re-issues,
divisions, continuations, renewals, extensions and continuations-in-part thereof
(all of the foregoing being collectively referred to as the "PATENTS"); it being
understood that the rights and interest assigned hereby shall include, without
limitation, all rights and interests pursuant to licensing or other contracts in
favor of such Grantor pertaining to patent applications and patents presently or
in the future owned or used by third parties but, in the case of third parties
which are not Affiliates of Assignor, only to the extent permitted by such
licensing or other contracts and, if not so permitted, only with the consent of
such third parties;
(d) all general intangibles relating to the Collateral;
(e) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(f) all proceeds, products, rents and profits (including, without
limitation, license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. CONDITIONAL ASSIGNMENT. In addition to, and not by way
of limitation of, the granting of a security interest in the Collateral pursuant
to Section 1, each
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Grantor hereby, effective upon the occurrence of an Event of Default and upon
written notice from Secured Party, grants, sells, conveys, transfers, assigns
and sets over to Secured Party, for its benefit and the ratable benefit of
Holders, all of such Grantor's right, title and interest in and to the
Collateral, including, without limitation, such Grantor's right, title and
interest in and to the Trademarks identified in Schedule I annexed hereto, the
goodwill of the business symbolized by said Trademarks, all Registrations
relating to said Trademarks, and the Patents identified in Schedule II.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and
the Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of each Grantor (whether as a borrower or guarantor)
now or hereafter existing under or arising out of or in connection with the
Indenture and the Notes and all extensions or renewals thereof, whether for
principal, interest (including, without limitation, interest that, but for the
filing of a petition in bankruptcy with respect to a Grantor would accrue on
such obligations, whether or not a claim is allowed against such Grantor for
such interest in the related bankruptcy proceeding), fees, expenses, indemnities
or otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature of
each Grantor now or hereafter existing under this Agreement (all such
obligations of Grantors, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
SECTION 4. GRANTOR REMAINS LIABLE. Anything contained herein to
the contrary notwithstanding, (a) each Grantor shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Secured
Party of any of its rights hereunder shall not release any Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) Secured Party shall not have any obligation or liability
under any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Except as set forth in
the Offering Circular, each Grantor represents and warrants as follows:
(a) Description of Collateral. A true and complete list of all
Trademarks, Registrations and Trademark Rights owned, held (whether pursuant to
a license or otherwise) or
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used by such Grantor, in whole or in part, as of the date of this Agreement is
set forth in Schedule I annexed hereto, and a true and complete list of all
Patents owned, held (whether pursuant to a license or otherwise) or used by such
Grantor, in whole or in part, as of the date of this Agreement is set forth in
Schedule II annexed hereto.
(b) Validity and Enforceability of Collateral. Each of the
Trademarks, Registrations, Trademark Rights and Patents owned, held or used by
such Grantor is valid, subsisting and enforceable, such Grantor is not aware of
any pending or threatened claim by any third party that any of the Trademarks,
Registrations or Trademark Rights or Patents owned, held or used by such Grantor
is invalid or unenforceable or that the use of any of the Trademarks,
Registrations, Trademark Rights or Patents by such Grantor violates the rights
of any third person or of any basis for any such claim.
(c) Ownership of Collateral. Except for the security interest and
conditional assignment created by this Agreement, such Grantor owns the
Collateral owned by such Grantor free and clear of any Lien. Except such as may
have been filed in favor of Secured Party relating to this Agreement, (i) no
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any filing or recording office and
(ii) no effective filing covering all or any part of the Collateral is on file
in the United States Patent and Trademark Office.
(d) Office Locations; Other Names. The chief place of business,
the chief executive office and the office where such Grantor keeps its records
regarding the Collateral owned by such Grantor is, and has been for the four
month period preceding the date hereof, located at the address set forth in
Schedule III. Such Grantor has not in the past done, and does not now do,
business under any other name (including any trade-name or fictitious business
name) except as set forth in Schedule IV.
(e) Governmental Authorizations. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by such Grantor of the
security interest and conditional assignment granted hereby, (ii) the execution,
delivery or performance of this Agreement by such Grantor, or (iii) the
perfection of or the exercise by Secured Party of its rights and remedies
hereunder (except as may have been taken by or at the direction of such
Grantor).
(f) Perfection. This Agreement, together with the filing of a
financing statement describing the Collateral with the filing offices listed on
Schedule V and the recording of this Agreement with the United States Patent and
Trademark Office creates a valid, perfected and first priority security interest
in the Collateral, securing the payment of the Secured Obligations, and all
filings and other actions necessary or desirable to perfect and protect such
security interest have been duly made or taken.
(g) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of such Grantor with respect
to the Collateral is accurate and complete in all respects.
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SECTION 6. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS
TRADEMARK RIGHTS, PATENTS AND PATENT APPLICATIONS.
(a) Each Grantor agrees that from time to time, at the expense of
such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Secured Party may request, in order to perfect and protect
any security interest or conditional assignment granted or purported to be
granted hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, each Grantor will: (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (ii) use its best efforts to obtain any
necessary consents of third parties to the grant and perfection of a security
interest and assignment to Secured Party with respect to any Collateral owned by
such Grantor, (iii) at any reasonable time, upon not less than one Business Day
written notice from Secured Party, exhibit the Collateral owned by such Grantor
to and allow inspection of such Collateral by Secured Party, or persons
designated by Secured Party, and (iv) at Secured Party's request, appear in and
defend any action or proceeding that may affect such Grantor's title to or
Secured Party's security interest in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of any Grantor. Each
Grantor agrees that a carbon, photographic or other reproduction of this
Agreement or of a financing statement signed by a Grantor shall be sufficient as
a financing statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor hereby authorizes Secured Party to modify this
Agreement without obtaining any Grantor's approval of or signature to such
modification by amending Schedule I or Schedule II annexed hereto, as
applicable, to include reference to any right, title or interest in any existing
Trademark, Registration, Trademark Right or Patent or any Trademark,
Registration, Trademark Right or Patent acquired or developed by a Grantor after
the execution hereof or to delete any reference to any right, title or interest
in any Trademark, Registration, Trademark Right or Patent in which a Grantor no
longer has or claims any right, title or interest.
(d) Each Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
(e) If any Grantor shall hereafter obtain rights to any new
Trademarks, Registrations, Trademark Rights, patentable inventions, or become
entitled to the benefit of any patent application or patent or any reissue,
division, continuation, renewal, extension or continuation-in-part of any Patent
or any improvement or any Patent, the provisions of this Agreement shall
automatically apply thereto. Such Grantor shall promptly notify Secured Party
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in writing of any of the foregoing rights acquired by such Grantor after the
date hereof and of any Registrations issued or applications for Registration or
for Patents made after the date hereof. Concurrently with the filing of an
application for Registration for any Trademark or any application for any
Patent, such Grantor shall execute, deliver and record in all places where this
Agreement is recorded an appropriate Patent and Trademark Security Agreement,
substantially in the form hereof, with appropriate insertions, or an amendment
to this Agreement, in form and substance satisfactory to Secured Party, pursuant
to which such Grantor shall grant a security interest and conditional assignment
to the extent of its interest in such Patent or Registration, as applicable, as
provided herein to Secured Party unless so doing would, in the reasonable
judgment of such Grantor, after due inquiry, result in the grant of a
Registration in the name of Secured Party, in which event such Grantor shall
give written notice to Secured Party as soon as reasonably practicable and the
filing shall instead be undertaken as soon as practicable but in no case later
than immediately following the grant of the Registration or Patent.
SECTION 7. CERTAIN COVENANTS OF GRANTOR. Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any
change in such Grantor's chief place of business or chief executive office or
the office where such Grantor keeps its records regarding the Collateral;
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith and
except where any failure to pay would not have a Material Adverse Effect;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment entered or filed
against such Grantor or any of the Collateral as a result of the failure to make
such payment;
(e) not sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted by the
Indenture;
(f) except for the security interest and conditional assignment
created by this Agreement or permitted under the Indenture, not create or suffer
to exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral
and at all times keep at least one complete set of its records concerning
substantially all of the Trademarks,
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Registrations, Trademark Rights and Patents at its chief executive office or
principal place of business;
(h) not permit the inclusion in any contract to which it becomes
a party of any provision that could or might in any way impair or prevent the
creation of a security interest in, or the assignment of, such Grantor's rights
and interests in any property included within the definitions of any Trademarks,
Registrations, Trademark Rights, Associated Goodwill and Patents acquired under
such contracts;
(i) take all steps necessary to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or in
connection with the Trademarks, Trademark Rights and Patents, including, without
limitation, entering into confidentiality agreements with employees and labeling
and restricting access to secret information and documents;
(j) use proper statutory notice in connection with its use of
each of the Trademarks, Registrations, Trademark Rights and Patents;
(k) use consistent standards of high quality (which may be
consistent with such Grantor's past practices) in the manufacture, sale and
delivery of products and services sold or delivered under or in connection with
the Trademarks, Registrations, Trademark Rights and Patents, including, to the
extent applicable, in the operation and maintenance of its distribution channel
and other resell operations; and
(l) upon any officer of such Grantor obtaining knowledge thereof,
promptly notify Secured Party in writing of any event that may materially and
adversely affect the value of the Collateral or any portion thereof, the ability
of such Grantor or Secured Party to dispose of the Collateral or any portion
thereof, or the rights and remedies of Secured Party in relation thereto,
including, without limitation, the levy of any legal process against the
Collateral or any portion thereof.
SECTION 8. CERTAIN INSPECTION RIGHTS. Each Grantor hereby grants
to Secured Party and its employees, representatives and agents the right to
visit such Grantor's and any of its Affiliate's or subcontractor's plants,
facilities and other places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and services
sold or delivered under any of the Trademarks, Registrations, Trademark Rights
or Patents (or which were so utilized during the prior six month period), and to
inspect the quality control and all other records relating thereto upon
reasonable notice to such Grantor and as often as may be reasonably requested.
SECTION 9. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except
as otherwise provided in this Section 9, each Grantor shall continue to collect,
at its own expense, all amounts due or to become due to such Grantor in respect
of the Collateral or any portion thereof. In connection with such collections,
such Grantor may take (and, at Secured Party's direction, shall take) such
action as such Grantor or Secured Party may deem necessary or advisable to
enforce collection of such amounts; provided, however, that Secured Party shall
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have the right at any time, upon the occurrence and during the continuation of
an Event of Default and upon written notice to such Grantor of its intention to
do so, to notify the obligors with respect to any such amounts of the existence
of the security interest created, and the conditional assignment effected
hereby, and to direct such obligors to make payment of all such amounts directly
to Secured Party, and, upon such notification and at the expense of such
Grantor, to enforce collection of any such amounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by such Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including checks and other instruments) received
by such Grantor in respect of amounts due to such Grantor in respect of the
Collateral or any portion thereof shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
and applied as provided by Section 17, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or discount
thereon.
SECTION 10. TRADEMARK AND PATENT APPLICATIONS AND LITIGATION.
(a) Each Grantor shall have the duty diligently, through counsel
reasonably acceptable to Secured Party, to prosecute any trademark or patent
application relating to any of the Trademarks and Patents owned, held or used by
such Grantor, specifically identified in Schedule I and Schedule II,
respectively, annexed hereto that is pending as of the date of this Agreement,
to make application on any existing or future registerable but unregistered
Trademarks or unpatented but patentable invention and to file and prosecute
opposition and cancellation proceedings, renew Registrations and do any and all
acts which are necessary or desirable to preserve and maintain all rights in all
Trademarks, Registrations, Trademark Rights and Patents. Any expenses incurred
in connection therewith shall be borne solely by such Grantor. Subject to the
foregoing, such Grantor shall not abandon any Trademark, Registration, Trademark
Right or any right to file a patent application or any pending patent
application or any Patent without the prior written consent of Secured Party.
(b) Except as provided in Section 10(d) and notwithstanding
Section 2, each Grantor shall have the right to commence and prosecute in its
own name, as real party in interest, for its own benefit and at its own expense,
such suits, proceedings or other actions for infringement, unfair competition,
dilution or other damage, or reexamination or reissue proceedings as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at such Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party.
(c) Each Grantor shall promptly, following its becoming aware
thereof, notify Secured Party of the institution of, or of any adverse
determination in, any proceeding (whether in the United States Patent and
Trademark Office or any federal, state, local or foreign court) described in
Section 10(a) or 10(b) or regarding such Grantor's ownership, right to use, or
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interest in any Collateral. Such Grantor shall provide to Secured Party any
information with respect thereto requested by Secured Party.
(d) Anything contained herein to the contrary notwithstanding,
upon the occurrence and during the continuation of an Event of Default, Secured
Party shall have the right (but not the obligation) to bring suit, in the name
of any Grantor, Secured Party or otherwise, to enforce any Trademark,
Registration, Trademark Right, Associated Goodwill, Patent and any license
thereunder, in which event such Grantor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by Secured
Party in aid of such enforcement and such Grantor shall promptly, upon demand,
reimburse and indemnify Secured Party as provided in Section 18 in connection
with the exercise of its rights under this Section 10. To the extent that
Secured Party shall elect not to bring suit to enforce any Trademark,
Registration, Trademark Right, Associated Goodwill, Patent or any license
thereunder as provided in this Section 10(d), such Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement of any of the Trademarks, Registrations, Trademark
Rights, Associated Goodwill or Patents by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
SECTION 11. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent
that any Grantor is permitted to license the Collateral, Secured Party shall
enter into a non-disturbance agreement or other similar arrangement, at such
Grantor's request and expense, with such Grantor and any licensee of any
Collateral permitted hereunder in form and substance satisfactory to Secured
Party pursuant to which (a) Secured Party shall agree not to disturb or
interfere with such licensee's rights under its license agreement with such
Grantor so long as such licensee is not in default thereunder and (b) such
licensee shall acknowledge and agree that the Collateral licensed to it is
subject to the security interest and conditional assignment created in favor of
Secured Party and the other terms of this Agreement.
SECTION 12. REASSIGNMENT OF COLLATERAL. If (a) an Event of
Default shall have occurred and, by reason of cure, waiver, modification,
amendment or otherwise, no longer be continuing, (b) no other Event of Default
shall have occurred and be continuing, (c) an assignment to Secured Party of any
rights, title and interests in and to the Collateral shall have been previously
made and shall have become absolute and effective pursuant to Section 2, Section
13(f) or Section 16(b), and (d) the Secured Obligations shall not have become
immediately due and payable, upon the written request of any Grantor and the
written consent of Secured Party, Secured Party shall promptly execute and
deliver to such Grantor such assignments as may be necessary to reassign to such
Grantor any such rights, title and interests as may have been assigned to
Secured Party as aforesaid, subject to any disposition thereof that may have
been made by Secured Party pursuant hereto; provided that, after giving effect
to such reassignment, Secured Party's security interest and conditional
assignment granted pursuant to Section 1 and Section 2, as well as all other
rights and remedies of Secured Party granted hereunder, shall continue to be in
full force and effect; and provided, further that the rights, title and
interests so reassigned shall be free and clear of all Liens other than Liens
(if any)
11
<PAGE> 12
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Liens.
SECTION 13. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each
Grantor hereby, upon the occurrence and during the continuance of an Event of
Default, irrevocably appoints Secured Party as Grantor's attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to endorse such Grantor's name on all applications,
documents, papers and instruments necessary for Secured Party in the use or
maintenance of the Collateral;
(b) to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clause (b) above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Indenture) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of such Grantor to Secured Party, due and payable immediately without demand;
and
(f) (i) to execute and deliver any of the assignments or
documents requested by Secured Party pursuant to Section 16(b), (ii) to grant or
issue an exclusive or non-exclusive license to the Collateral or any portion
thereof to any Person, and (iii) otherwise generally to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Secured Party were the absolute owner thereof
for all purposes, and to do, at Secured Party's option and such Grantor's
expense, at any time or from time to time, all acts and things that Secured
Party deems necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
SECTION 14. SECURED PARTY MAY PERFORM. If any Grantor fails to
perform any agreement contained herein, Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of Secured Party incurred
in connection therewith shall be payable by such Grantor under Section 18.
12
<PAGE> 13
SECTION 15. STANDARD OF CARE. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 16. REMEDIES.
(a) If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Collateral), and also may (a) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of Secured Party forthwith, assemble all or part of the Collateral
as directed by Secured Party and make it available to Secured Party at a place
to be designated by Secured Party that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process, (c) prior to the disposition of the
Collateral, store the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Secured Party deems appropriate, (d)
take possession of Grantors' premises or place custodians in exclusive control
thereof, remain on such premises and use the same for the purpose of taking any
actions described in the preceding clause (c) and collecting any Secured
Obligation, (e) exercise any and all rights and remedies of a Grantor under or
in connection with the contracts related to the Collateral or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
such Grantor to demand or otherwise require payment of any amount under, or
performance of any provision of, such contracts, and (f) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. Secured Party or any Holder may be the purchaser of any
or all of the Collateral at any such sale and Secured Party, as agent for and
representative of Holders, shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.
13
<PAGE> 14
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any claims
against Secured Party arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Secured Obligations, Grantors shall be liable for
the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Upon written demand from Secured Party, each Grantor shall
execute and deliver to Secured Party an assignment or assignments of the
Trademarks, Registrations, Trademark Rights, the Associated Goodwill and Patents
and such other documents as are necessary or appropriate to carry out the intent
and purposes of this Agreement; provided that the failure of such Grantor to
comply with such demand will not impair or affect the validity of the
conditional assignment effected by Section 2 or its effectiveness upon notice by
Secured Party as specified in Section 2. Each Grantor agrees that such an
assignment (including, without limitation, the conditional assignment effected
by Section 2) and/or recording shall be applied to reduce the Secured
Obligations outstanding only to the extent that Secured Party (or any Holder)
receives cash proceeds in respect of the sale of, or other realization upon, the
Collateral.
(c) Within five Business Days after written notice from Secured
Party, each Grantor shall make available to Secured Party, to the extent within
such Grantor's power and authority, such personnel in such Grantor's employ on
the date of such Event of Default as Secured Party may reasonably designate, by
name, title or job responsibility, to permit such Grantor to continue, directly
or indirectly, to produce, advertise and sell the products and services sold or
delivered by such Grantor under or in connection with the Trademarks,
Registrations and Trademark Rights, such persons to be available to perform
their prior functions on Secured Party's behalf and to be compensated by Secured
Party at such Grantor's expense on a per diem, pro-rata basis consistent with
the salary and benefit structure applicable to each as of the date of such Event
of Default.
SECTION 17. APPLICATION OF PROCEEDS. All proceeds received by
Secured Party in respect of the sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied as provided in
subsection 4.10 of the Indenture.
SECTION 18. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify Secured Party and each
Holder from and against any and all claims, losses and liabilities in any way
relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's or such Holder's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
14
<PAGE> 15
(b) Grantors shall pay to Secured Party upon demand the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (ii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by any Grantor to perform or observe any of the provisions
hereof.
(c) The provisions of this Section 18 shall survive any
termination of this Agreement.
SECTION 19. CONTINUING SECURITY INTEREST AND CONDITIONAL
ASSIGNMENT; TRANSFER OF NOTES. This Agreement shall create a continuing security
interest in, and conditional assignment of, the Collateral and shall (a) remain
in full force and effect until the payment in full of the Secured Obligations,
(b) be binding upon each Grantor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (d), but subject to the provisions of
subsection 2.06 of the Indenture, any Holder may assign or otherwise transfer
any Notes held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Secured Party
or Holders herein or otherwise. Upon the payment in full of all Secured
Obligations, the security interest and conditional assignment granted hereby
shall terminate and all rights to the Collateral shall revert to Grantors. Upon
any such termination Secured Party will, at Grantors' expense, execute and
deliver to Grantor such documents as Grantors shall reasonably request to
evidence such termination.
SECTION 20. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Holders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Indenture; provided that Secured Party
shall exercise, or refrain from exercising, any remedies provided for in Section
16 in accordance with the instructions of the Holders of a majority in principal
amount of the then outstanding Notes.
(b) Secured Party shall at all times be the same Person that is
Trustee under the Indenture. Written notice of resignation by Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute notice of resignation
as Secured Party under this Agreement; removal of Trustee pursuant to subsection
7.08 of the Indenture shall also constitute removal as Secured Party under this
Agreement; and appointment of a successor Trustee pursuant to subsection 7.08 of
the Indenture shall also constitute appointment of a successor Secured Party
under this Agreement. Upon the acceptance of any appointment as Trustee under
subsection 7.08 of the Indenture by a successor Trustee, that successor Trustee
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this
15
<PAGE> 16
Agreement shall promptly (i) transfer to such successor Secured Party all sums
held by Secured Party hereunder (which shall be deposited in a new Collateral
Account established and maintained by such successor Secured Party), together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Secured Party under this
Agreement, and (ii) execute and deliver to such successor Secured Party such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Trustee's
resignation or removal hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.
SECTION 21. ADDITIONAL GRANTORS. The initial Grantors hereunder
shall be such of the Subsidiaries of Company as are signatories hereto on the
date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of Company may become parties hereto, as additional Grantors (each
an "ADDITIONAL GRANTOR"), by executing, delivering and recording in all places
where this Agreement is recorded an appropriate Patent and Trademark Security
Agreement, substantially in the form hereof, with appropriate insertions, or an
amendment to this Agreement. Upon delivery of any such agreement or amendment to
Trustee, notice of which is hereby waived by Grantors, each such Additional
Grantor shall be a Grantor and shall be as fully a party hereto as if such
Additional Grantor were an original signatory hereto. Each Grantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Grantor hereunder, nor by any
election of Trustee not to cause any Subsidiary of Company to become an
Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder.
SECTION 22. AMENDMENTS; ETC. No amendment, modification,
termination or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by Secured Party and, in the case of any
such amendment or modification, by Grantors. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
SECTION 23. NOTICES. Any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or, as to either
party, such other address as shall be designated by such party in a written
notice delivered to Secured Party.
16
<PAGE> 17
SECTION 24. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 25. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 27. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Indenture, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
SECTION 28. COUNTERPARTS. This Agreement may be executed in one
or more counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
17
<PAGE> 18
IN WITNESS WHEREOF, Grantors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ZILOG, INC.
By: /s/ ROBERT E. COLLINS
----------------------------------------
Name: ROBERT E. COLLINS
--------------------------------------
Title: Vice President & Chief Financial
Officer
-------------------------------------
Address: 210 East Hacienda Avenue
Campbell, CA 95008
ZILOG EUROPE
By: /s/ RICHARD R. PICKARD
----------------------------------------
Name: RICHARD R. PICKARD
--------------------------------------
Title: Secretary
-------------------------------------
Address: 210 East Hacienda Avenue
Campbell, CA 95008
STATE STREET BANK AND TRUST COMPANY, SECURED
PARTY (IN ITS CAPACITY AS TRUSTEE)
By: /s/ Steven Cimalore
----------------------------------------
Name: Steven Cimalore
--------------------------------------
Title: Vice President
-------------------------------------
Address: Goodwin Square
225 Asylum Street
Hartford, CA 06103
18
<PAGE> 1
EXHIBIT 4.13
COPYRIGHT SECURITY AGREEMENT
THIS COPYRIGHT SECURITY AGREEMENT dated as of February 27, 1998
(this "AGREEMENT") is made by ZILOG, INC., a Delaware company ("COMPANY") and
each of the undersigned direct and indirect Subsidiaries of Zilog, Inc. (each of
Company and such Subsidiaries being a "GRANTOR" and collectively, "GRANTORS";
provided, that after the Closing Date, Grantors shall be deemed to include any
Additional Grantors (as hereinafter defined)), whose addresses are as set forth
below their name on signature pages annexed hereto and STATE STREET BANK AND
TRUST COMPANY, a chartered trust company, in its capacity as Trustee under the
Indenture referred to below (in such capacity, called "SECURED PARTY").
PRELIMINARY STATEMENTS
A. Secured Party has entered into an Indenture dated as of
February 27, 1998 (said Indenture, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "INDENTURE", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Company and certain subsidiaries of Company pursuant to which
Company has issued 9 1/2% Senior Secured Notes Due 2005 in the original
principal amount of $280,000,000 (the "NOTES"). The Notes are offered pursuant
to the offering circular dated February 23, 1998 (the "Offering Circular").
B. It is a condition precedent to the initial purchase of the
Notes that Grantors shall have granted the security interests and undertaken the
obligations contemplated by this Agreement.
C. Secured Party, for its benefit and the ratable benefit of
Holders, desires to become a secured creditor with respect to all of Grantors'
right, title and interest in and to all of the existing and future Proprietary
Rights and Products (as each such term is hereinafter defined) and all proceeds
relating thereto, and Grantors agree to create a secured and protected interest
in such Proprietary Rights and Products and all the proceeds thereof as provided
herein.
D. The Indenture requires that each Grantor grant the security
interest contemplated by this Agreement as a condition precedent to the initial
purchase of the Notes.
NOW THEREFORE, in consideration of the premises, and in order to
induce the initial Holders to purchase the Notes, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Grantor hereby agrees with Secured Party for Secured Party's
benefit and the ratable benefit of Holders as follows:
1. GRANT OF SECURITY. Each Grantor hereby mortgages, pledges,
hypothecates, grants and assigns to Secured Party for its benefit and the
ratable benefit of Holders to secure the Secured Obligations (as hereinafter
defined) a continuing first priority security interest in and to all of such
Grantor's right, title and interest of every kind and nature in and to (but none
of such Grantor's obligations with respect to) the following, tangible or
intangible, in every stage of development, production and completion, whether
now owned or in
<PAGE> 2
existence or hereafter made, acquired or created and all products and proceeds
thereof (the "Collateral"):
(a) all worldwide copyrights (common law and statutory),
rights in copyrights, interests in copyrights (whether acquired pursuant to a
license or otherwise), registrations and applications for copyrights anywhere in
the world, including without limitation the registrations and applications
listed on Schedule 1(a) hereto, and renewals and extensions of copyrights,
domestic and foreign (collectively, the "COPYRIGHTS"), all mask works, rights in
mask works, interests in mask works, registrations and applications for
protection under the Semiconductor Chip Protection Act of 1984, as amended from
time to time, (the "CHIP ACT") or any similar law or regulation anywhere in the
world, including without limitation the registrations and applications listed on
Schedule 1(a) (collectively, "MASK WORKS"), trade secrets, trade secret rights,
trade dress rights, trade names and all other intellectual property and/or
proprietary rights whether now existing or hereafter created or acquired
(collectively with Copyrights, Mask Works and the foregoing "PROPRIETARY
RIGHTS"); and (b) all inventions, ideas, drawings, designs, schematics,
algorithms, writings, techniques, processes, formulas, computer software
(including object code and source code), data bases, licenses, logos, indicia,
corporate and company names, product and service names and identifiers, business
source or business identifiers, and the accompanying goodwill, semiconductor
chips, masks, cell libraries, layouts, programs, other works of authorship,
know-how, improvements, discoveries, developments and any other works and/or
information relating to, embodying and/or protectable by Proprietary Rights
whether now existing or hereafter created, acquired, improved, made or produced,
including all items set forth on Schedule 1(b) attached hereto and incorporated
herein by this reference (hereinafter collectively referred to as "PRODUCTS")
and all goods, tangible property and intangible property related to the Products
and/or Proprietary Rights, whether now owned or in existence or hereafter made,
acquired, improved or created, including, without limitation, the following:
(i) Specifically excluding all inventory subject to
the security agreements entered into pursuant to the Credit Agreement between
Company and certain lenders being entered into substantially concurrently
herewith, all tangible personal property and physical properties of every kind
or nature of or relating to any item of Product or the Proprietary Rights,
including, without limitation, all physical properties relating to the
development, creation, completion, importing, distribution or other exploitation
of any item of Product or the Proprietary Rights or any part thereof, including,
without limitation, semiconductor chips, tapes and discs of all types and
gauges, all contracts and other materials relating to any item of Product or the
Proprietary Rights and any and all other physical properties of every kind and
nature relating to any item of Product or the Proprietary Rights in whatever
state of completion, and all duplicates, drafts, versions, variations and copies
of each thereof (hereinafter referred to collectively as the "PHYSICAL
PROPERTIES");
(ii) All collateral, allied, ancillary, subsidiary
and publishing rights of every kind and nature, without limitation, derived
from, appurtenant to or related to any item of Product or the Proprietary
Rights; all rights to use, exploit and license others to use or exploit any and
all rights arising out of or connected with or inspired by any item of Product
2
<PAGE> 3
and/or the Proprietary Rights and all commercial exploitation in connection with
or related to any item of Product and/or the Proprietary Rights;
(iii) All rights of every kind or nature, present
and future, in and to all agreements relating to the development, creation, use,
production, completion, delivery and exploitation of any item of Product and/or
the Proprietary Rights, including, without limitation, all agreements for
personal services, including the services of programmers and other technical
staff and agreements for the use of equipment and facilities;
(iv) All insurance and insurance policies
heretofore or hereafter placed upon any item of Product, the Proprietary Rights
or the Physical Properties or the insurable properties thereof and/or any person
or persons engaged in the creation, development, production, completion,
delivery or exploitation of any item of Product or the Proprietary Rights and
the proceeds thereof;
(v) All income, royalties, damages and payments now
or hereafter due and payable under and with respect to Copyrights and/or other
Proprietary Rights (including, without limitation, damages and payments for past
or future infringements thereof), the right (but not the obligation) to make
publication of Copyrights for copyright purposes, to register claims under
Copyright and/or other Proprietary Rights, the right (but not the obligation) to
renew and extend Copyrights and/or other Proprietary Rights and to register
works protectable by Copyright and/or other Proprietary Rights, the right (but
not the obligation) to sue or bring opposition or cancellation proceedings in
the name of such Grantor or in the name of Secured Party for past, present and
future infringements of Copyright and/or other Proprietary Rights and all rights
corresponding thereto and throughout the universe, and the right to make and
exploit all derivative works based on or adopted from all works covered by
Copyrights and/or other Proprietary Rights;
(vi) All rights (but not the obligation) to
commercially exploit any Mask Work, to register claims, the right to register
works protectable by the Chip Act or any similar law or regulation anywhere in
the world, the right (but not the obligation) to sue in the name of such Grantor
or the Secured Party for past, present and future infringements of Mask Works
and all other rights of an owner of Mask Works or holder of Mask Work
registration under the Chip Act and all rights corresponding thereto and
throughout the universe.
(vii) All rights to create, acquire, sell,
distribute, subdistribute, lease, sublease, market, license, sublicense, import,
use, reproduce, publicize or otherwise exploit any item of Product and/or the
Proprietary Rights and any and all rights therein (including, without
limitation, the rights referred to in Section 1(b)(iii) above) in perpetuity,
without limitation, in any manner and in any media whatsoever throughout the
universe by any and all scientific, mechanical or electronic means, methods,
processes or devices now known or hereafter conceived, devised or created;
(viii) All rights of any kind or nature, direct or
indirect, to acquire, produce, develop, reacquire, finance, sell, distribute,
subdistribute, lease, sublease, market, import, license, sublicense, transmit,
reproduce, use, publicize, or otherwise exploit any
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<PAGE> 4
item of Product, the Proprietary Rights or any other rights in any item of
Product, including, without limitation, pursuant to agreements entered into by
such Grantor which relate to the ownership, production, distribution, licensing
or financing of the item of Product or any Proprietary Rights, including without
limitation, the licenses listed on Schedule 1(b) and, including without
limitation, (a) all rights of such Grantor to receive moneys due or to become
due pursuant to any such agreement, (b) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to any
such agreement, (c) claims of such Grantor for damages arising out of or for
breach of or default under any such agreement and (d) all rights of such Grantor
to terminate any such agreement, to perform thereunder and to compel performance
and otherwise exercise any and all rights and remedies thereunder;
(ix) Any and all tangible and intangible personal
property including without limitation general intangibles (as defined in the
UCC), not elsewhere included in this definition, constituting or relating to any
item of Product or Proprietary Rights;
(x) Pledgeholder agreements, laboratory access
agreements, semiconductor wafer fabrication agreements, facility agreements and
escrow agreements relating to any item of Product or Proprietary Rights and any
and all documents, receipts or books and records, including, without limitation,
documents or receipts of any kind or nature issued by any pledgeholder,
warehouseman or bailee with respect to any item of Product and any Physical
Properties relating thereto;
(xi) Specifically excluding all accounts and
related contracts subject to the security agreements entered into pursuant to
the Credit Agreement between Company and certain lenders being entered into
substantially concurrently herewith, all contract rights and general intangibles
(and all proceeds and products thereof) relating to the grant or license by such
Grantor to any person of any right to sell, distribute, subdistribute, lease,
sublease, market, license, sublicense, import, use, reproduce, publicize, or
otherwise exploit any item of Product or Proprietary Rights or any rights in any
item of Product or Proprietary Rights pursuant to any agreements entered into by
such Grantor, including, without limitation, (a) all rights of such Grantor to
receive moneys due or to become due pursuant to any such agreement, (b) all
rights of such Grantor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to any such agreement, (c) claims of such Grantor for
damages arising out of or for breach of or default under any such agreement and
(d) the right of such Grantor to terminate any such agreement, to perform
thereunder and to compel performance and otherwise exercise any and all rights
and remedies thereunder;
(xii) Specifically excluding all inventory subject
to the security agreements entered into pursuant to the Credit Agreement between
Company and certain lenders being entered into substantially concurrently
herewith, all machines, electrical and electronic components, equipment,
computers, fixtures, implements and other tangible personal property of every
kind and description now owned or hereafter acquired by such Grantor and all
goods of like kind or type hereafter acquired by such Grantor in substitution or
replacement thereof, and all additions and accessions thereto relating to items
of Product and/or Proprietary Rights; and
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(xiii) All proceeds of any and all of the foregoing
Collateral in this Section 1(b) (including, without limitation, license
royalties and proceeds of infringement suits) and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is the loss
payee thereof) or any indemnity, warranty or guaranty payable by reason of loss
or damage to or otherwise with respect to the foregoing Collateral. For purposes
of this Agreement, the term "proceeds" includes whatever is receivable or
received when Collateral or proceeds are sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including returned premiums, with
respect to any insurance relating thereto.
2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of such Grantor now or hereafter existing under or
arising out of or in connection with the Indenture and the Notes and all
extensions or renewals thereof, whether for principal, interest (including
interest that, but for the filing of a petition in bankruptcy with respect to
such Grantor, would accrue on such obligations), fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Holder as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT") and all obligations of every nature of
Grantors now or hereafter existing under this Agreement (all such obligations of
Grantors, together with the Underlying Debt, being the "SECURED OBLIGATIONS").
3. REPRESENTATIONS AND WARRANTIES. Except as set forth in the
Offering Circular, each Grantor represents, warrants and covenants as follows:
(a) A true and complete list of all registrations of
Copyrights and Mask Works and applications for Copyrights and Mask Works owned,
held (whether pursuant to a license or otherwise) or used by such Grantor, in
whole or in part, in conducting its business and/or relating to the Collateral
is set forth in Schedule 1(a) attached hereto. Schedule 1(a) lists the correct
dates of all such registrations of Copyrights and Mask Works and applications
for all Copyrights and Mask Works and the owner of the Copyrights and Mask
Works.
(b) Such Grantor has full power, authority and legal right
to pledge all of the Collateral pursuant to this Agreement and none of such
Grantor's Affiliates has any right, title or interest in any Collateral.
(c) Each of the Proprietary Rights a part of or relating
to the Collateral are subsisting and none of the Copyrights, Mask Works or other
Proprietary Rights a part of or relating to the Collateral have been adjudged
invalid or unenforceable.
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(d) Each of the Proprietary Rights a part of or relating
to the Collateral is believed to be valid and enforceable and such Grantor is
not presently aware of any past, present or prospective claim by any third party
that the Proprietary Rights are invalid or unenforceable or of any basis for any
such claim.
(e) There are no claims that the Products and/or
Proprietary Rights a part of or relating to the Collateral do or may violate the
rights of any third person.
(f) Such Grantor has taken and will continue to take all
reasonable steps to protect the secrecy of all trade secrets relating to
unpublished Collateral.
(g) Except as may be prohibited by law, such Grantor will
use statutory notice in connection with its use of each of the Copyrights and
Mask Works.
(h) To the knowledge of the Grantors, such Grantor's
ownership, use of, rights in or exploitation of any Products and/or any
Proprietary Rights does not and will not infringe the rights of any person.
(i) Such Grantor has registered all Mask Works within two
(2) years after the date on which such Mask Work was first commercially
exploited anywhere in the world.
(j) Such Grantor is the legal and beneficial owner of the
Collateral free and clear of any Lien, including, without limitation, pledges,
assignments, licenses and covenants by Grantor not to sue third persons, except
for the Lien and conditional assignment created by this Agreement and Permitted
Liens. No effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of Secured Party relating to the
Indenture or this Agreement or for which duly executed termination statements
have been recorded or delivered to Secured Party. No effective filing with the
United States Copyright Office covering all or any part of the Collateral is on
file with the United States Copyright Office, except such as may be filed in
favor of such Grantor evidencing such Grantor's right, title and interest in the
Copyrights or in favor of Secured Party relating to this Agreement or for which
duly executed termination statements have been delivered to Secured Party.
(k) Such Grantor's chief executive office is located at
the address specified on the signature page to this Agreement which address
qualifies as its "location" under the Code.
(l) This Agreement will create in favor of Secured Party
for its benefit and the ratable benefit of Holders a valid and perfected first
priority security interest in the Collateral upon making the filings referred to
in clause (m) below.
(m) Except for the filing of financing statements with the
Secretaries of State of the States of California, Idaho and Texas under the Code
and filings with the United States Copyright Office necessary to perfect the
security interest created hereunder, no
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authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the grant
by such Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by such Grantor or (ii) for the
perfection of or the exercise by Secured Party of its rights and remedies
hereunder to the Collateral in the United States of America.
(n) All information heretofore, herein or hereafter
supplied to Secured Party and Holders by or on behalf of such Grantor with
respect to the Collateral is accurate and complete in all respects.
4. NEW PROPRIETARY RIGHTS. If any Grantor shall obtain rights to
any new works protectable by Proprietary Rights, or become entitled to the
benefit of any Proprietary Rights or renewals or extension of any Proprietary
Rights, the provisions of this Agreement shall automatically apply thereto. With
respect to any such rights or benefits in a Proprietary Right, such Grantor
shall give prompt notice thereof in writing to Secured Party. Without limiting
each Grantor's obligations set forth in Section 7(d) below, concurrently with
the filing of an application for any Proprietary Right, such Grantor shall
execute, deliver and record in all places where this Agreement is recorded an
appropriate Copyright Security Agreement, substantially in the form hereof, with
appropriate insertions or an amendment to this Agreement, in form and substance
satisfactory to Secured Party, pursuant to which Grantor shall grant a security
interest to the extent of its interest in such Proprietary Right as provided
herein to Secured Party on its behalf and on behalf of Holders.
5. COPYRIGHT, MASK WORK REGISTRATION, RENEWAL AND LITIGATION.
(a) Each Grantor shall have the duty to diligently,
through counsel reasonably acceptable to Secured Party, make any application for
registration on any existing or future (i) unregistered but copyrightable works
and (ii) works protectable under the Chip Act (except for works of nominal
commercial value) and to do any and all acts which are reasonably necessary or
desirable to preserve, renew and maintain all rights in all Copyrights and Mask
Works. Any expenses incurred in connection therewith shall be borne solely by
such Grantor.
(b) Except as provided in Section 8 and notwithstanding
Section 1, each Grantor shall have the right and obligation to commence and
diligently prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other actions for
infringement or other damage as are in its reasonable business judgment
necessary to protect the Collateral. Such Grantor shall provide to Secured Party
any information with respect thereto requested by Secured Party. Secured Party
shall provide at such Grantor's expense all and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(c) Each Grantor shall promptly, following its becoming
aware thereof, notify Secured Party of the institution of, or any adverse
determination in, any proceeding in the United States Copyright Office or any
United States or foreign court described in Section 5(a) or 5(b) or regarding
such Grantor's claim of ownership in any of the Copyrights or Mask Works, its
right to register the same, or its right to keep and maintain such registration;
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<PAGE> 8
6. GRANTOR'S COVENANTS. On a continuing basis, each Grantor shall
make, execute, acknowledge and deliver, and file and record in the proper filing
and recording places, all such instruments and documents, including, without
limitation, appropriate financing and continuation statements and security
agreements, and take all such action as may be necessary or advisable or may be
requested by Secured Party to carry out the intent and purposes of this
Agreement, or for assuring, confirming or protecting the grant or perfection of
security interest granted or purported to be granted hereby, to ensure such
Grantor's compliance with this Agreement or to enable Secured Party to exercise
and enforce its rights and remedies hereunder with respect to the Collateral.
Without limiting the generality of the foregoing sentence, each Grantor:
(a) authorizes Secured Party in its sole discretion after
10 days prior notice to such Grantor, to modify this Agreement without first
obtaining any Grantors' approval of or signature to such modification by
amending Schedule 1(a) thereof (i) to include a reference to any right, title or
interest in any existing Copyrights or Mask Works acquired by any Grantor after
the execution hereof, (ii) to delete any reference to any right, title or
interest in any existing Copyright or Mask Works in which Grantors no longer
have or claim any right, title or interest, or (iii) to include a reference to
any right, title or interest in any Copyrights or Mask Works acquired or created
by any Grantor after the execution hereof;
(b) shall, from time to time, upon Secured Party's
request, cause its books and records to be marked with such legends or
segregated in such manner as Secured Party may reasonably specify, and take or
cause to be taken such other action and adopt such procedures as Secured Party
may reasonably specify to give notice of or to perfect the security interest and
assignment in the Collateral intended to be created hereby;
(c) hereby authorizes Secured Party, in its sole
discretion, to file one or more financing or continuation statements, and after
10 days' prior notice to Grantors, amendments thereto, relative to all or any
portion of the Collateral without the signature of Grantor where permitted by
law;
(d) shall diligently keep reasonable records respecting
the Collateral;
(e) shall at all times keep at least one complete set of
its records concerning substantially all of the Products and Proprietary Rights
of a part of or relating to the collateral at its chief executive office as set
forth above and will not change the location of its chief executive office or
such records without giving Secured Party at least 30 days' prior written notice
thereof;
(f) shall notify Secured Party promptly of any change in
any Grantor's name, identity or corporate structure;
(g) shall not enter into any agreement that would or might
in any material way impair or conflict with such Grantor's obligations
hereunder;
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(h) shall use its best efforts to obtain any necessary
consents of third parties to the grant or perfection of a security interest and
assignment to Secured Party with respect to the Collateral;
(i) shall not permit the inclusion in any contract to
which it becomes a party of any provision that could impair or prevent the
creation of a security interest in such Grantor's rights and interest in any
property included within definitions of the Products and/or Proprietary Rights
acquired under such contracts;
(j) shall use its best efforts to uncover any
infringements of the Proprietary Rights and forthwith advise Secured Party in
writing of any infringement discovered;
(k) shall properly maintain and care for the Collateral;
(l) shall not grant or permit to exist any Lien in the
Collateral or any portion thereof except for Permitted Liens;
(m) upon any officer of such Grantor obtaining knowledge
thereof, shall promptly notify Secured Party in writing of any event that may
materially adversely affect the value of the Collateral or any portion thereof,
the ability of such Grantor or Secured Party to dispose of the Collateral or any
portion thereof or the rights and remedies of Secured Party in relation thereto
including, without limitation, the levy of any legal process against the
Collateral or any portion thereof;
(n) shall not use or permit any Collateral to be used
unlawfully or in violation of any provision of this Agreement, or any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral;
(o) shall pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being contested in good
faith and except where any failure to pay would not have a Material Adverse
Effect; provided that such Grantor shall in any event pay such taxes,
assessments, governmental charges or levies not later than five days prior to
the date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against the such Grantor as a result of the failure to make
such payment.
(p) shall furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other materials evidencing or reports pertaining to the Collateral as
Secured Party may reasonably request, all in reasonable detail;
(q) shall use its best efforts to uncover any infringement
of the Proprietary Rights and forthwith advise Secured Party in writing of any
infringement so discovered;
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<PAGE> 10
(r) shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral, except as permitted by
the Indenture:
(s) shall notify Secured Party immediately and in writing
of any claim of infringement of any of the Collateral by any third party and of
all steps, including the commencement and course of litigation, taken to remedy
such infringement; and
(t) shall employ statutory notices in compliance with
applicable legal requirements or as permitted to maximize the protection and
enforcement of the Proprietary Rights.
7. SPECIAL COVENANTS WITH RESPECT TO COPYRIGHTS AND MASK WORKS.
(a) Each Grantor does not and shall not at any time keep
tangible personal property constituting Collateral in any jurisdiction other
than one in which a financing statement or similar evidence of a security
interest under applicable law satisfactory to Secured Party has theretofore been
filed.
(b) Each Grantor agrees that it will at all times keep
custody of a mask for each Mask Work a part of or relating to the Collateral,
source and object code for all software a part of or relating to the Collateral
and cell libraries, schematics and layouts constituting Collateral in "first
class" bonded warehouses or other facilities reasonably satisfactory to Secured
Party or with other "first class" custodians reasonably satisfactory to Secured
Party. Custody of at least one complete set of masks for such Mask Works shall
be maintained in Grantor's name at [____________] fabrication facility located
in Nampa, Idaho. The masks and source and object codes maintained at such
facilities shall be updated at regular intervals such that the most current
version is held by such facility.
(c) Each Grantor and each custodian described in Section
7(b) above shall upon Secured Party's reasonable request execute and deliver a
Pledgeholder Agreement in a form satisfactory to Secured Party. Each Grantor
will, from time to time, promptly following Secured Party's reasonable request,
use its best efforts to cause any custodian described in Section 7(b) above to
authorize, execute and deliver to Secured Party such other pledgeholder, access
or warehousing agreements (collectively, "PLEDGEHOLDER DOCUMENTS") relating to
Physical Properties in its custody as Secured Party may reasonably request, all
in form and substance reasonably satisfactory to Secured Party; provided,
however, that in the event any such custodian fails or refuses for any reason
whatsoever to authorize, execute and deliver to Secured Party any such
Pledgeholder Documents then, promptly upon Secured Party's reasonable request,
such Grantor shall move all Physical Properties from the custody of such
custodian into the custody of another custodian described in Section 7(b) above
satisfactory to Secured Party who is willing to so authorize, execute and
deliver to Secured Party such Pledgeholder Documents.
(d) Each Grantor will submit, or will cause to be
submitted, to the United States Copyright Office or other applicable
governmental authority for registration or recordation, as applicable, a
completed application for the registration of (i) each item of Product
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protectable by Copyright or under the Chip Act owned, acquired or created by
such Grantor and (ii) each work protectable by Copyright or under the Chip Act
in which such Grantor owns or acquires rights (the items specified in (i) and
(ii) above are referred to collectively as "WORKS") and, if such Work is not
registered in the United States Copyright Office in the name of such Grantor,
assignments or other appropriate instruments of transfer from the registered
Copyright or Mask Work owner of such Work to such Grantor of the interest
acquired by such Grantor in the Work and such Grantor will comply with all
requirements of the United States Copyright Act and the Chip Act and the rules
and regulations thereunder, as from time to time in effect, or other applicable
law necessary to validly register the ownership by such Grantor of the
applicable interest in the Copyright or Mask Work registration to such Work with
the United States Copyright Office or other applicable governmental authority.
Concurrently with the applicable submission with respect to any Work, such
Grantor will submit, or will cause to be submitted, to Secured Party an
amendment to this Agreement in substantially the form of Schedule 7(d) attached
hereto (an "AMENDMENT") duly executed and notarized and in proper form for
recordation in the United States Copyright Office or other applicable
governmental authority. Each Grantor will make, or will cause to be made, the
required submissions to the United States Copyright Office or other applicable
governmental authority as follows:
(e) Each Grantor will (a) with respect to unregistered
copyrightable Work owned by such Grantor, promptly (i.e., within thirty (30)
days after the later of such Grantor's acquisition or creation of such Work) (i)
register the Work for copyright in such Grantor's name with the United States
Copyright Office, and concurrently therewith, (ii) provide Secured Party with an
Amendment, duly executed and notarized and in proper form for recordation in the
United States Copyright Office with respect to such Work reflecting the security
interests of Secured Party with respect to such Work or (b) with respect to any
Work protectable by copyright not described in the foregoing clause (a),
promptly following such Grantor's acquisition of rights in and to such Work
(i.e., within thirty (30) days thereafter) (i) if unregistered, cause the owner
of the Work to register the Work for copyright in the owner's name in the United
States Copyright Office, (ii) record all appropriate instruments of transfer in
the United States Copyright Office reflecting the rights granted to such Grantor
from the registered Copyright owner of the Work, and (iii) provide Secured Party
with an Amendment duly executed and notarized and in proper form for recordation
in the United States Copyright Office with respect to such Work reflecting the
security interests of Secured Party with respect to such Work.
(f) Each Grantor will (a) with respect to unregistered
Work protectable under the Chip Act owned by such Grantor, promptly (i.e.,
within the earlier of (x) thirty (30) days after such Grantor's acquisition or
creation of such Work and (y) one hundred three (103) weeks after such work is
first commercially exploited anywhere in the world) (i) register under the Chip
Act the Work in such Grantor's name with the United States Copyright Office, and
concurrently therewith, (ii) provide Secured Party with an Amendment, duly
executed and notarized and in proper form for recordation in the United States
Copyright Office with respect to such Work reflecting the security interests of
Secured Party with respect to such Work or (b) with respect to any Work
protectable under the Chip Act not described in the foregoing clause (a),
promptly following such Grantor's acquisition of rights in and to such
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Work, promptly (i.e., within the earlier of (x) thirty (30) days after such
Grantor's acquisition of rights in and to such Work and (y) one hundred three
(103) weeks after such work is first commercially exploited anywhere in the
world) (A) if unregistered, cause the owner of the Work to register under the
Chip Act the Work in the owner's name in the United States Copyright Office,
(ii) record all appropriate instruments of transfer in the United States
Copyright Office reflecting the rights granted to such Grantor from the
registered owner under the Chip Act of the Work, and (iii) provide Secured Party
with an Amendment duly executed and notarized and in proper form for recordation
in the United States Copyright Office with respect to such Work reflecting the
security interests of Secured Party with respect to such Work.
(g) Each Grantor agrees that from time to time such
Grantor will promptly execute and deliver all further instruments and documents,
including, without limitation, one or more Amendments hereto, as applicable, and
will take all further action, that may be reasonably necessary that Secured
Party may reasonably request, in order to perfect, protect, evidence, renew
and/or continue the security interest granted or purported to be granted hereby
or to enable Secured Party to enforce its rights and remedies. Without limiting
the generality of the foregoing, each Grantor will: (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (ii) within 30 days after the end of each
calendar quarter, deliver to Secured Party copies of such applications or other
documents filed during such calendar quarter and copies of all such certificates
of title issued during such calendar quarter indicating the security interest
created hereunder in the items of Collateral covered thereby, (iii) at any
reasonable time, upon request by Secured Party, exhibit the Collateral to and
allow inspection of the Collateral by Secured Party, or persons designated by
Secured Party, and (iv) at Secured Party's request, appear in and defend any
action or proceeding that may affect such Grantor's title to or Secured Party's
security interest in all or any part of the Collateral.
8. INSURANCE. Each Grantor shall, at its own expense, maintain
insurance with respect to the Collateral in accordance with the terms of the
Indenture.
9. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
otherwise provided in this Section 9 and in the Indenture, each Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
such Grantor in respect of the Collateral or any portion thereof. Upon the
occurrence and during the continuance of an Event of Default, Secured Party is
hereby given full power and authority, on its behalf and on behalf of Holders,
without notice or demand, (a) to notify any and all obligors with respect to the
Collateral or any portion thereof of the existence of the security interest
created and the conditional assignment effected hereby and (b) to demand, take,
collect, sue for and receive for its own use all amounts due or to become due to
such Grantor in respect of the Collateral or any portion thereof and (c) in
connection therewith, to enforce all rights and remedies with respect to the
Collateral or any portion thereof which such Grantor could enforce if this
Agreement had not been made. Each Grantor hereby ratifies any action which
Secured Party shall lawfully take to enforce Secured Party's rights hereunder.
Whether or not Secured Party shall have so notified any obligors, each Grantor
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shall at its expense render all reasonable assistance to Secured Party in
enforcing claims against such obligors.
10. PROPRIETARY RIGHTS LITIGATION AFTER DEFAULT. Upon the
occurrence and during the continuance of an Event of Default, Secured Party
shall have the right but shall in no way be obligated to bring suit in the name
of any Grantor, Secured Party or Holders to enforce any Proprietary Rights as
part of or relating to the Collateral and any license thereunder, in which event
such Grantor shall, at the request of Secured Party, do any and all lawful acts
and execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party and any other Indemnitee as provided in Section 17 in connection
with the exercise of their rights under this Section 10. To the extent that
Secured Party shall elect not to bring suit to enforce any Proprietary Rights as
part of or relating to the Collateral or any license thereunder, Grantor agrees
to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Proprietary Rights as part
of or relating to the Collateral by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
11. GRANTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Secured Party or any Holder
of any of the rights hereunder shall not release such Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral, (c) neither Secured Party nor any Holder shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement nor shall Secured Party or any Holder be obligated to
perform any of the obligations or duties of such Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder and
(d) the powers conferred on Secured Party and Holders hereunder are solely to
protect their interests in the Collateral and shall not impose any duty upon
Secured Party or any Holder to exercise any such powers.
12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each Grantor
hereby, upon the occurrence and during the continuance of an Event of Default,
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to obtain and adjust insurance required to be
maintained by such Grantor or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
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(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a) and (b)
above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Indenture) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of such Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral;
(g) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and such Grantor's expense, at
any time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do;
(h) to endorse such Grantor's name on all applications,
documents, papers and instruments necessary for Secured Party in the use or
maintenance of the Collateral;
(i) to ask, demand, collect, sue for, recover, impound,
receive and give acquittance and receipts for money due and to become due under
or in respect of any of the Collateral;
(j) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral; and
(k) to sign and file any documents related to protection
of the Proprietary Rights including, without limitation, any registration
applications, extensions, renewals, continuations, assignments or other such
documents.
13. SECURED PARTY MAY PERFORM. If any Grantor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by such Grantor under Section 17.
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<PAGE> 15
14. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
15. REMEDIES. If any Event of Default shall have occurred and be
continuing,
(a) Secured Party may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "CODE") (whether or not the Code applies to the affected
Collateral), and also may (a) require each Grantor to, and each Grantor hereby
agrees that it will at its expense and upon request of Secured Party forthwith,
assemble all or part of the Collateral as directed by Secured Party and make it
available to Secured Party at a place to be designated by Secured Party that is
reasonably convenient to both parties, (b) enter onto the property where any
Collateral is located and take possession thereof with or without judicial
process, (c) prior to the disposition of the Collateral, store, process, repair
or recondition the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Secured Party deems appropriate, (d)
take possession of Grantors' premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of Grantors' equipment
for the purpose of completing any work in process, taking any actions described
in the preceding clause (c) and collecting any Secured Obligation, and (e)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Secured
Party's offices or elsewhere, for cash, on credit or for future delivery, at
such time or times and at such price or prices and upon such other terms as
Secured Party may deem commercially reasonable. Secured Party or any Holder may
be the purchaser of any or all of the Collateral at any such sale and Secured
Party, as agent for and representative of Holders, shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Secured Party at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to
15
<PAGE> 16
which it was so adjourned. Grantor hereby waives any claims against Secured
Party arising by reason of the fact that the price at which any Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree. If the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all the Secured Obligations, Grantor shall be liable for the deficiency and
the fees of any attorneys employed by Secured Party to collect such deficiency.
(b) Within five Business Days of written notice from
Secured Party, each Grantor shall make available to Secured Party, to the extent
within such Grantor's power and authority, such personnel in such Grantor's
employ on the date of the Event of Default as Secured Party may reasonably
designate, by name, title or job responsibility, to permit Secured Party to
continue, directly or indirectly, to produce, advertise and sell the products
and services sold or delivered by such Grantor under or in connection with the
Copyrights, Mask Works and Products, such persons to be available to perform
their prior functions on Secured Party's behalf and to be compensated by Secured
Party at such Grantor's expense on a per diem, pro-rata basis consistent with
the salary and benefit structure applicable to each as of the date of such Event
of Default.
16. APPLICATION OF PROCEEDS. All proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 4.10 of
the Indenture.
17. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify Secured Party and
each Holder from and against any and all claims, losses and liabilities in any
way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including enforcement of this Agreement),
except to the extent such claims, losses or liabilities result solely from
Secured Party's or such Holder's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
(b) Grantors shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(ii) the exercise or enforcement of any of the rights of Secured Party
hereunder, or (iii) the failure by any Grantor to perform or observe any of the
provisions hereof.
(c) The provisions of this Section 17 shall survive any
termination of this Agreement.
18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, (b) be binding upon each Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
16
<PAGE> 17
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 2.06 of the Indenture, any Holder may
assign or otherwise transfer any Notes held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Holders herein or otherwise. Upon the payment in full of all
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantors. Upon any such termination
Secured Party will, at Grantors' expense, execute and deliver to Grantors such
documents as Grantors shall reasonably request to evidence such termination.
19. SECURED PARTY AS TRUSTEE.
(a) Secured Party has been appointed to act as Secured
Party hereunder by Holders. Secured Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Indenture; provided that Secured Party shall exercise, or
refrain from exercising, any remedies provided for in Section 15 in accordance
with the instructions of the Holders of a majority in principal amount of the
then outstanding Notes.
(b) Secured Party shall at all times be the same Person
that is Trustee under the Indenture. Written notice of resignation by Trustee
pursuant to subsection 7.08 of the Indenture shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Trustee pursuant
to subsection 7.08 of the Indenture shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Trustee pursuant to
subsection 7.08 of the Indenture shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Trustee under subsection 7.08 of the Indenture by a successor
Trustee, that successor Trustee shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums held by Secured Party hereunder (which shall be deposited in a new
Collateral Account established and maintained by such successor Secured Party),
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Secured Party
under this Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Trustee's
resignation or removal hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.
20. ADDITIONAL GRANTORS. The initial Grantors hereunder shall be
the Subsidiary of Company that is a signatory hereto on the date hereof. From
time to time
17
<PAGE> 18
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Grantors (each an "ADDITIONAL GRANTOR"), by
executing a counterpart of this Agreement substantially in the form of Schedule
20 annexed hereto, by executing, delivering and recording in all places where
this Agreement is recorded an appropriate Copyright Security Agreement,
substantially in the form hereof, with appropriate insertions, or by executing
an Amendment to this Agreement, as Secured Party may direct. Upon delivery of
any such counterpart to Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such Additional Grantor were an original signatory hereof.
Each Grantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of Secured Party not to cause any Subsidiary of
Company to become an Additional Grantor hereunder. This Agreement shall be fully
effective as to any Grantor that is or becomes a party hereto regardless of
whether any other Person becomes or fails to become or ceases to be a Grantor
hereunder.
21. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
any Grantor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
22. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice delivered
to Secured Party.
23. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
24. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
18
<PAGE> 19
25. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
26. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT
TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. Unless otherwise defined herein or in the Indenture, terms used in
Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined. The rules of construction set forth in
subsection 1.3 of the Indenture shall be applicable to this Agreement mutatis
mutandis.
27. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ZILOG, INC., as Grantor
By: /s/ ROBERT E. COLLINS
---------------------------------------
Name: Robert E. Collins
--------------------------------------
Title: Vice President and Chief Financial
Officer
------------------------------------
Address: 210 East Hacienda Avenue
Campbell, CA 95008
ZILOG EUROPE, as Grantor
By: /s/ RICHARD R. PICKARD
---------------------------------------
Name: Richard R. Pickard
--------------------------------------
Title: Secretary
------------------------------------
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<PAGE> 20
Address: 210 East Hacienda Avenue
Campbell, CA 95008
ZILOG TOA COMPANY
By: /s/ RICHARD R. PICKARD
---------------------------------------
Name: Richard R. Pickard
--------------------------------------
Title: Secretary
------------------------------------
Notice Address: 210 East Hacienda Avenue
Campbell, CA 95008
20
<PAGE> 21
STATE STREET BANK AND TRUST COMPANY, SECURED
PARTY (IN ITS CAPACITY AS TRUSTEE)
By: /s/ STEVEN CIMALORE
----------------------------------------
Name: Steven Cimalore
--------------------------------------
Title: Vice President
-------------------------------------
Address: Goodwin Square
225 Asylum Street
Hartford, CA 06103
<PAGE> 1
EXHIBIT 4.14
STOCKHOLDERS' AGREEMENT
by and among
ZILOG, INC.,
TPG PARTNERS II, L.P.,
TPG INVESTORS II, L.P.,
TPG PARALLEL II, L.P.,
and
CERTAIN OTHER STOCKHOLDERS of ZILOG, INC.
dated as of March 26, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I......................................................................2
SECTION 1.01 Definitions..............................................2
SECTION 1.02 Interpretation...........................................5
ARTICLE II.....................................................................6
SECTION 2.01 General Prohibition on Transfers of Securities...........6
SECTION 2.02 Permitted Transfers by TPG...............................6
SECTION 2.03 Permitted Transfers by Retaining Stockholders............6
SECTION 2.04 Tag-Along Rights.........................................8
SECTION 2.05 Drag-Along Rights........................................9
SECTION 2.06 Transfer Costs; Closing.................................10
SECTION 2.07 Restrictive Legend......................................11
ARTICLE III...................................................................11
SECTION 3.01 Piggy Back Registration.................................11
SECTION 3.02 Registration Procedures.................................13
SECTION 3.03 Indemnification; Contribution...........................15
ARTICLE IV....................................................................18
SECTION 4.01 Transactions with Affiliates............................18
SECTION 4.02 Conflict with Certificate and/or Bylaws.................18
SECTION 4.03 Amendment...............................................18
SECTION 4.04 Specific Performance....................................18
SECTION 4.05 Successors and Assigns..................................18
SECTION 4.06 Shares Subject to this Agreement........................19
SECTION 4.07 Notices.................................................19
SECTION 4.08 Complete Agreement; Counterparts........................20
SECTION 4.09 Term of the Agreement...................................20
SECTION 4.10 Headings................................................20
SECTION 4.11 Choice of Law...........................................20
SECTION 4.12 Consent by TPG and by the Retaining Stockholders........21
</TABLE>
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<PAGE> 3
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of March 26,
1998, by and among ZILOG, INC. (the "Company"), TPG PARTNERS II, L.P. ("TPG
Partners"), TPG INVESTORS II, L.P., TPG PARALLEL II, L.P. (TPG Partners II,
L.P., TPG Investors II, L.P. and TPG Parallel II, L.P., each a "member" of, and
collectively referred to as, "TPG"), and each of the individuals or entities
that are (or are deemed to be) or become signatories hereto (each of such other
individuals or entities are collectively referred to herein as the "New
Stockholders"). TPG and the New Stockholders are referred to herein collectively
as the "Stockholders" and individually as a "Stockholder".
WHEREAS, TPG Partners and the Company have entered into that certain
Agreement and Plan of Merger dated as of July 20, 1997, as amended by Amendments
Number One, Number Two and Number Three dated as of November 18, 1997, December
10, 1997 and January 26, 1998, respectively, (the "Merger Agreement") which
provided for the merger (the "Merger") of TPG Zeus Acquisition Corporation, a
subsidiary of TPG Partners, with and into the Company with the Company being the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation"), upon the terms and subject to the conditions set forth in the
Merger Agreement;
WHEREAS, in connection with the consummation of the Merger, TPG acquired
a certain number of Shares of the Company;
WHEREAS, it has been proposed that TPG sell to the New Stockholders, and
the New Stockholders acquire from TPG, a certain number of Shares of the
Company; and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of agreeing to certain aspects of their relationship as stockholders of
the Company following the consummation of the proposed sale of Shares
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and agreements of the parties hereto, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions hereof, the parties hereto agree as
follows:
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<PAGE> 4
ARTICLE I
SECTION 1.01 Definitions. In addition to the terms defined herein, for
purposes of this Agreement, the following terms shall have the meanings
specified below. Capitalized terms used but not defined herein having the
meanings set forth in the Merger Agreement.
"100% Affiliate" shall mean (i) when used with reference to any entity,
(A) any partnership of which one hundred percent (100%) of either the capital or
profit interests of such partnership is directly or indirectly owned or
controlled by such entity or (B) any corporation or limited liability company of
which one hundred percent (100%) of the outstanding voting securities or member
interests of such corporation is, directly or indirectly, owned or controlled by
such entity; and (ii) when used with respect to any natural person, any trust
created for the benefit of such person and/or members of such person's family.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person; "control" when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities or by contract or otherwise; and the term "voting securities" means
securities or interests entitling the holder thereof to vote or designate
directors or individuals performing a similar function.
"Agreement" has the meaning ascribed to it in the preamble hereto.
"Applicable Amount" has the meaning ascribed to it in Section 2.04(a)
hereof.
"Board" means the Board of Directors of the Company.
"Bona Fide Offer" means with respect to an offer from a Person pursuant
to Section 2.03(c) or 2.05, an offer (i) from a Person who (A) makes such offer
in good faith, (B) is not an Affiliate of the Person receiving the offer and (C)
has the financial capability to purchase the Shares pursuant to the offer and
(ii) whose terms do not conflict with the provisions of this Agreement.
"Certificate" shall mean the certificate of incorporation of the Company
as amended in accordance with the Merger Agreement and in effect immediately
following the Effective Time.
"Common Stock" shall mean the voting common stock, par value $.01 per
share, of the Company.
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<PAGE> 5
"Company" has the meaning ascribed to it in the preamble hereto.
"Drag-Along Notice" means a written notice delivered to the New
Stockholders by TPG pursuant to Section 2.05 hereof pursuant to which each of
the New Stockholders shall transfer all of its respective Shares to a Person
making a Bona Fide Offer. Such notice shall include, without limitation, the
identity of such Person, the price and other material terms and conditions of
the proposed transfer, the closing date of the proposed transfer and, if
applicable, TPG's valuation of any non-cash consideration to be received by TPG
and the New Stockholders pursuant to such proposed transfer.
"Electing Stockholder" means, depending upon the context used, a New
Stockholder who has delivered an Election Notice pursuant to Section 2.04(a)
hereof or a New Stockholder who has sold its Shares to a Prospective Purchaser
pursuant to Section 2.04(b) hereof.
"Election Notice" has the meaning ascribed to it in Section 2.04(a)
hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Public Offering" has the meaning ascribed to it in Section
2.04(a) hereof.
"Merger" has the meaning ascribed to it in the recitals.
"NASDAQ" has the meaning ascribed to it in Section 3.02(a)(ix) hereof.
"New Stockholder Affiliate" has the meaning ascribed to it in Section
2.03(a) hereof.
"New Stockholders" has the meaning ascribed to it in the preamble
hereto.
"Notice Date" has the meaning ascribed to it in Section 2.03(c) hereof.
"Notice of Offer" has the meaning ascribed to it in Section 2.03(c)
hereof.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or any other entity
or any government or political subdivision or an agency, department or
instrumentality thereof.
"Prospective Purchaser" has the meaning ascribed to it in Section
2.04(a) hereof.
"Registrable Securities" means (i) the Shares and (ii) any shares of
common stock of the Company issued or issuable by way of stock dividend or other
distribution or stock split or in connection with a combination, exchange or
replacement of Shares, recapitalization, merger, consolidation or other
reorganization or otherwise with respect to Registrable Securities. Registrable
Securities shall cease to be Registrable Securities when (i) a registration
statement
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<PAGE> 6
with respect to the sale of such securities shall have become effective under
the 1933 Act and such securities shall have been disposed of in accordance with
such registration statement, (ii) such securities shall have been distributed by
a Person pursuant to a Rule 144 Sale or Rule 144(k) Sale or (iii) such
securities shall have been otherwise transferred and new certificates therefor
not bearing a legend restricting further transfer shall have been delivered by
the Company.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Article III including, without limitation, all
registration and filing fees, all fees and expenses of complying with securities
or blue sky laws, all printing expenses, the reasonable fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits required by or incident to such performance
and compliance, but excluding (i) any allocation of salaries of personnel of the
Stockholders on whose behalf Registrable Securities are being registered or
other general overhead expenses of such Stockholders or other expenses for the
preparation of financial statements or other data prepared by such Stockholders,
(ii) any fees or expenses of legal counsel (other than the reasonable and
documented fees and expenses of one special counsel for all of the Stockholders
and Retaining Stockholders requesting Registrable Securities to be included in
each registration statement pursuant to Section 3.01 hereof and pursuant to
Section 3.01 of the Retaining Stockholders Agreement, respectively), financial
advisors, accountants or other consultants or advisors engaged by the
Stockholders on whose behalf Registrable Securities are being registered, and
(iii) underwriting fees, discounts and commissions and applicable transfer
taxes, if any, applicable to the sale of Registrable Securities which shall be
borne in all cases by the Stockholder or Stockholders on whose behalf
Registrable Securities are being sold.
"Retaining Stockholders" means the "Retaining Stockholders" as defined
in the Retaining Stockholders Agreement.
"Retaining Stockholders Agreement" means that certain Stockholders'
Agreement, dated as of February 27, 1998, by and among the Company, TPG Partners
and each of the other signatories thereto, as the same may be amended from time
to time.
"Rule 144 Sale" means a sale (other than a Rule 144(k) Sale) pursuant
to, and in compliance with, Rule 144 of the 1933 Act, as such rule may be
amended from time to time or any similar rule or regulation enacted after the
date of this Agreement.
"Rule 144(k) Sale" means a sale pursuant to, and in compliance with,
Rule 144(k) of the 1933 Act, as such rule may be amended from time to time, or
any similar provision, rule or regulation enacted after the date of this
Agreement which, upon compliance with its non-affiliate and holding period
requirements, terminates the volume, manner or other restrictions set forth in
Rule 144 of the 1933 Act.
"SEC" means the Securities and Exchange Commission.
-4-
<PAGE> 7
"Shares" means all of the issued and outstanding shares of Common Stock
and Class A non-voting common stock, par value $.01 per share, of the Company.
"Stockholder" has the meaning ascribed to it in the preamble hereto.
"Subsidiary" means, with respect to any Person, any other Person of
which a majority of the outstanding voting securities or ownership interests is
owned, directly or indirectly, by such Person.
"Tag-Along Notice" has the meaning ascribed to it in Section 2.04(a)
hereof.
"Tag-Along Rights" means the rights of the New Stockholders pursuant to
Section 2.04.
"TPG" has the meaning ascribed to it in the preamble hereto.
"TPG Partners" has the meaning ascribed to it in the preamble hereto.
SECTION 1.02 Interpretation. For all purposes of this Agreement, except
as otherwise expressly provided herein or unless the context otherwise requires:
(a) the terms defined in this Article I or elsewhere in this Agreement
have the meanings assigned to them in this Article I or elsewhere in this
Agreement and include the plural as well as the singular and vice-versa;
(b) words importing neuter or gender include all genders;
(c) any reference to an "Article", a "Section", an "Exhibit" or a
"Schedule" refers to an Article, a Section, an Exhibit or a Schedule, as the
case may be, of this Agreement;
(d) all references to this Agreement and the words "herein", "hereof",
"hereto", and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Exhibit,
Schedule or other subdivision;
(e) any references to agreements or contracts, including this Agreement,
shall mean such agreements or contracts together with all exhibits, schedules,
appendices and attachments thereto and as such agreements or contracts may be
amended, restated, supplemented or otherwise modified from time to time; and
(f) the determination of whether a Person is a "beneficial owner," has
"beneficial ownership" or "beneficially owns" Shares or any other securities
shall be made in accordance with Rule 13d-3 of the 1934 Act.
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ARTICLE II
TRANSFER RESTRICTIONS
SECTION 2.01 General Prohibition on Transfers of Securities. No New
Stockholder shall, directly or indirectly, sell, assign, pledge, hypothecate,
encumber or otherwise dispose (voluntarily or involuntarily) of any Shares or
any interest therein beneficially owned by it (all of which acts shall be deemed
included in the term "transfer" as used in this Agreement) unless (i) such
transfer is expressly permitted by, and made in compliance with, the terms of
Sections 2.03, 2.04, 2.05 or 3.01, or (ii) such transfer is made to a member of
TPG or one or more of TPG's Affiliates. Any transfer in violation of such
restrictions shall be void and ineffectual and shall not operate to transfer any
interest of title in the Shares so transferred to the proposed transferee. If,
notwithstanding the immediately preceding sentence, any such transfer is held by
a court of competent jurisdiction to be effective, then the provisions of this
Agreement shall apply to the transferee and to any subsequent transferee as
fully as if such transferee were a party hereto.
SECTION 2.02 Permitted Transfers by TPG. Each member of TPG may, at any
time and from time to time after the date hereof, transfer (voluntarily or
involuntarily) any Shares or any interest therein beneficially owned by it to
any Person (including any of its Affiliates) free and clear of any restrictions
set forth in this Agreement, subject only to the obligations of such member of
TPG under the second sentence of this Section 2.02 and under Section 2.04 of
this Agreement. In the event any member of TPG transfers any Shares or any
interest therein beneficially owned by it to an Affiliate of TPG (a "TPG
Transferee"), then such member of TPG shall remain liable for such TPG
Transferee's failure to perform its obligations under this Agreement with
respect to such transferred Shares, such TPG Transferee shall take such Shares
subject to all the provisions of this Agreement, and prior to such transfer,
such TPG Transferee shall (a) execute and deliver to the Company (i) a written
agreement, satisfactory in substance and form to the Company, assuming all of
the obligations (including, without limitation, the obligations set forth in
Section 2.04) of such member of TPG under this Agreement with respect to such
transferred Shares and (ii) such other documents as may be reasonably necessary,
in the opinion of the Company, to assume such obligations, and (b) agree that it
will not cease to be an Affiliate of TPG unless prior to the time such TPG
Transferee ceases to be an Affiliate of TPG, such TPG Transferee transfers to
such member of TPG all Shares owned by such TPG Transferee.
SECTION 2.03 Permitted Transfers by New Stockholders. (a)
Notwithstanding the provisions of Section 2.01 and without first offering its
Shares to TPG as contemplated by Section 2.03(c), any New Stockholder may
transfer the Shares beneficially owned by it to a 100% Affiliate of such New
Stockholder (a "New Stockholder Affiliate"); provided, that such New Stockholder
shall remain liable for such New Stockholder Affiliate's failure to perform its
obligations under this Agreement with respect to such transferred Shares, such
New Stockholder Affiliate shall take such Shares subject to all the provisions
of this Agreement, and prior to such transfer such New Stockholder Affiliate
shall (i) execute and deliver to the Company and TPG (x) a written agreement,
satisfactory in substance and form to TPG, assuming all of the obligations
(including, without limitation, the obligations set forth in Section 2.05) of
such New
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Stockholder under this Agreement with respect to such transferred Shares and (y)
such other documents as may be reasonably necessary, in the opinion of TPG, to
assume such obligations, and (ii) agree that it will not cease to be a 100%
Affiliate of such New Stockholder unless prior to the time such New Stockholder
Affiliate ceases to be a 100% Affiliate of such New Stockholder, such New
Stockholder Affiliate transfers to such New Stockholder all Shares owned by such
New Stockholder Affiliate.
(b) Notwithstanding the provisions of Section 2.01 and without first
offering its Shares to TPG as contemplated by Section 2.03(c), any New
Stockholder may, at any time after the date hereof, pledge, hypothecate or
encumber any Shares beneficially owned by it to a financial institution;
provided that the pledgee (and any subsequent transferee) agrees in writing to
execute and deliver to the Company and TPG (i) a written agreement, satisfactory
in substance and form to TPG, assuming all of the obligations (including,
without limitation, the obligations set forth in Section 2.05) of such
Stockholder under this Agreement with respect to such Shares and (ii) such other
documents as may be reasonably necessary, in the opinion of TPG, to assume such
obligations.
(c) Notwithstanding the provisions of Section 2.01 but on the terms and
subject to the conditions set forth below in this Section 2.03(c) (including the
last sentence of this Section 2.03(c)), each New Stockholder may transfer all or
a portion of its Shares to a third party pursuant to a Bona Fide Offer. If at
any time after the date hereof, a New Stockholder desires to transfer all or a
portion of the Shares owned by it to a third party, such New Stockholder shall
give prompt written notice (a "Notice of Offer") to the Company and TPG, which
notice shall contain the proposed purchase price for the Shares being offered,
the proposed closing date for such transfer, the number of Shares which the New
Stockholder proposes to transfer and any other material term or condition of the
transfer. If a New Stockholder has received any written offer to purchase all or
a portion of the Shares owned by it, the Notice of Offer shall also contain a
true and complete copy of such offer. The date on which such notice is actually
received by the Company and TPG is referred to hereinafter as the "Notice Date."
The Notice of Offer shall be deemed an irrevocable offer to sell to TPG (or any
Person designated by TPG) such Shares on the terms and conditions set forth in
the Notice of Offer. TPG shall have 20 days following the Notice Date to notify
in writing the New Stockholder of its election to purchase such Shares (or to
have such Shares purchased by its designee). If TPG notifies the New Stockholder
of its election to purchase such Shares, the closing for such transaction shall
take place in accordance with the terms of Section 2.06 but in any event no
earlier than 45 days from the date of the Notice of Offer, provided that if the
proposed transfer by the New Stockholder to the third party provides for the
payment of non-cash consideration, TPG may in its discretion, in lieu thereof,
pay the New Stockholder in cash the fair market value of such non-cash
consideration (which fair market value shall be determined by TPG if such New
Stockholder, in its sole discretion, agrees with such determination or, in the
absence of such agreement, by an independent investment bank selected jointly by
TPG and such New Stockholder (or if there is no agreement as to the selection of
the independent investment bank, by an independent investment bank selected by
lot from among six such investment banks selected by TPG)). If the New
Stockholder does not receive such written notice from TPG within the 20 day
period, TPG shall be deemed to have declined to purchase such Shares and the New
Stockholder may transfer all, but not less than all,
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of the Shares indicated in the Notice of Offer upon the terms and conditions set
forth therein; provided that as a condition to such transfer, the transferee
shall execute and deliver to the Company and TPG (i) a written agreement,
satisfactory in substance and form to TPG, assuming all of the obligations
(including, without limitation, the obligations set forth in Section 2.05) of
such New Stockholder under this Agreement with respect to such transferred
Shares and (ii) such other documents as may be reasonably necessary, in the
opinion of TPG, to assume such obligations; provided further that, if the New
Stockholder does not complete the contemplated sale within 90 days of the Notice
Date, the provisions of this Section 2.03(c) shall again apply, and no transfer
of Shares shall be made otherwise than in accordance with this Agreement.
Notwithstanding anything herein to the contrary, the terms and conditions of
this Section 2.03(c) do not apply to transfers by any New Stockholder pursuant
to Section 2.03(a), Section 2.03(b), 2.04, 2.05, Section 3.01 or in connection
with any merger or business combination of the Company approved by the Board.
SECTION 2.04 Tag-Along Rights. Notwithstanding the provisions of Section
2.01 and without first offering its Shares to TPG as contemplated by Section
2.03(c), in the event that at any time after the date hereof and prior to the
completion of an initial public offering of any of the Shares (the "Initial
Public Offering"), TPG reaches a binding agreement with a Person to sell all or
a portion of its Shares that would result in any Person (together with its
Affiliates) unaffiliated with TPG holding 40% or more of the voting power of the
Company, TPG shall cause the prospective purchaser ("Prospective Purchaser"),
subject to the terms and conditions set forth in this Section 2.04 and subject
further to the terms and conditions set forth in Section 2.05, which terms and
conditions shall control in the event that TPG is proposing to sell all of its
shares of Common Stock, to purchase from each Electing Stockholder (in lieu of
purchasing from TPG) that number of shares of Common Stock then owned by such
Electing Stockholder that equals the product of (1) the number of shares of
Common Stock then owned by such Electing Stockholder multiplied by (2) a
fraction, the numerator of which equals the number of shares of Common Stock to
be purchased by the Prospective Purchaser from TPG and the denominator of which
equals the total number of shares of Common Stock then owned by TPG (the
"Applicable Amount"). TPG shall notify promptly each of the New Stockholders in
writing of any such binding agreement, indicating the price and other material
terms and conditions of the proposed sale, the identity of the Prospective
Purchaser, the intended closing date of such sale, the percentage of issued and
outstanding shares of Common Stock being sold by TPG and the Applicable Amount
of shares of Common Stock of each New Stockholder that may be sold by such New
Stockholder pursuant to this Section 2.04(a) (the "Tag-Along Notice") and shall
provide a copy of such binding agreement to each of the New Stockholders. Any
purchase by the Prospective Purchaser of the Applicable Amount of shares of
Common Stock of any Electing Stockholder shall be at the same consideration per
share of Common Stock and on the same terms and conditions as are applicable to
TPG in such transaction. Each of the New Stockholders will have 20 days from
receipt of the Tag-Along Notice (or any amendment or supplement thereto) to
notify TPG in writing of its election to exercise its Tag-Along Rights (an
"Election Notice") and to exercise its Tag-Along Rights pursuant to this Section
2.04. In the event that a New Stockholder notifies TPG in writing of its
election to exercise Tag-Along Rights within 20 days of the receipt of a
Tag-Along Notice and such New Stockholder subsequently receives an amendment or
supplement to such Tag-Along Notice from TPG, such
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New Stockholder shall be able to withdraw its previously given election to
exercise Tag-Along Rights by giving written notice to TPG within 20 days of the
receipt of such amendment or supplement. In the event TPG does not receive an
Election Notice from any of the New Stockholders within 20 days of receipt of
the Tag-Along Notice (or any amendment or supplement thereto), such Person shall
be deemed to have elected not to exercise its Tag-Along Rights hereunder.
Notwithstanding anything to the contrary contained herein, (i) TPG shall not be
obligated to cause a Prospective Purchaser to purchase any New Stockholders'
shares of Common Stock hereunder if at the time of such sale (but prior to
giving effect thereto) TPG beneficially owns less than 40% of the voting power
of the Company and (ii) TPG shall not be obligated to consummate the transfer of
shares of Common Stock contemplated by an agreement between TPG and a
Prospective Purchaser if, pursuant to the terms and conditions of such
agreement, TPG is not obligated to do so and, in the event TPG elects not to
consummate a transfer which it is not obligated to consummate as provided in
this clause (ii), TPG shall have no liability to any New Stockholder (which term
includes, without limitation, any Electing Stockholder).
The closing of the sale of TPG's shares of Common Stock to the
Prospective Purchaser hereunder shall be conditioned on the simultaneous
purchase by the Prospective Purchaser of the Applicable Amount of shares of
Common Stock from each Electing Stockholder. Notwithstanding the foregoing, in
the event any Electing Stockholder breaches any obligation it may have under
this Section 2.04 or, in the event that any representation and warranty of any
Electing Stockholder contained in the purchase agreement with the Prospective
Purchaser is not true and correct as of the date made or as of the proposed
closing date or the Electing Stockholder shall fail to perform any covenant or
agreement contained in such agreement or the Electing Stockholder shall
otherwise breach its obligations under such agreement and, in each case, such
misrepresentation, breach or failure to perform such covenant or agreement
results in the nonsatisfaction of a condition precedent to such agreement (and
the Prospective Purchaser does not waive such condition precedent), TPG shall be
free to sell its Shares to the Prospective Purchaser without liability to the
Electing Stockholder under this Agreement and such sale shall not limit or waive
in any respect any claim, right or cause of action that TPG may have against
such Electing Stockholder in respect of such breach.
SECTION 2.05 Drag-Along Rights. Notwithstanding the provisions of
Section 2.01 and without first offering its shares of Common Stock to TPG as
contemplated by Section 2.03(c), if TPG executes a binding agreement to transfer
all of its shares of Common Stock to a Person making a Bona Fide Offer, then
each of the New Stockholders shall transfer, subject to the terms and conditions
set forth below, at the sole election of TPG (exercisable by delivery to each of
the New Stockholders of a copy of such binding agreement and a Drag-Along Notice
at least 20 days prior to the closing date specified in such Notice), all of its
shares of Common Stock to such Person; provided that (i) each of the New
Stockholders shall receive from such Person the same per share consideration to
be paid to TPG in such transaction, (ii) the consideration received in such
transaction shall be the same as the consideration to be paid to TPG in such
transaction and (iii) the closing of any transaction effected pursuant to
this Section 2.05 shall be conditioned on the simultaneous purchase of TPG's
shares of Common Stock; and provided, further, that the New Stockholders shall
not be obligated to transfer their shares of Common Stock pursuant to
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this Section 2.05 if at the time of TPG's transfer pursuant to such agreement
(prior to giving effect thereto) TPG beneficially owns less than 40% of the
voting power of the Company. Notwithstanding the foregoing, in the event any New
Stockholder breaches its obligations under this Section 2.05 or, in the event
that any representation and warranty of such New Stockholder contained in the
purchase agreement with the Person making the Bona Fide Offer is not true and
correct as of the date made or as of the proposed closing date or such New
Stockholder shall fail to perform any covenant or agreement contained in such
agreement or such New Stockholder shall otherwise breach its obligations under
such agreement and, in each case, such misrepresentation, breach or failure to
perform such covenant or agreement results in the nonsatisfaction of a condition
precedent to such agreement (and the Person making the Bona Fide Offer does not
waive such condition precedent), TPG shall be free to sell its shares of Common
Stock to such Person without liability to any New Stockholder under this
Agreement and such sale shall not limit or waive in any respect any claim, right
or cause of action that TPG may have against such New Stockholder in respect of
such breach.
SECTION 2.06 Transfer Costs; Closing.
(a) In the event the New Stockholders receive a Tag-Along Notice or
Drag-Along Notice pursuant to Section 2.04 or 2.05, as the case may be, each
Electing Stockholder (with respect to a Tag-Along Notice) or New Stockholder
(with respect to a Drag-Along Notice), as the case may be, agrees to use its
commercially reasonable efforts, in good faith and in a timely matter, to take,
or cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable, under applicable laws and regulations
(including, without limitation, to ensure that all appropriate legal and other
requirements are met and all consents of third Persons are obtained, in each
case, with respect to the transfer by such Electing Stockholder or New
Stockholder, as the case may be), to consummate the proposed transactions
contemplated by Section 2.04 or 2.05, as the case may be. All reasonable costs
and expenses incurred by Electing Stockholders or New Stockholders, as the case
may be, in connection with a transfer made pursuant to Section 2.04 or 2.05
(including, without limitation, all costs and disbursements, finders' fees or
brokerage commissions but excluding the fees and disbursements of counsel which
shall be borne independently by each Electing Stockholder or New Stockholder, as
the case may be), or to be paid by Electing Stockholders or New Stockholders as
provided for in the relevant purchase agreement, shall be allocated pro rata
among the Electing Stockholders or the New Stockholders, as the case may be,
based upon the number of Shares sold by each Electing Stockholder or New
Stockholder.
(b) The closing of any transfer of Shares pursuant to Section 2.03(c),
2.04 or 2.05 shall take place at the offices of the Company (or at such other
place as the participants shall mutually agree upon) not later than 90 days from
the receipt by TPG of a Notice of Offer or from the receipt by the New
Stockholders of the Tag-Along Notice or the Drag-Along Notice, as the case may
be (subject to the expiration of any waiting period under the HSR Act and the
other terms and conditions provided in the underlying purchase agreement). At
such closing, the purchaser shall pay the purchase price for such Shares, in the
form and in the manner provided for in the underlying purchase agreement,
against delivery by the transferors of the Shares to be transferred, free and
clear of all liens, security interests or adverse claims of any kind and nature
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except as otherwise provided for in this Agreement, duly endorsed or accompanied
by duly executed documents of transfer, in each case with signatures guaranteed
by a signature guarantor reasonably acceptable to the purchaser, and with any
required stock transfer tax stamp affixed.
SECTION 2.07 Restrictive Legend. Each certificate evidencing Shares
shall contain the following restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF
TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF A STOCKHOLDERS' AGREEMENT DATED AS OF MARCH 26, 1998 AND MAY BE
VOTED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE
WITH SUCH AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER."
ARTICLE III
PIGGY BACK REGISTRATION
SECTION 3.01 Piggy Back Registration.
(a) If the Company, at any time, proposes to register any of its equity
securities (or securities convertible into equity securities) under the 1933 Act
(other than by registration on a Form S-4 or Form S-8 or any successor or
similar form then in effect), whether or not for sale for its own account, on a
form and in a manner which would permit registration of Registrable Securities
for sale, each such time it shall give prompt written notice to all Stockholders
owning Registrable Securities of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration, and upon the written request of any such
Stockholder delivered to the Company within 30 days after the giving of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such Stockholder and the intended method of disposition thereof),
the Company shall use its reasonable best efforts to effect the registration
under the 1933 Act of all Registrable Securities which the Company has been so
requested to register by such Stockholders, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, provided that:
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(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
or delay the registration of such securities, the Company may, at its
election, give written notice of such determination to each Stockholder
owning Registrable Securities and thereupon, (A) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration, and (B) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities.
(ii) if (A) the registration so proposed by the Company involves
an underwritten offering of the securities so being registered, whether
or not for sale for the account of the Company, to be distributed (on a
firm commitment basis) by or through one or more underwriters under
underwriting terms appropriate for such a transaction and (B) the
managing underwriter of such underwritten offering shall advise the
Company, and/or the party on whose behalf the securities are being
registered, that, in its opinion, the distribution of all or a specified
portion of such Registrable Securities concurrently with the securities
being distributed by such underwriters will adversely affect the
distribution of such securities by such underwriters, then the Company
shall promptly furnish each such holder of Registrable Securities with a
copy of such opinion and may deny, by written notice to each such
Stockholder accompanying such opinion, the registration of all or a
specified portion of such Registrable Securities (in case of a denial as
to a portion of such Registrable Securities, such portion to be
allocated among such Stockholders and the Retaining Stockholders in
proportion to the respective number of Shares requested to be included
therein by such Stockholder); and
(iii) each Stockholder requesting registration of Registrable
Securities pursuant to this Section 3.01 shall be permitted to withdraw
all or part of such Stockholder's Registrable Securities at any time
prior to the effective date of such registration; provided that in the
event of a withdrawal from a registration, any fees and disbursements
incurred by Stockholders requesting withdrawal in connection with such
registration shall be paid by such Stockholders.
(iv) the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3.01, (A) in
connection with any merger, acquisition, exchange offer,
recapitalization, or consolidation of the Company or any of its
Subsidiaries or the adoption or implementation of any dividend
reinvestment plan, stock option or other employee benefit plan or (B) in
connection with an Initial Public Offering unless the Company permits
any Stockholder to participate in such Initial Public Offering, in which
case, then all other Stockholders shall be allowed to participate in
such offering, and the
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Company shall be obligated to give prompt written notice to all
Stockholders owning Registrable Securities of their right to do so.
(v) the New Stockholders will, if requested by the
underwriters for an underwritten public offering of equity securities of
the Company, agree not to sell or transfer any equity securities of the
Company (other than equity securities, if any, included in such
offering), without the consent of the underwriters, for a period of not
more than 180 days following effectiveness of the registration statement
relating to such public offering
(b) In connection with the preparation and filing of each registration
statement under the 1933 Act pursuant to which Registrable Securities will be
registered, the Company will give (i) each holder of Registrable Securities, who
beneficially owns in excess of 5% of the shares of Common Stock then
outstanding, to be registered under such registration statement, (ii) their
underwriters, if any, and (iii) their respective counsel and accountants such
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act.
(c) Subject to Section 3.01(a)(iii), the Company shall pay all
Registration Expenses in connection with each registration of Registrable
Securities requested to be registered pursuant to this Section 3.01 (including
Registration Expenses incurred in connection with registration efforts which are
terminated in accordance with Section 3.01(a)(1) hereof). All other costs and
expenses shall be borne by the party bearing such costs or expenses.
SECTION 3.02 Registration Procedures.
(a) In connection with the registration of any Registrable Securities
under the 1933 Act as provided in Section 3.01, the Company shall as soon as
practicable:
(i) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities covered by
such registration statement until the earlier of such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller, or sellers, thereof set
forth in such registration statement or the expiration of six (6) months
after such registration statement becomes effective;
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(iii) furnish to each seller of such Registrable Securities such
number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the 1933
Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents, as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities being sold by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to furnish to each holder of at least
twenty-five percent (25%) of the Registrable Securities covered by the
registration statement, upon such holder's request, a signed
counterpart, addressed to such holder, of an opinion of counsel for the
Company, dated the effective date of such registration statement (or, if
such registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement speaking both as of
the effective date of the registration statement and the date of the
closing under the underwriting agreement) covering substantially the
same matters with respect to such registration statement (and the
prospectus included therein) as are customarily covered in opinions of
issuer's counsel;
(vi) use its reasonable best efforts to obtain a "cold comfort"
letter from the Company's independent public accountant in customary
form and covering such matters of the type customarily covered by "cold
comfort" letters as the holders of a majority of the Registrable
Securities covered by the registration statement may request;
(vii) promptly notify each holder of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event known to the Company as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
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existing, and at the request of any such holder or holders prepare and
furnish to such holder or holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include 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 in
the light of the circumstances then existing;
(viii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and generally make
available to its securities holders an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 under the 1933
Act not later than eighteen (18) months after the effective date of such
registration; and
(ix) use its reasonable best efforts to (A) list the Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Shares is then listed, if any, or (B) have
authorized for quotation and/or listing, as applicable, on the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
or the National Market System of NASDAQ if the Registrable Securities so
qualify; in each case subject to the applicable listing requirements of
the respective securities exchange or NASDAQ.
The Company may require, as a condition to each holder's participation in the
registration, each holder of Registrable Securities as to which any registration
is being effected (i) to furnish the Company with such information regarding
such holder and the distribution of such Registrable Securities as the Company
may from time to time reasonably request or as shall be required by law
(including, without limitation, any applicable state securities law) or by the
SEC in connection therewith and (ii) to enter into a holdback agreement on
customary terms and conditions.
(b) If the securities proposed to be registered are to be distributed
by or through one or more underwriters, the managing underwriter shall be
selected by the Company or the Person (other than the New Stockholders) on whose
behalf the securities were initially requested to be registered.
SECTION 3.03 Indemnification; Contribution.
(a) In the event of any registration of any Registrable Securities under
the 1933 Act, the Company shall indemnify and hold harmless (i) in the case of
any registration statement (including any related notification or document
incident to such registration statement) filed pursuant to Section 3.01, the
seller of any Registrable Securities covered by such registration statement, its
directors and officers, each officer and director of each underwriter, each
other Person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other Person, if any, who controls such seller
or any such underwriter, within the meaning of the 1933 Act, against any losses,
claims, damages, liabilities and expenses (including
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<PAGE> 18
reasonable fees and expenses incurred in connection with enforcing the
provisions of this Section 3.03(a)), joint or several, to which any such
indemnified party may become subject under the 1933 Act or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions or proceedings
in respect thereof) arise out of or are based upon (x) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the 1933
Act, any preliminary prospectus (unless any such statement is corrected in a
subsequent prospectus and the underwriters are given the opportunity to
circulate the corrected prospectus to all persons receiving the preliminary
prospectus), final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, or any document incorporated by reference
therein, or (y) any 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 the Company will reimburse such indemnified parties for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case and
shall not indemnify any Person to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement or
document incorporated by reference based upon written information furnished by
such Person to the Company for use in the preparation thereof. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such indemnified parties and shall survive the transfer of such
securities by such seller. The Company shall agree to provide for contribution
relating to such indemnity pursuant to Section 3.03(b) below.
(b) If for any reason the foregoing indemnity and reimbursement is
unavailable or is insufficient to hold harmless an indemnified party under
Section 3.03(a), then the Company shall contribute to the amount paid or payable
by such indemnified party as a result of any loss, claim, damage or liability
(as actions or proceedings, whether commenced or threatened, in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Company on the other. The relative fault 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 indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, the Company shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative fault but also the relative benefits to the
Company and the indemnified party as well as any other relevant equitable
considerations. The parties agree that it would not be just and equitable if
contributions pursuant to this Section 3.03(b) were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentences of this
Section 3.03(b). Notwithstanding anything in this
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<PAGE> 19
Section 3.03(b) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 3.03(b) to contribute any amount in
excess of the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(c) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to Section 3.02(a), that
the Company shall have received an undertaking satisfactory to it from each of
the prospective sellers of such securities and their underwriters, to indemnify
and hold harmless, and to provide for contribution (in the same manner and to
the same extent as set forth in subdivisions (a) and (b) of this Section 3.03),
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement and each other Person, if any, who controls the
Company within the meaning of the 1933 Act, with respect to any untrue
statement, or alleged untrue statement, or omission, or alleged omission, made
in such registration statement, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto, or
any document incorporated by reference therein, if such untrue statement, or
alleged untrue statement, or omission, or alleged omission, was based upon
written information furnished by any such prospective sellers or their
underwriters to the Company for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or document incorporated by reference. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller.
(d) Promptly after receipt by an indemnified party of written notice of
the commencement of any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 3.03, such indemnified party shall,
if a claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 3.03 except to the extent that the indemnifying
party's liabilities and obligations under this Section 3.03 are prejudiced as a
result of such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof unless (i) the indemnifying party shall have
failed to retain counsel for the indemnified party as aforesaid, (ii) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (iii) representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interest
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<PAGE> 20
between such indemnified party and any other Person represented by such counsel
in such proceeding. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01 Transactions with Affiliates. All transactions between the
Company and any member of TPG or any Affiliate of TPG shall require the prior
approval of the holders of a majority of the Common Stock (excluding stock held
by TPG and its Affiliates) other than agreements or transactions which are on
arms-length terms or consulting fees with terms which are customary as between
TPG and its portfolio companies.
SECTION 4.02 Conflict with Certificate and/or Bylaws. The parties hereto
intend that in the event of any conflict or inconsistency between this Agreement
and the Certificate or Bylaws of the Company, the provisions of this Agreement
shall control, and therefore in the event that any term or provision of this
Agreement is rendered invalid, illegal or unenforceable by the Certificate or
Bylaws, the parties agree to take all action, including voting their Shares, to
amend the Certificate or Bylaws (as the case may be) so as to render such term
or provision valid, legal and enforceable, if and to the extent legally
permitted.
SECTION 4.03 Amendment. This Agreement may be altered or amended only
with the written consent of the Company, TPG and the collective consent of the
New Stockholders. Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof.
SECTION 4.04 Specific Performance. The parties hereto agree that the
obligations imposed on them in this Agreement are special, unique and of an
extraordinary character, and that in the event of breach by any party damages
would not be an adequate remedy, and each of the other parties shall be entitled
to specific performance and injunctive and other equitable relief in addition to
any other remedy to which it may be entitled, at law or in equity; and the
parties hereto further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such injunctive or
other equitable relief.
SECTION 4.05 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assignees of the parties hereto; provided that except
as expressly permitted or required elsewhere in this Agreement, the rights and
obligations of the parties hereto may not be assigned without the prior written
consent of the Company, TPG and the collective consent of the New Stockholders.
Notwithstanding the foregoing, TPG may assign its rights under this Agreement
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<PAGE> 21
to any transferee of its Shares other than a transferee pursuant to Article III
or pursuant to a Rule 144 or Rule 144(k) Sale and (ii) any New Stockholder may
assign any of its rights hereunder to any transferee of its Shares pursuant to
Section 2.03. Any party to, or Person who is subject to, this Agreement, upon
ceasing to own Shares or any interest therein, shall thereupon cease to be a
party to, or Person who is subject to, this Agreement and shall thereafter have
no rights or obligations hereunder except as expressly provided for elsewhere in
this Agreement, including, without limitation, Section 2.03(a) and Section 3.03.
SECTION 4.06 Shares Subject to this Agreement. All Shares of the Company
(or any successor thereto) beneficially owned or hereafter acquired by the
Stockholders or their Affiliates shall be subject to the terms of this
Agreement. Any Shares acquired in the open market or pursuant to a public
offering or a Rule 144 or Rule 144(k) Sale shall not be subject to this
Agreement.
SECTION 4.07 Notices. All notices, statements, instructions or other
documents provided for herein shall be in writing and shall be delivered either
personally or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested or
by mailing (as set forth above) and transmitting by facsimile a copy of such
writing, addressed as follows:
(a) if to TPG, to:
TPG Partners II, L.P.
345 California Street, Suite 3300
San Francisco, California 94104
Attention: Mr. David M. Stanton
Facsimile: (415) 616-0420
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Facsimile: (212) 225-3999
(b) if to the Company, to:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008
Attention: Richard R. Pickard, Esq.
Facsimile: (408) 374-8183
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<PAGE> 22
with a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304-1115
Attention: Katharine A. Martin, Esq.
Facsimile: (650) 233-4545
(c) if to the New Stockholders, to their respective addresses and
facsimile numbers set forth on Schedule I hereto.
Each party, by written notice given to the other parties in accordance with this
Section 4.07, may change the address to which notices, statements, instructions
or other documents are to be sent to such party. Except as otherwise provided
herein, all notices, statements, instructions and other documents hereunder
shall be deemed to have been given on the earlier of the date of actual delivery
and 3 days after the date of mailing, except that notice of a change of address
shall be effective only upon actual delivery.
SECTION 4.08 Complete Agreement; Counterparts. This Agreement
constitutes the entire agreement among the parties hereto or any of them with
respect to the matters referred to herein as they relate to the parties hereto.
This Agreement may be executed by the parties hereto in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same instrument.
SECTION 4.09 Term of the Agreement. Unless this Section 4.09 is amended
in accordance with the provisions of Section 4.03 hereof, this Agreement shall
expire on February 27, 2006; provided that the provisions of Article II of this
Agreement shall expire upon the earlier of February 27, 2006 and the completion
of the Initial Public Offering; provided further that the provisions of Article
III of this Agreement shall expire on February 27, 2013.
SECTION 4.10 Headings. The section headings herein are for convenience
of reference only and in no way define, limit or extend the scope or intent of
this Agreement or any provisions hereof.
SECTION 4.11 Choice of Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without regard
to principles of conflicts of law). The parties agree that any service of
process to be made hereunder may be made by certified mail, return receipt
requested, addressed to the party at the address appearing in Section 4.07
together with a copy to be delivered to such party's attorneys as provided in
Section 4.07. The parties consent and agree that the state or federal courts
located in Delaware shall have jurisdiction to hear and determine any claims or
disputes pertaining to this Agreement or to any matter arising out of or related
to this Agreement and each party waives any objection that it may have based
upon lack of personal jurisdiction, improper venue or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.
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<PAGE> 23
SECTION 4.12 Consent by TPG and by the New Stockholders.
(a) Any provision of this Agreement that requires any consent,
agreement, waiver, designation or other determination or decision of TPG shall
require, and shall be deemed to have been given or made upon, the consent,
agreement, waiver, designation or other determination or decision of TPG
Partners.
(b) Any provision of this Agreement that requires any collective
consent, agreement, waiver, designation or other determination or decision of
the New Stockholders, shall require, and shall be deemed to have been given or
made upon, the consent, agreement, waiver, designation or other determination or
decision of holders of a majority of the Shares held by the New Stockholders, as
of the date such collective consent, agreement, waiver, designation or other
determination or decision is required.
SECTION 4.13 Additional Parties. Notwithstanding the provisions of
Section 4.08, additional holders of Shares may be added to and bound by this
Agreement upon the signing and delivery of a counterpart of this Agreement by
the Company and the acceptance thereof by such additional holders. Promptly
thereafter, the Company will deliver a conformed copy thereof to the
Stockholders.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
TPG PARTNERS II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc.,
General Partner
By /s/ JAMES O'BRIEN
-------------------------------------
Title Vice President
----------------------------------
TPG INVESTORS II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc.,
General Partner
By /s/ JAMES O'BRIEN
-------------------------------------
Title Vice President
----------------------------------
TPG PARALLEL II, L.P.
By TPG GenPar II, L.P., General Partner
By TPG Advisors II, Inc.,
General Partner
By /s/ JAMES O'BRIEN
-------------------------------------
Title Vice President
----------------------------------
ZILOG, INC.
By /s/ RICHARD R. PICKARD
-------------------------------------
Title Secretary
----------------------------------
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<PAGE> 25
SCHEDULE I
NEW STOCKHOLDERS
FOX PAINE CAPITAL FUND, L.P. Print Name: FOX PAINE CAPITAL FUND, L.P.
By: FOX PAINE CAPITAL, LLC, Address: 950 Tower Lane, Suite 1950
its General Partner Foster City, California 94404
Facsimile: 650-525-1396
Telephone: 650-525-1300
____________________________
Name:
Title:
___________________________ Print Name________________________________
Address ________________________________
________________________________
________________________________
Facsimile ________________________________
Telephone ________________________________
___________________________ Print Name________________________________
Address ________________________________
________________________________
________________________________
Facsimile ________________________________
Telephone ________________________________
___________________________ Print Name________________________________
Address ________________________________
________________________________
________________________________
Facsimile ________________________________
Telephone ________________________________
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<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF PILLSBURY MADISON & SUTRO LLP]
April 28, 1998
Zilog, Inc.
910 East Hamilton Avenue
Campbell, CA 95008
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
This opinion is being delivered in connection with the proposed offer to
exchange (the "Exchange Offer") by Zilog, Inc. (the "Company") its 9-1/2% Senior
Secured Notes Due 2005 (the "New Notes") for any and all of its outstanding
9-1/2% Senior Secured Notes Due 2005 (the "Old Notes"). The New Notes are to be
issued pursuant to a Registration Statement on Form S-4 (the "Registration
Statement") of even date herewith filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The New Notes
will be issued under the Indenture, dated as of February 27, 1998 (the
"Indenture"), between the Company and State Street Bank & Trust Company (the
"Trustee"), filed as Exhibit 4.5 to the Registration Statement.
We are of the opinion that, when (a) the Indenture, under which the New
Notes will be issued, has been qualified under the Trust Indenture Act of 1939,
as amended, (b) the New Notes have been executed by the Company and
authenticated by the Trustee in accordance with the terms of the Indenture and
(c) the New Notes have been delivered in exchange for the Old Notes in the
manner and for the consideration stated in the Registration Statement and the
Indenture, the New Notes will be legally issued and binding obligations of the
Company.
We are members of the Bar of the State of California and the foregoing
opinion is limited to the laws of the State of California, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
/s/ PILLSBURY MADISON & SUTRO LLP
<PAGE> 1
EXHIBIT 10.1
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Agreement entered into this 22nd day of March 1979 at Makati, Metro
Manila, Philippines, by and between:
FRUEHAUF ELECTRONICS PHILS. CORPORATION, a corporation
organized and existing under Philippine laws, with offices at 444
T. M. Kalaw, Ermita, Manila, represented in this act by its duly
authorized President, Mr. Antonio K. Litonjua, by virtue of a
Board resolution, a copy of which is attached hereto and made an
integral part hereof as Annex "A", hereinafter called the
"LESSOR";
- and -
ZILOG PHILIPPINES, INC., a corporation organized and
existing under Philippine laws, with offices at Pildora Area, CAA
Compound, MIA, Metro Manila, represented in this act by its duly
authorized President/General Manager, Mr. Robert Wallace, by
virtue of a Board resolution, a copy of which is attached hereto
and made an integral part hereof as Annex "B", hereinafter called
the "LESSEE":
WITNESSETH: That
For and in consideration of the payment by LESSEE of the rent hereinafter
specified and the performance by LESSEE of the covenants and agreements
hereinafter agreed to be performed by it, and in accordance with all of the
provisions hereinafter set forth, LESSOR does hereby let and demise unto LESSEE
and LESSEE does hereby lease from LESSOR, that parcel of land having an
aggregate area of 13,000 square meters, covered by Transfer Certificate of Title
No. S-83454 of the Register of Deeds of Metro Manila District IV, a xerox copy
of which is attached hereto and
<PAGE> 2
- 2 -
made an integral part hereof as Annex "C" (hereinafter referred to as the
"Leased Premises"), and more particularly described as follows:
"A parcel of land (Lot 1 of the consolidation-subdivision
plan, (LRC) Pcs-24430, approved as a non-subdivision project,
being a portion of the consolidation of Lot 1-B-1-B, (LRC)
Psd-123283 & Lot 2-C-2, (LRC) Psd-114654, LRC Rec. Nos. 10766
and 34-915) situated in the Barrio of Sucat & San Dionisio,
Municipality of Taguig, (now Paranaque, Metro Manila (Rizal),
Island of Luzon. Bounded on the NE., points 5 to 7, by Lot
1-B-1-A, (LRC) Psd-123283 (now) Dr. A. Santos Ave., (Sucat Road)
and points 7 to 1, by Lot 2 of the consolidation-subdivision
plan; on the S., points 1 to 2, by Lot 1-A, Psd-44584; and on
the NW., points 2 to 5 by property of Rosendo Salas and Creek:
Beginning at a point marked "1" on plan, being S. 21 deg. 37'W.,
8828.09 m. from BLLN 1, Mun. of Taguig; Rizal; thence N. 86 deg.
13'E., 127.00 m. to point 2; thence N. 11 deg. 31'E., 127.72 m.
to point 3; thence N. 72 deg. 20'E., 27.11 m. to point 4; thence
N. 28 deg. 11'W., 11.88 m. to point 5; thence S. 75 deg. 09'E.,
20.59 m. to point 6; thence S. 71 deg. 10'E., 26.44 m. to point
7; thence S. 14 deg. 45'E., 142.60 m. to the point of beginning;
containing an area of THIRTEEN THOUSAND (13,000) SQUARE METERS,
more or less. All points referred to are indicated on the plan
and are marked on the ground as follows: points 4 to 6, by Old PS
and points 2 & 3 by Old PLS and the rest by P.S. Cyl. Conc. Mons.
15x60 cms.; bearings true; date of the original survey, Feb.
16-23, 1915 & April 12, 1928, and that of the
consolidation-subdivision survey, executed by Rolando J. Kilala,
Geodetic Engineer, on Jan. 20, 1976."
together with all the rights, easements and appurtenances thereto and therewith
usually held and enjoyed, for a term of twenty five (25) years beginning
September 1, 1979 and ending August 31, 2004 and subject to renewal and
extension by mutual agreement as hereinafter provided, at an annual rent of ONE
HUNDRED FIFTY THOUSAND FOUR HUNDRED PESOS (P150,400.00).
The deposit for the rental is the amount of THREE MILLION SEVEN HUNDRED
SIXTY THOUSAND PESOS (P3,760,000.00), receipt
<PAGE> 3
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of which is hereby acknowledged by LESSOR, and the sold amount is applied to the
rental for twenty-five (25) years at the rate of ONE HUNDRED FIFTY THOUSAND FOUR
HUNDRED PESOS (P150,400.00) a year. On the first day of September of each year,
the LESSOR shall be credited from the aforementioned deposit, the amount of one
twenty-fifth (1/25) thereof which is equivalent to ONE HUNDRED FIFTY THOUSAND
FOUR HUNDRED PESOS (P150,400.00).
This Contract of Lease is made upon the foregoing and the following
agreements, covenants, and conditions, all and every one of which LESSOR and
LESSEE agree to keep and perform.
1. Use of Leased Premises. -- LESSEE will use and occupy the leased
premises for its lawful business purposes. LESSEE will comply with any and all
laws, ordinances, rules and regulations of any government authority which are
applicable to the conduct of LESSEE's business on the leased premises.
2. Taxes, Assessments, and Utility Charges. - (a) Real estate taxes during
the effectivity of the period of this Contract of Lease due on the leased
premises and the improvements thereon shall be for the account of LESSEE. Real
estate taxes which accrued or shall accrue before the beginning of the period of
lease shall be for the account of LESSOR.
(b) LESSEE shall pay all charges of electricity, water, sewage disposal and
gas or other fuel consumed upon the leased premises.
3. Insurance. - LESSEE shall procure and maintain all insurance equivalent
to restoration value for its protection against loss of or damage to the leased
premises or any other property of LESSEE situated thereon with copy of the
insurance policy to be furnished
<PAGE> 4
-4-
to LESSOR. Building insurance proceeds shall be used for the restoration of the
damaged or lost property to its condition before the damage or loss occurred.
4. Improvements by the LESSEE. - During the life of this Contract of Lease
and renewals thereof, LESSEE shall have full rights to the continued possession,
enjoyment, use and occupancy of the leased premises as its factory site for
purposes of its manufacturing operations and LESSOR shall take no action to
interfere with LESSEE's possession, enjoyment, use and occupancy. LESSOR hereby
expressly recognizes that except as herein provided, the buildings,
installations and other improvements which will be constructed and found on the
leased premises herein leased to LESSEE are owned solely by LESSEE, and that
LESSOR has no right or claim whatsoever in respect thereto as against LESSEE
during the period of lease. Copies of drawings of the new improvements,
additions and installation which are submitted to government agencies will be
submitted to LESSOR prior to said modifications for information only. LESSEE
shall be allowed at its own expense and without need of prior approval by
LESSOR, to make any reasonable alterations, modifications or improvements upon
the leased premises and to construct, make or place new buildings, installations
or improvements on the leased premises, as LESSEE may in its discretion
determine to be necessary, required, convenient or desirable for the business or
manufacturing operations of LESSEE. It is hereby expressly understood and agreed
that the addition of new buildings, installations or improvements on the leased
premises shall not be a cause for the revision of the rental hereinabove agreed
upon.
<PAGE> 5
-5-
Upon the termination of this Contract of Lease, such alterations,
additions, or improvements shall become the property of LESSOR, except where
other written agreement is made between LESSEE and LESSOR. Plant support
facilities such as, but not limited to deionized water equipment and storage,
air condition compressors (except those which are more than five [5] years
old), air compressors, manufacturing equipment, hot water heaters, power
generators (except those necessary for operation of fire sprinklers) and
controls, and water supply equipment remain as property of LESSEE even after
the termination of this Contract of Lease. LESSOR has the option to purchase
the air condition compressors installed within the last five (5) years of this
Contract of Lease, at LESSEE's original book value based on a fifteen (15) year
straight line depreciation.
5. Liability, Indemnity. - (a) LESSEE shall be liable for any injury or
death of persons and for any loss of or damage to property caused by the
negligent acts or omissions of its agents, employees or invitees. LESSEE shall
indemnify and save LESSOR harmless against any and all liabilities, claims,
demands, actions, costs, and expenses which may be sustained by LESSOR by
reason of the causes for which LESSEE is liable pursuant to this subsection (a).
(b) LESSOR shall be liable for any injury to or death of persons and for
any loss of or damage to property caused by the negligent acts or omissions of
its agents, employees or invitees. LESSOR shall indemnify and save LESSEE
harmless against any and all liabilities, claims, , demands, actions, costs and
expenses which may be sustained by LESSEE by reason of any of the causes for
which LESSOR is liable pursuant to this subsection (b).
<PAGE> 6
-6-
6. Warranties by LESSOR - LESSOR covenants and warrants that it has the
legal title over the land and has legal right to make this lease, that it will
maintain LESSEE in full and exclusive possession of the leased premised, and
that if LESSEE shall perform all the agreements, covenants and conditions
required by this Contract of Lease to be performed by it, LESSEE may freely,
peaceably and quietly occupy and enjoy the leased premises without molestation
or hindrance, lawful or unlawful, of any person whomsoever. During the
lifetime of this Contract of Lease and any extensions and/or renewals thereof,
a three-meter wide road with convenient access to central sewer lines, will be
made available by LESSOR to LESSEE from South Superhighway, Frontage Road, to
said leased premises at reasonable remuneration to be mutually agreed upon in
writing by LESSOR and LESSEE.
7. Action of Public Authorities. - In the event that the leased premises
and/or the buildings, installations and improvements existing thereon, or any
part thereof, or the right to use and occupy the leased premises or the
buildings, installations and improvements thereon, is expropriated and taken
for public or quasi-public use, the compensation received for such taking shall
be given to, allocated and divided between the LESSOR and the LESSEE based upon
LESSOR obtaining interest equal to 1/25 per annum beginning the effective date
of this Contract of Lease of the compensation on the land, buildings,
installations and improvements thereon.
<PAGE> 7
-7-
8. Default by LESSOR/LESSEE. - If LESSOR/LESSEE shall fail to perform
any duty or obligation imposed upon it by this Contract of Lease and such
default continues for a period of thirty (30) days after written notice
thereof has been given by LESSEE/LESSOR, then and in such event LESSEE/LESSOR
may at its option, terminate this lease without prejudice to its right to
recover damages.
9. Assignment, Subletting. - LESSEE shall have the right to assign this
Contract of Lease or to sublet the leased premises, and buildings and
improvements thereon or any parts thereof, provided, however, that no such
assignment or subletting shall relieve LESSEE from its duty to perform fully
all of the agreements, covenants, and conditions set forth in this Contract of
Lease.
10. Assignment by LESSOR. - LESSOR shall not sell, assign or mortgage the
leased premises without previous written thirty (30) day notice to LESSEE.
LESSOR agrees that it will give written notice to any such would be vendee,
assignee or mortgagee of the existence of this Contract of Lease. In the case of
any sale, assignment or mortgage, such sale, assignment or mortgage shall be
subject to the terms and conditions of this Contract of Lease and LESSOR hereby
<PAGE> 8
- 8 -
represents that it shall cause the deed of any sale, assignment or mortgage to
contain a specific provision that the vendee, assignee or mortgagee has
knowledge of this Contract of Lease, that the sale, assignment or mortgage is
subject to its terms and conditions and the latter agrees to be bound by the
same; Provided, however, that during the period and effectivity of this
Contract of Lease, LESSOR hereby guarantees to LESSEE that LESSEE shall and may
lawfully and peaceably occupy and enjoy the leased premises during the entire
term of this Contract of Lease and renewals thereof.
11. Renewal or Extension. - This Contract of Lease may be renewed for
another period of twenty-five (25) years under such terms and conditions as may
be mutually agreed upon by LESSOR and LESSEE, provided that the LESSEE, at
least one hundred fifty (150) days prior to the expiration of the term of this
Contract of Lease, gives the LESSOR written notice of such intention to renew.
On August 31, 2004, the building and improvements, except for equipment
and facilities enumerated in paragraph 4 hereof, shall become the property of
LESSOR.
12. Notice. - (a) Any notice or demand required by the provisions of this
Contract of Lease to be given to LESSOR shall be deemed to have been given
adequately if sent by certified mail to LESSOR at the following address:
FRUEHAUF ELECTRONICS PHILS. CORPORATION
444 T. M. Kalaw, Ermita
Manila
(b) Any notice or demand required by the provisions of this Contract of
Lease to be given to LESSEE shall be deemed to have
<PAGE> 9
-9-
been given adequately if sent by certified mail to LESSEE at both addresses:
ZILOG PHILIPPINES, INC. ZILOG, INC.
Ptldera Area, CAA Compound 10460 Bubb Road
MIA, Metro Manila Cupertino, California
Philippines U. S. A.
(c) Either party shall have the right to change its address as above
designated by giving to the other party thirty (30) days notice of its intention
to make such change and of the substituted address at which any notice or
demand may be directed to it.
13. Covenants to Bind Respective Parties. - This Contract of lease and all
of the agreements, covenants, and conditions contained herein shall be binding
upon LESSOR and LESSEE and upon their respective heirs, executors,
administrators, successors, and assigns.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused these presents to be
executed by their duly authorized officers on the day and year first above
written.
FRUEHAUF ELECTRONICS
PHILS. CORPORATION ZILOG PHILIPPINES, INC.
By: /s/ ANTONIO K. LITONJUA By: /s/ ROBERT WALLACE
-------------------------- ----------------------------
ANTONIO K. LITONJUA ROBERT WALLACE
President President/General Manager
SIGNED IN THE PRESENCE OF:
[SIG]
--------------------------
[SIG]
--------------------------
<PAGE> 1
EXHIBIT 10.2
INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made and entered into this 3rd day of March, 1981, by and between
M.J.H.M. Partnership II, a California general partnership (hereinafter
"Landlord") and ADDA Corporation, a California Corporation (hereinafter
"Tenant"). For and in consideration of the rental and of the covenants and
agreements hereinafter set forth to be kept and performed by the Tenant,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises herein described for the term, at the rental and subject to and upon
all of the terms, covenants and agreements hereinafter set forth.
1. Premises
1.1 Description. Landlord hereby leases to Tenant and Tenant hereby rents
from Landlord those certain Premises, crosshatched on Exhibit A, located in the
City of Campbell, County of Santa Clara, California, commonly known as 210-220
Hacienda Avenue and 222-236 Hacienda Avenue, Campbell, Calif. 95008 and
described as approximately 80,000 square feet of office and manufacturing space.
The Premises include the underlying realty and the improvements or so much
thereof as Tenant is entitled to occupy or use under this Lease.
1.2 Work of Improvement. The obligations of Landlord to perform the work
and supply material and labor to prepare the Premises for occupancy are set
forth in detail in Exhibit B. Landlord shall expend all funds and do all acts
required of them in Exhibit B and shall have the work performed promptly and
diligently in a first-class workmanlike manner.
2. Term
2.1 Term. The term of this lease shall be for five (5) years commencing
August 1, 1981 and ending on July 31, 1986 unless sooner terminated pursuant to
this lease, or unless extended by reason of exercise of the Option to Extend
provided in Paragraph 20.
2.2 Delay in Commencement. Tenant agrees that in the event of the
inability of Landlord for any reason to deliver possession of the Premises to
Tenant on the commencement date set forth in Section 2.1 Landlord shall not be
liable for any damage thereby nor shall such inability affect the validity of
this Lease or the obligations of Tenant hereunder, but in such case the Tenant
shall not be obligated to pay rent or other monetary sums until possession of
the Premises is tendered to Tenant; provided that if the delay in delivery of
possession exceeds thirty (30) days, then the expiration date of the term of
the Lease shall be extended by the period of time computed from the scheduled
commencement date to the date possession is tendered. In the event Landlord
shall not have delivered possession of the Premises within four (4) months from
the scheduled commencement date, then Tenant at its option to be exercised
within thirty (30) days after the end of said four (4) month period may
terminate this Lease and upon Landlord's return of any monies previously
deposited by Tenant the parties shall have no further rights or liabilities
toward each other. If Tenant occupies the Premises prior to said commencement
date, such occupancy shall be subject to all provisions hereof, such occupancy
shall not advance the termination date, and Tenant shall pay rent for such
period at the initial monthly rates as set forth below.
2.3 Commencement After Construction. If Landlord is obligated under
Section 1.2 and Exhibit B to perform construction or remodeling work, then
possession shall not be deemed tendered and the term of this Lease shall not
commence until the first to occur of the following:
(a) 0 days after a Certificate of Occupancy is granted by the proper
governmental agency or, if no Certificate of Occupancy be issued by any local
agency, then the same number of days after certification by Landlord's
architect or contractor that the Landlord's construction work has been
completed; or
(b) Upon the Tenant's opening for business.
2.4 Acknowledgement of Commencement Date. In the event the commencement
date of the term of the Lease is delayed beyond the thirty (30) days described
in Section 2.2 or if the commencement date is to be determined pursuant to
Section 2.3, then Landlord and Tenant shall execute a written acknowledgement
of the date of commencement.
3. Rent.
Tenant shall pay to Landlord as rent for the Premises in advance on the
first day of each calendar month of the term of this Lease without deduction,
offset, prior notice or demand, in lawful money of the United States, the sum
of Sixty Eight Thousand and No/100ths Dollars * ($68,000.00*). If the
commencement date is not the first day of a month, or if the Lease termination
date is not the last day of a month, a prorated monthly installment shall be
paid at the then current rate for the fractional month during which the Lease
commences and/or terminates.
Concurrently with Tenant's execution of this Lease, Tenant shall pay to
Landlord the sum of Sixty Eight Thousand and No/100ths Dollars ($68,000.00), as
rent for first month.
4. Security Deposit.
Concurrently with Landlord's commencement on construction of interior
improvements, Tenant shall deposit with Landlord the sum of Sixty Eight Thousand
and No/100ths Dollars ($68,000.00). Said sum shall be held by Landlord as a
security deposit for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provisions of
this Lease, including but not limited to the provisions relating to the payment
of rent and any of the monetary sums due herewith, Landlord may (but shall not
be required to) use, apply or retain all or any part of this security deposit
for the payment of any other amount which Landlord may spend or become
obligated to spend by reason of Tenant's default.
* (See Paragraph 20.)
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<PAGE> 2
10.2
[ILLEGIBLE] original amount. Tenant's failure to do (word blocked out) be a
material breach of this Lease. Landlord shall (word blocked out) required to
keep this security deposit separate from its general funds and Tenant shall not
be entitled to interest on such deposit. If Tenant shall fully (word blocked
out)thfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Tenant (or at
Landlord's option to the last assignee of Tenant's interests hereunder; at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said deposit to Landlord's successor in interest, whereupon Tenant
agrees to release Landlord from all liability for the return of such deposit or
the accounting therefore. Tenant hereby agrees not to look to the Mortgagee, as
mortgagee, mortgagee in possession or successor in title to the property, for
accountability for any security deposit required by the landlord hereinunder,
unless said sums have actually been received by said mortgagee as security for
the tenant's performance of this lease. If at any time the rent is increased,
the security deposit shall be increased by the same amount.
5. Taxation
5.1 Payment of Real Property Taxes. Tenant shall pay all real property
taxes levied against the Premises during the term of this Lease. Landlord shall
provide tenant with a written statement setting forth the amount of said real
property taxes within five (5) days of Landlord's receipt of same and payment of
said taxes shall be made by Tenant not later than ten (10) days prior to the
date such taxes become delinquent.
5.2 Proration; Joint Assessment. In the event any such real property
taxes paid by Tenant cover any period of time prior to commencement of the
expiration of the term of this Lease. Tenant's share of such taxes shall be
equitably prorated to cover only the period of time within the fiscal tax year
during which this Lease is in effect, and Landlord shall reimburse Tenant to the
extent required. With respect to any assessments which may be levied against or
upon the Premises or which under the laws then in force may be evidenced by
improvement or other bonds or may be paid in annual installments only the amount
of such annual installment (with appropriate proration for any partial year) and
interest due thereon shall be included within the computation of the annual
taxes and assessments levied against the Premises. In the event the Premises are
not separately assessed, Tenant's liability shall be an equitable proportion of
the real property taxes for all of the land and improvements included within the
tax parcel assessed such proportion to be determined by Landlord from the
respective valuations assigned in the Assessor's worksheets or such other
information as may be reasonably available to Landlord, with Landlord's
reasonable determination thereof in good faith to be conclusive.
5.3 Definition of "Real Property Tax". As used in this Lease, the term
"real property tax" shall include any form of assessment, levy, penalty or tax
(other than inheritance, estate, net income or franchise taxes). Imposed by any
authority having the direct or indirect power to tax including any city, county,
state or federal government or any school, agricultural, lighting, drainage or
other improvement district thereof, whether such tax is (a) upon allocation to
or measured by the area of the Premises or the rental payable hereunder,
including without limitation any gross income tax or excise tax levied by the
State, any political subdivision thereof, city or Federal Government with
respect to the receipt of such rental, or (b) upon or with respect to the
possession leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion thereof or (c) upon or
measured by the value of Tenant's personal property, equipment or fixtures
located in the Premises; or (d) upon this transaction or any document to which
Tenant is a party creating or transferring an interest or an estate in the
Premises; or (e) whether or not now customary or within the contemplation of the
parties.
5.4 Personal Property Taxes.
(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere. When
possible, tenant shall cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the real
property of Landlord.
(b) If any of Tenant's personal property shall be assessed with
Landlord's real property, Tenant shall pay Landlord the taxes attributable to
Tenant within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Tenant's property.
6. Use.
6.1 Use. The Premises shall be used and occupied by Tenant for only the
following purposes and for no other purposes whatsoever without obtaining the
prior written consent of Landlord: manufacturing, assembly and sales of
electronic components and administrative and sale offices.
6.2 Suitability. If the Premises are completed as of the date of
execution hereof, then Tenant by execution of this Lease, shall be deemed to
have accepted the Premises in the condition existing as of the date of execution
and in any event this Lease shall be subject to all applicable zoning ordinances
and to any municipal, county and state laws and regulations governing and
regulating the use of the Premises. Tenant acknowledges that neither Landlord
nor Landlord's agent has made any representation or warranty as to the
suitability of the Premises for the conduct of Tenant's business.
6.3 Uses Prohibited.
(a) Tenant shall not do or permit anything to be done in or about
the Premises which will increase the existing rate of insurance upon the
Premises (unless Tenant shall pay any increased premium as a result of such use
or acts) or cause the cancellation of any insurance policy covering said
Premises or any building of which the Premises may be a part, nor shall Tenant
sell or permit to be kept, used or sold in or about said Premises any articles
which may be prohibited by a standard form policy of fire insurance.
(b) Tenant shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of any building of which the Premises may be a part
or injure or annoy them or use or allow the Premises to be used for any unlawful
or objectionable purpose, nor shall Tenant cause, maintain or permit any
nuisance in, on or about the Premises. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises.
(c) Tenant shall not use the Premises or permit anything to be done
in or about the Premises which will in anyway conflict with any law [illegible]
zoning restriction, ordinance or governmental rule or regulation or requirements
or duly constituted public authorities now in force or which may hereafter be
enacted or promulgated. Tenant shall at its sole cost and expense promptly
comply with all laws, statutes, ordinances and governmental rules, regulations,
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises. The judgement of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any law, statute, ordinance or
governmental rule, regulation or requirement, shall be conclusive of that fact
as between Landlord and Tenant.
7. Utilities.
Tenant shall pay prior to delinquency for all water, gas, heat, light,
power, telephone, sewage, air conditioning and ventilating, scavenger,
janitorial, landscaping and all other materials and utilities supplied to the
Premises. If any such services are not separately metered to Tenant, Tenant
shall pay a reasonable
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<PAGE> 3
proportion of all charges which are jointly mete [ILLEGIBLE] the determination
to be made by landlord, and payment to be made by Tenant within ten (10) days of
receipt of a statement for such charges.
8. MAINTENANCE AND REPAIRS, ALTERATIONS AND ADDITIONS.
8.1 LANDLORD'S OBLIGATIONS. Subject to the provisions of Section 13 and
except or damage caused by any negligent or intentional act of omission of
Tenant and Tenant's agents, employees or invitees, Landlord, at Landlord's
expense, shall keep in good order, condition and repair the foundations,
exterior walls and the exterior roof of the Premises. Landlord shall not,
however, be obligated to paint such exterior, nor shall Landlord be required to
maintain the interior surface of exterior walls, windows, doors or plate glass.
Landlord shall have no obligation to make repairs under this Paragraph 8.1 until
a reasonable time after receipt of written notice of the need for such repairs.
Tenant expressly waives the benefits of any statute now or hereafter in effect
which would otherwise afford Tenant the right to make repairs at Landlord's
expense or to terminate this Lease because of Landlord's failure to keep the
Premises in good order, condition and repair.
8.2 TENANT'S OBLIGATIONS.
(a) Subject to the provisions of Sections 13 and 8.1, Tenant, at
Tenant's expense, shall keep in good order, condition and repair the Premises
and every part thereof, regardless of whether the damaged portion of the
Premises or the means of repairing the same are accessible to tenant, including
without limitation thereto, all plumbing, heating, air conditioning,
ventilating, electrical and lighting facilities and equipment within the
Premises and all sidewalks, landscaping, driveways, parking lots, fences and
signs located in the areas which are adjacent to and included with the
Premises.
(b) Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Premises in the same condition as received, broom clean,
ordinary wear and tear and damage by fire, earthquake, act of God or the
elements alone excepted. Tenant, at its sole cost and expense, agrees to repair
any damage to the Premises caused by or in connection with the removal of any
articles of personal property, business or trade fixtures, machinery,
equipment, cabinetwork, furniture, movable partition, or permanent improvements
or addition, including without limitation thereto, repairing the floor and
patching and painting the walls where required by Landlord to Landlord's
reasonable satisfaction. Tenant shall indemnify the Landlord against any loss
or ability resulting from delay by Tenant in so surrendering the Premises,
including without limitation, any claims made by any succeeding tenant founded
on such delay.
(c) In the event Tenant fails to perform Tenant's obligations under
this Section 8, Landlord shall give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant fails to do the work
and diligently prosecute it to completion, then Landlord shall have the right
(but not the obligation) to do such acts and expend such funds at the expense
of Tenant as are reasonably required to perform such work. Any amount so
expended by Landlord shall be paid by Tenant promptly after demand with
interest at ten percent (10%) per annum from the date of such work. Landlord
shall have no liability to Tenant for any damage, inconvenience or interference
with the use of the Premises by Tenant as a result of performing any such work.
8.3 LANDLORD'S RIGHTS. In the event Tenant fails to perform Tenant's
obligations under this Section 8, Landlord shall give Tenant such notice to do
such acts as are reasonably required to so maintain the Premises; if Tenant
shall fail to commence such work and diligently prosecute it to completion,
then Landlord shall have the right but not the obligation to do such acts and
expend such funds at the expense of Tenant as are reasonably required to
perform such work. Any amount so expended by Landlord shall be paid by Tenant
promptly after demand with interest at ten percent (10%) per annum from the
date of such work Landlord shall have no liability to Tenant for any damage,
inconvenience or interference with the use of the Premises by Tenant as a
result of performing any such work.
8.4 ALTERATIONS AND ADDITIONS.
(a) Tenant shall not, without Landlord's prior written consent, make
any alterations, additions, improvements or utility installations in, on or
about the Premises, except for non-structural alterations not exceeding $2500
in cost. As used in this Section 8.4, the term "utility installations" shall
include ducting, power panels, fluorescent fixtures, space heaters, conduit and
wiring. As a condition to giving such consent, Landlord may require that Tenant
agree to remove any such alterations, additions, improvements or utility
installations at the expiration of the term and to restore the Premises to
their prior condition. As a further condition to giving such consent, Landlord
may require Tenant to provide Landlord, at Tenant's sole cost and expense, a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such improvements, to insure Landlord against any liability
for mechanics and materialmen's liens and to insure completion of the work.
(b) Unless Landlord requires their removal as set forth in Paragraph
8.4(a), all alterations, additions, improvements and utility installation
(whether or not such utility installations constitute trade fixtures of
Tenant), which may be made on the Premises, shall at the expiration or earlier
termination of the Lease become the property of Landlord and remain upon and be
surrendered with the Premises. Notwithstanding the provisions of this Paragraph
8.4(b) personal property, business and trade fixtures, cabinetwork, furniture,
movable partitions, machinery and equipment, other than that which is affixed
to the Premises so that it cannot be removed without material damage to the
Premises, shall remain the property of Tenant and may be removed by Tenant
subject to the provisions of Paragraph 8.2, at any time during the term of this
Lease when Tenant is not in default.
9. ENTRY BY LANDLORD.
Landlord and Landlord's agents shall have the right at reasonable times to
enter the Premises to inspect the same or to maintain or repair, make
alterations or additions to the Premises or any portion thereof or to show the
Premises to prospective purchasers, tenants or lenders. Landlord may, at any
time, place on or about the Premises any ordinary "for sale" signs; Landlord
may at any time during the last ninety (90) days of the term of the Lease place
on or about the Premises any ordinary "for lease" signs. Tenant hereby waives
any claim for abatement of rent or for damages for any injury or inconvenience
to or interference with Tenant's business, any loss of occupancy or quiet
enjoyment of the Premises, and any other loss occasioned thereby.
10. LIENS.
Tenant shall keep the Premises and any building of which the Premises are
a part free from any liens arising out of work performed, materials furnished
or obligations incurred by Tenant and shall indemnify, hold harmless and defend
Landlord from any liens and encumbrances arising out of any work performed or
materials furnished by or at the direction of Tenant. In the event that Tenant
shall not, within twenty (20) days following the imposition of any such lien
cause such lien to be released of record by payment or posting of a proper
bond. Landlord shall have, in addition to all other remedies provided herein
and by law, the right, but not the obligation, to cause the same to be released
by such means as it shall deem proper, including payment of the claim giving
rise to such lien. All such sums paid by Landlord and all expenses incurred by
it in connection therewith including attorney's fees and costs shall be payable
to Landlord by Tenant on demand with interest at the rate of ten percent (10%)
per annum. Landlord shall have the right at all times to post and keep posted
on the Premises any notices permitted or required by law, or which Landlord
shall deem proper, for the protection of Landlord and the Premises, and any
other party having an interest therein, from mechanics' and materialmen's
liens, and Tenant shall give to landlord at least ten (10) business days prior
written notice of the expected date of commencement of any work relating to
alterations or additions to the Premises.
11. INDEMNITY.
11.1 INDEMNITY. Tenant shall indemnify and hold Landlord harmless from and
against any and all claims of liability for any injury or damage to any person
or property arising from Tenant's use of the Premises, or from the conduct of
Tenant's business, or from any activity, work or thing done, permitted
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or suffered by Tenant in or about the Premises or elsewhere. Tenant shall
further indemnify and hold Landlord harmless from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under this Lease, or arising from any negligence
of Tenant or Tenant's agents, contractors or employees, and from and against all
costs attorney's fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon. In the event any action
or proceeding is brought against Landlord by reason of any such claim. Tenant
upon notice from Landlord shall defend same at Tenant's expense or counsel
satisfactory to Landlord. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property or injury to persons,
in, upon or about the Premises arising from any cause and Tenant hereby waives
all claims in respect thereof against Landlord.
11.2 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be liable
for injury to Tenant's business or loss of income therefrom or for damage which
may be sustained by the person, goods, wares, merchandise or property of Tenant,
its employees, invitees, customers, agents or contractors or any other person in
or about the Premises, caused by or resulting from fire, steam, electricity,
gas, water or rain, which may leak or flow from or into any part of the
Premises, or from the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures of the same, whether the said damage or injury results from conditions
arising upon the Premises or upon other portions of the building of which the
Premises are a part, or from other sources or places and regardless of whether
the cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant. Landlord shall not be liable for any damages arising
from any act or neglect of any other tenant, if any, of the building in which
the Premises is located.
12. INSURANCE.
12.1 LIABILITY INSURANCE. Tenant shall, at Tenant's expense, procure and
maintain at all times during the term of this Lease a policy of comprehensive
public liability insurance insuring Landlord and Tenant against any liability
arising out of the ownership, use, occupancy, or maintenance of the Premises and
appurtenant areas. Such insurance shall at all times be in an amount of not less
than $300,000.00 for injury to or death of any one person in any one accident or
occurrence and in an amount of not less than $500,000.00 for injury to or death
of more than one person in any one accident or occurrence and in amount of not
less than $50,000.00 for liability for property damage. The limits of such
insurance shall not limit the liability of Tenant. If the Premises are part of a
larger property, said insurance shall have a Landlord's Protective Liability
endorsement attached hereto. All insurance required hereunder shall be with
companies rated AAA or better in "Best's Insurance Guide". Tenant shall deliver
to Landlord certificates of insurance of evidencing the existence and amounts of
such insurance with loss payable clauses satisfactory to Landlord, provided that
in the event Tenant fails to procure and maintain such insurance. Landlord may
(but shall not be required to) procure same at Tenant's expense after ten (10)
days prior written notice. No such policy shall be cancellable or subject to
reduction of coverage or other modification except after thirty (30) days prior
written notice to Landlord by the insurer. All such policies shall be written as
primary policies, not contributing with and not in excess of coverage which the
Landlord may carry. Tenant shall, within twenty (20) days prior to the
expiration of such policies, furnish Landlord with renewals or binders or
Landlord may order such insurance and charge the cost to Tenant, which amount
shall be payable by Tenant upon demand. Tenant shall have the right to provide
such insurance coverage pursuant to blanket policies obtained by Tenant provided
such blanket policies expressly afford coverage to the Premises and to Tenant as
required by this Lease.
12.2 PROPERTY INSURANCE. Landlord shall, at Tenant's expense, procure and
maintain at all times during the term of this Lease a policy or policies of
insurance covering loss or damage to the Premises in the amount of the full
replacement value thereof (exclusive of Tenant's trade fixtures and equipment)
providing protection against all perils included within the classification of
the fire, extended coverage, vandalism, malicious mischief, sprinkler leakage
and special extended peril (all-risk). Tenant shall pay such premium to Landlord
within fifteen (15) days after receipt by Tenant of a copy of the premium
statement or other reasonably satisfactory evidence of the amount due, which
shall include the method of calculation of Tenant's share thereof if the
insurance covers other improvements than the Premises. If the term of the Lease
does not expire concurrently with the expiration of the period covered by the
insurance. Tenant's liability for premium increases shall be prorated on an
annual basis. See Paragraph #23.
12.3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive any and
all rights of recovery against the other or against the officers, employees
agents and representatives of the other, on account of loss or damage
occasioned to such waiving party of its property or the property of others
under its control caused by fire or any of the extended coverage risks
described above to the extent that such loss or damage is insured against under
any insurance policy in force at the time of such loss or damage. The insuring
party shall, upon obtaining the policies of insurance required under this Lease,
give notice to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease.
13. DAMAGE OR DESTRUCTION.
13.1 PARTIAL DAMAGE -- INSURED. In the event improvements on the Premises
are damaged by any casualty which is covered under an insurance policy required
to be maintained to Section 12.2, then Landlord shall repair such damage as soon
as reasonably possible and this Lease shall continue in full force and effect.
13.2 PARTIAL DAMAGE -- UNINSURED. In the event the improvements on the
Premises are damaged, except by a negligent or willful act or omission of
Tenant, by any casualty not covered under an insurance policy required to be
maintained pursuant to Section 12.2, then Landlord may, at Landlord's option,
either (a) repair such damage as soon as reasonably possible at Landlord's
expense, in which event this Lease shall continue in full force and effect, or
(b) give written notice to Tenant within thirty (30) days after the date of
occurrence of such damage of Landlord's intention to cancel and terminate this
Lease as of the date of the occurrence of the damage. In the event Landlord
elects to terminate this Lease pursuant to this Section 13.2, Tenant shall have
the right within ten (10) days after receipt of the required notice to notify
Landlord in writing of Tenant's intention to repair such damage at Tenant's
expense, without reimbursement from Landlord, in which event this Lease shall
continue in full force and effect, and Tenant shall proceed to make such repairs
as soon as reasonably possible. If Tenant does not give such notice within ten
(10) day period, this Lease shall be cancelled and terminated as of the date of
the occurrence of such damage. See Paragraph #24.
11.3 TOTAL DESTRUCTION. If the Premises are totally destroyed during the
term of this Lease from any cause whether or not covered by the insurance
required under Section 12.2 (including any destruction required by any
authorized public authority), this Lease shall automatically terminate as of
the date of such total destruction.
13.4 DAMAGE NEAR END OF THE TERM. See Paragraph #25.
13.5 LANDLORD'S OBLIGATION. The Landlord shall not be required to repair
any injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, office fixtures, partitions,
railings, ceilings, floor covering, equipment, machinery or fixtures or any
other improvements or property installed in the Premises by Tenant or at the
direct or indirect expense of Tenant, with the exception of those improvements
installed by Tenant pursuant to the additional improvement allowance provided
under Exhibit "B" attached hereto. Tenant shall be required to restore or
replace same in the event of damage.
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13.6 ABATEMENT OF RENT: TENANT'S REMEDIES
(a) If the Premises are partially destroyed or damaged and
Landlord or Tenant repairs them pursuant to this Lease, the rent payable
hereunder for the period during which such damage and repair continues shall be
abated in proportion to the extent to which Tenant's use of the Premises is
impaired. Except for abatement of rent, if any, Tenant shall have no claim
against Landlord for any damage suffered by reason of any such damage,
destruction or restoration.
(b) If Landlord shall be obligated to repair or restore the
Premises under this Section 13 and shall not commence such repair or
restoration within ninety (90) days after such obligation shall accrue, Tenant
at Tenant's option may cancel and terminate this Lease by written notice to
Landlord at any time prior to the commencement of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
13.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Section 13, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Tenant to Landlord. Landlord
shall, in addition, return to Tenant so much of Tenant's security deposit as
has not theretofore been applied by Landlord.
14. CONDEMNATION.
(a) If the Premises or any portion thereof are taken under the power of
eminent domain, or sold by Landlord under the threat of the exercise of said
power (all of which is herein referred to as "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever occurs first. If more than ten percent (10%) of
the floor area of any buildings on the Premises, or more than twenty-five (25%)
of the land area of the Premises not covered with buildings, is taken by
condemnation, either Landlord or Tenant may terminate this Lease, as of the
date the condemning authority takes possession, by notice in writing of such
election within twenty (20) days after Landlord shall have notified Tenant of
the taking, or in the absence of such notice then within twenty (20) days after
the condemning authority shall have taken possession.
(b) If this Lease is not terminated by either Landlord or Tenant then
it shall remain in full force and effect as to the portion of the Premises
remaining, provided the rent shall be reduced in the proportion that the floor
area of the buildings taken within the Premises bears to the total floor area
of all buildings located on the Premises. In the event this Lease is not so
terminated then Landlord agrees, at Landlord's sole cost, to restore the
Premises to a complete unit of like quality and character as existed prior to
the condemnation as soon as reasonably possible. All awards for the taking of
any part of the Premises or any payment made under the threat of the exercise
of power of eminent domain shall be the property of Landlord, whether made as
compensation for diminution of value of a leasehold or for the taking of the
fee or as severance damages; provided, however, that Tenant shall be entitled
to any award for loss of or damage to Tenant's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Landlord shall, to the extent of severance damages received
by Landlord in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Tenant has been
reimbursed therefor by the condemning authority. Tenant shall pay any amount in
excess of such severance damages required to complete such repair.
15. ASSIGNMENT & SUBLETTING.
15.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate or encumber this Lease or any interest therein,
and shall not sublet the Premises or any part thereof, without the prior
written consent of Landlord and any attempt to do so without such consent being
first had and obtained shall be wholly void and shall constitute a breach of
this Lease. In lieu of consent, Landlord may, at Landlord's option, elect to
terminate this lease thirty (30) days after the proposed effective date of
proposed assignment or subletting.
15.2 REASONABLE CONSENT. If Tenant complies with the following
conditions, landlord shall not unreasonably withhold its consent to the
subletting of the Premises or any portion thereof. Tenant shall submit in
writing to Landlord: (a) the name and legal composition of the proposed
subtenant; (b) the nature of the proposed subtenant's business to be carried on
in the Premises; (c) the terms and provisions of the proposed sublease;
(d) such reasonable financial information as Landlord may request concerning the
proposed subtenant.
15.3 NO RELEASE OF TENANT. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligation to be performed by
the Tenant under this Lease, whether occurring before or after such consent,
assignment or subletting. The consent by Landlord to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other assignment or subletting. The acceptance
of rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any assignment,
subletting or other transfer. Consent to one assignment, subletting or other
transfer shall not be deemed to constitute consent to any subsequent
assignment, subletting or transfer.
16. SUBORDINATION.
16.1 SUBORDINATION. This Lease at Landlord's option shall be subject and
subordinate to all ground or underlying leases which now exist or may hereafter
be executed affecting the Premises or the land upon which the Premises are
situated or both, and to the lien of any mortgages or deeds of trust in any
amount or amounts whatsoever now or hereafter placed on or against the land or
improvements or either thereof, of which the Premises are a part, or on or
against Landlord's interest or estate therein, or on or against any ground or
underlying lease, without the necessity of the execution and delivery of any
further instruments on the part of Tenant to effectuate such subordination. If
any mortgagee, trustee or ground lessor shall elect to have this Lease prior to
the lien of its mortgage, deed of trust or ground lease, and shall given
written notice thereof to Tenant, this Lease shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease is dated prior or
subsequent to the date of said mortgage, deed of trust or ground lease or the
date of the recording thereof.
16.2 SUBORDINATION AGREEMENTS. Tenant covenants and agrees to execute
and deliver upon demand without charge therefore, such further instruments
evidencing such subordination of this Lease to such ground or underlying leases
and to the lien of any such mortgages or deeds of trust as may be required by
Landlord. Tenant hereby appoints Landlord as Tenant's attorney-in-fact,
irrevocably, to execute and deliver any such agreements, instruments, releases
or other documents.
16.3 QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
upon Tenant paying rent and other monetary sums due under the Lease and
performing its covenants and conditions, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises for the term, subject however to the
terms of the Lease and of any of the aforesaid ground leases, mortgages or
deeds of trust described above.
16.4 ATTORNMENT. In the event any proceedings are brought for default
under any ground or underlying lease or in the event of foreclosure or the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, the Tenant shall attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease; provided said purchaser expressly agrees in writing to be bound by
the terms of the Lease.
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17. DEFAULT; REMEDIES.
17.1 DEFAULT. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant.
(a) Any failure by Tenant to pay the rent or any other monetary sums
required to be paid hereunder (where such failure continues for three (3) days
after written notice thereof by Landlord to Tenant);
(b) The abandonment or vacation of the Premises by Tenant;
(c) A failure by Tenant to observe and perform any other provision of
this Lease to be observed or performed by Tenant where such failure continues
for twenty (20) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of such default is such that the same
cannot reasonably be cured within such twenty (20) day period. Tenant shall not
be deemed to be in default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion;
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors, the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a petition for reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days),
the appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days or the
attachment execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
17.2 REMEDIES. In the event of any such material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice and demand
and without limiting Landlord in the exercise of any right or remedy at law or
in equity which Landlord may have by reason of such default or breach.
(a) Maintain this Lease in full force and effect and recover the rent
and other monetary charges as they become due, without terminating Tenant's
right to possession, irrespective of whether Tenant shall have abandoned the
Premises. In the event Landlord elects to not terminate the Lease, Landlord
shall have the right to attempt to re-let the Premises at such rent and upon
such conditions and for such a term, and to do all acts necessary to maintain or
preserve the Premises as Landlord deems reasonable and necessary without being
deemed to have elected to terminate the Lease including removal of all persons
and property from the Premises, such property may be removed and stored in a
public warehouse or elsewhere, at the cost of and for the account of Tenant. In
the event any such re-letting occurs, this Lease shall terminate automatically
upon the new Tenant taking possession of the Premises. Notwithstanding that
Landlord fails to elect to terminate the Lease initially, Landlord at any time
during the term of this Lease may elect to terminate this Lease by virtue of
such previous default by Tenant.
(b) Terminate Tenant's right to possession by any lawful means, in
which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event Landlord shall be entitled
to recover from Tenant all damages incurred by Landlord by reason of Tenant's
default including without limitation thereto, the following: (i) The worth at
the time of award of any unpaid rent which had been earned at the time of such
termination; plus (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that is proved could have been
reasonably avoided; plus (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that is proved could be reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; plus (v) at Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
applicable state law. Upon any such re-entry Landlord shall have the right to
make any reasonable repairs, alterations or modifications to the Premises, which
Landlord in its sole discretion deems reasonable and necessary. As used in
subparagraph (i) above, the "worth at the time of awarded" is computed by
allowing interest at the rate of ten percent (10%) per annum from the date of
default. As used in subparagraphs (ii) and (iii) the "worth at the time of
award" is computed by discounting such amount at the discount rate of the U.S.
Federal Reserve Bank at the time of award plus one percent (1%). The term
"rent," as used in this Section 17, shall be deemed to be and to mean the rent
to be paid pursuant to Section 3 and all other monetary sums required to be paid
by Tenant pursuant to the terms of this Lease.
17.3 LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent and other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include but are not limited to
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
ten percent (10%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
17.4 DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time but
in no event later than thirty (30) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation,
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for performance, then Landlord shall not be
in default if Landlord commences performance within such thirty-day period and
thereafter diligently prosecutes the same to completion.
18. MISCELLANEOUS.
18.1 ESTOPPEL CERTIFICATE.
(a) Tenant shall at any time upon not less than ten (10) days' prior
written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults, if any, are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant (i) that this Lease is in full force and effect
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance and (iii) that not more than
one month's rent has been paid in advance.
(c) If Landlord desires to finance or refinance said Premises, or any
part thereof, Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be reasonably required by
such lender. Such statements shall include the past three years financial
statements of Tenant. All such financial statements shall be received by
Landlord in confidence and shall be used only for the purpose herein set forth.
18.2 TRANSFER OF LANDLORD'S INTEREST. In the event of a sale or conveyance
by Landlord or Landlord's interest in the Premises other than a transfer for
security purposes only, Landlord shall be relieved from and after the date
specified in such notice of transfer of all obligations and liabilities accruing
thereafter on the part of the Landlord, provided that any funds in the hands of
Landlord at the time of transfer in which Tenant has an interest, shall be
delivered to the
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successor of Landlord. This Lease shall not be terminated by any such sale and
Tenant agrees to attorn to the purchaser or assignee provided all Landlord's
obligations hereunder are assumed in writing by the transferee.
18.3 CAPTIONS; ATTACHMENTS; DEFINED TERMS.
(a) The captions of the paragraphs of this Lease are for
convenience only and shall not be deemed to be relevant in resolving any
question of interpretation or construction of any section of this Lease.
(b) Exhibits attached hereto, and addendums and schedules
initialed by both the parties, are deemed by attachment to constitute part of
this Lease and are incorporated herein.
(c) The words "Landlord" and Tenant", as used herein, shall
include the plural as well as the singular. Words used in neuter gender include
the masculine and feminine and words in the masculine or feminine gender
include the neuter. If there be more than one Landlord or Tenant, the
obligations hereunder imposed upon Landlord or Tenant shall be joint and
several. If the Tenants are husband and wife, the obligations shall extend
individually to their sole and separate property as well as to their community
property. The term "Landlord" shall mean only the owner or owners at the time
in question of the fee title or a tenant's interest in a ground lease of the
Premises. The obligations contained in this Lease to be performed by Landlord
shall be binding on Landlord's successors and assigns only during their
respective periods of ownership.
18.4 ENTIRE AGREEMENT. This instrument along with any exhibits and
attachments hereto constitutes the entire agreement between Landlord and Tenant
relative to the Premises and this Agreement and the exhibits and attachments may
be altered, amended or revoked only by an instrument in writing signed by both
Landlord and Tenant. Landlord and Tenant agree hereby that all prior or
contemporaneous oral agreements between and among themselves and their agents
or representatives relative to the leasing of the Premises are merged in or
revoked by this Agreement.
18.5 SEVERABILITY. If any term or provision of this Lease shall, to
any extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law.
18.6 COSTS OF SUIT.
(a) If Tenant or Landlord shall bring any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorney's fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgement.
(b) Should Landlord, without fault on Landlord's part, be made
a party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using the Premises by
license of Tenant, or for the foreclosure of any lien for labor or material
furnished to or for Tenant or any such other person or otherwise arising out of
or resulting from any act or transaction of Tenant or of any such other person,
Tenant covenants to save and hold Landlord harmless form any judgment rendered
against Landlord or the premises or any part thereof, and all costs and
expenses, including reasonable attorneys fees, incurred by Landlord in or in
connection with such litigation.
18.7 TIME; JOINT AND SEVERAL LIABILITY. Time is of the essence of
this Lease and each and every provision hereof, except as to the conditions
relating to the delivery of possession of the premises to Tenant. All the
terms, covenants and conditions contained in this lease to be performed by
either party, if such party shall consist of more than one person or
organization, shall be deemed to be joint and several, and all rights and
remedies of the parties shall be cumulative and non-exclusive of any other
remedy at law or in equity.
18.8 BINDING EFFECT: CHOICE OF LAW. The parties hereto agree that
all the provisions hereof are to be construed as both covenants and conditions
as though the words importing such covenants and conditions were used in each
separate paragraph hereof, subject to any provisions hereof restricting
assignment or subletting by Tenant and subject to Section 18.2, all of the
provisions hereof shall bind and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns. This
Lease shall be governed by the laws of the state of California.
18.9 WAIVER. No covenant, term or condition or the breach thereof
shall be deemed waived, except by written consent of the party against whom the
waiver is claimed, and any waiver or the breach of any covenant, term or
condition shall not be deemed to be a waiver of any preceeding or succeeding
breach of the same or any other covenant, term or condition. Acceptance by
Landlord of any performance by Tenant after the time the same shall have become
due shall not constitute a waiver by Landlord of the breach or default of any
covenant, term or condition unless otherwise expressly agreed to by Landlord in
writing.
18.10 SURRENDER OF PREMISES. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and
shall at the option of the Landlord, terminate all or any existing sublease or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies.
18.11 HOLDING OVER. If Tenant remains in possession of all or any
part of the Premises after the expiration of the term hereof, with or without
the express or implied consent of Landlord, such tenancy shall be from month to
month only, and not a renewal hereof or an extension for any further term and
in such case rent and other monetary sums due hereunder shall be payable in
the amount and at the time specified in this Lease and such month to month
tenancy shall be subject to every other term, covenant and agreement contained
herein.
18.12 SIGNS AND AUCTIONS. See Paragraph #26.
18.13 REASONABLE CONSENT. Except as limited elsewhere in this Lease,
wherever in this Lease Landlord or Tenant is required to give its consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld. In the event of failure to give any such consent,
the other party shall be entitled to specific performance at law and shall have
such other remedies as are reserved to it under this Lease, but in no event
shall Landlord or Tenant be responsible in monetary damages for failure to give
consent unless said failure is withheld maliciously or in bad faith.
18.14 INTEREST ON PAST DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
ten per cent (10%) per annum from the due date. Payment of such interest shall
not excuse or cure any default by Tenant under this Lease.
18.15 RECORDING. Tenant shall not record this Lease without
Landlord's prior written consent, and such recordation shall, at the option of
Landlord, constitute a non-curable default of Tenant hereunder. Either party
shall, upon request of the other, execute, acknowledge and deliver to the other
a "short form" memorandum of this Lease for recording purposes.
18.16. NOTICES. All notices or demands of any kind required or desired
to be given by Landlord or Tenant hereunder shall be in writing and shall be
deemed delivered forty-eight (48) hours after depositing the notice or demand in
the United States mail, certified or registered, postage prepaid, addressed to
the Landlord or Tenant respectively at the addresses set forth after their
signatures at the end of this Lease.
18.17 CORPORATE AUTHORITY. If Tenant is a corporation, each
individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this lease on behalf
of said corporation in accordance with a duly adopted resolution of the Board
of Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation Tenant shall, within thirty (30) days
after execution of this Lease, deliver to Landlord a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
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18.18 LEASEHOLD PERCENTAGES. Tenant hereby acknowledges that Tenant occupies
26.7% of the entire project which the demised premises represents 100% of the
building Tenant occupies.
19. PARKING. Tenant shall have the non-exclusive use of 320 parking spaces.
20. OPTION TO EXTEND: "Tenant is hereby given the option to extend the Lease
Term on all the provisions contained in this lease, (except for the monthly
rental) for one (1) five (5) year period (the "Extended Term") following
expiration of the initial term by giving written notice of such exercise to
Landlord at least ninety (90) days prior to the expiration of the Lease Term;
provided said notice shall be effective only if Tenant is not in default under
any of the terms, covenants, or conditions contained in the Lease at the time
of exercising said option.
21. RENTAL ADJUSTMENTS. The rental to be paid shall be adjusted every thirty
(30) months including said renewal period to reflect any increase in the CPI
from the Commencement Date hereof (as described in Paragraph 2.1 and/or 2.4).
On the first day after each thirty (30) month period following the commencement
of this lease the monthly rent to be paid during said thirty (30) month period
shall be determined by multiplying the sum of $68,000.00 by a fraction (i) the
numerator of which shall be the CPI published nearest and proceeding the first
day of the next period and (ii) the denominator of which shall be the CPI
published for the month nearest and preceeding the Lease Commencement Date (as
defined in Paragraph 2.3), provided in no event shall said monthly rental, at
any time during the said renewal period, be less than $68,000.00 per month,
however; said increase shall not exceed a compounded rate of 9% per annum.
The term "CPI" shall mean the Consumer Price Index for urban wage earners and
clericals workers as published by the United States Department of Labor, Bureau
of Labor Statistics, San Francisco/Oakland Metropolitan Area (1967 = 100), all
items now being published bi-monthly. If the CPI is changed so that the base
year is altered from that used as of the Lease Commencement Date, the CPI shall
be converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics, to obtain the same
result that would have been obtained had the base year not been changed. If no
conversion factor is available, or if the CPI is otherwise changed, revised or
discontinued for any reason, there shall be substituted in lieu thereof, and
the term "CPI" shall thereafter refer to the most nearly comparable official
price index of the United States Government in order to obtain substantially
the same result for any adjustment required by this Lease as would have been
obtained had the original CPI not been discontinued, revised or changed.
22. RIGHT OF FIRST REFUSAL TO LEASE. Landlord hereby grants to Tenant after
the initial rental thereof the Right-of-First-Refusal-to-Lease buildings
A,B,E,F, or G as shown on Exhibit A of this lease provided Tenant is not in
default under the terms and conditions of this lease. Tenant shall have one
hundred twenty (120) hours from receipt of an acceptable bonafied lease, or
offer to lease, to accept or reject said lease or offer to lease. Tenant must
notify Landlord in writing within said one hundred twenty (120) hour period or
it shall be deemed that Tenant rejects said lease or offer to lease. This right
does not apply to subleases from other Tenants.
23. PROPERTY INSURANCE. Property insurance to be paid by Tenant shall be
limited to policies of All Risk Replacement Cost Insurance with Agreed Amount
Endorsement, flood insurance (if the Premises are in an area which is considered
a flood risk area by the United States Department of Housing and Urban
Development), rent insurance, war risk insurance covering such other hazards as
Landlord's mortgagee may require from time to time, in amounts, form, and
substance satisfactory to Landlord's mortgagee, and with companies acceptable to
Landlord's mortgagee. All hazard and business or rental interruption insurance
policies shall be endorsed with a standard noncontributory mortgagee clause in
favor of and in form acceptable to Landlord's mortgagee, and may be cancelled or
modified only upon not less than thirty (30) days prior written notice
<PAGE> 9
to Landlord's mortgagee. All of the above mentioned insurance policies or
certificates of such insurance satisfactory to Landlord's mortgagee, together
with the receipts for the payment of premiums thereon, shall be delivered to and
held by Landlord's mortgagee. All renewal and replacement policies shall be
delivered to Landlord's mortgagee at lease fifteen (15) days before the
experation of the expiring policies.
24. PARTIAL DAMAGE UNINSURED (continued) Premises must be destroyed to the
extent of ten percent (10%) or more of the then replacement cost thereof or
Landlord shall be required to repair said damage.
25. DAMAGE NEAR END OF THE TERM. If the Premises are destroyed to the extent of
ten percent (10%) or more of the then replacement cost thereof during the last
six (6) months of the term of this Lease, and if Tenant shall not have exercised
its option to extend this lease under Paragraph 20 herein prior to the date
Landlord provides the notice next described, Landlord may, at Landlord's option,
give written notice to Tenant of Landlord's intent to terminate this Lease
within (30) days after the date of occurence of such damage.
26. SIGNS AND AUCTIONS. Tenant shall have the right to place signs on the
premises, provided that all such signs shall pertain to the business conducted
by Tenant and shall comply with government regulations and provided Tenant
obtains prior written consent which consent will not be unreasonably withheld.
Tenant shall not conduct any auction on the premises without landlord's prior
written consent.
27. PROGRESS REPORTS. Landlord shall provide Tenant with a progress report on
construction every month advising Tenant of any changes in the estimated
construction completion date.
M.J.H.M. Partnership II, ADDA Corporation,
a California General Partnership a California Corporation
by: /s/ JAMES D. MAIR by: [SIG]
----------------------------- ----------------------------
by: by: [SIG]
----------------------------- ----------------------------
Address: 511 Division Street Address: 1671 Dell Avenue
----------------------- ----------------------
Campbell, Calif. 95008 Campbell, Calif. 95008
------------------------ ----------------------
<PAGE> 10
FIRST ADDENDUM TO LEASE
The undersigned hereby agree to amend that certain lease dated March 3, 1981,
between M.J.H.M. Partnership II, a California general partnership, "Landlord",
and ADDA Corporation, a California corporation as assigned on August 25, 1981
to Zilog, Inc. "Tenant" as follows:
1. Effective September 18, 1986 the Premises shall be known as 222
Hacienda Avenue, Building "D" and described as approximately 40,000
square feet of office and manufacturing space.
2. On or before September 17, 1986, Tenant shall vacate 210-220
Hacienda, Building "C" and return possession to Landlord.
3. The term of the lease shall be extended through March 10, 1988.
4. The base monthly rent shall continue at the rate of $36,545.00.
5. All other terms and conditions shall remain the same.
LANDLORD: M.J.H.M. Partnership II, TENANT: Zilog, Inc.
a California general
partnership
By: /s/ JAMES D. MAIR By: /s/ W.R. WALKER
------------------------------ -------------------------------
James D. Mair W.R. Walker
It's: General Partner It's: SR. VICE PRESIDENT OF FINANCE
& ADMINISTRATION
Dated: 6/20/86 Dated: 6/20/86
<PAGE> 11
SECOND ADDENDUM TO LEASE
Second addendum to that certain lease dated March 3, 1981, between M.J.H.M.
Partnership II, a California general partnership, ("Landlord"), and ADDA
Corporation, a California corporation, as assigned on August 25, 1981 to Zilog,
Inc., ("Tenant") for the premises located at 210-220 Hacienda Avenue, Campbell,
California ("Building C" and "Building D"), and any addendums thereof, whereby
Landlord and Tenant agree to amend the lease as follows:
1. The lease for 210-220 Hacienda, Building C, shall be extended through
March 17, 1988.
2. The combined base monthly rent shall be $73,090.00 per month for both
Buildings "C" and "D".
3. All other terms and conditions shall remain the same.
LANDLORD: M.J.H.M. Partnership II, TENANT: Zilog, Inc.
a California general
partnership
By: /s/ JAMES D. MAIR By: /s/ W.R. WALKER
-------------------------- --------------------------------
Its: General Partner Its: Senior Vice President
Finance and Administration
-------------------------- --------------------------------
Dated: August 20, 1986 Dated: August 20, 1986
------------------------- -----------------------------
<PAGE> 12
THIRD ADDENDUM TO LEASE
Third addendum to that certain lease dated March 3, 1981, between M.J.H.M.
Partnership II, a California general partnership, ("Landlord"), and ADDA
Corporation, a California corporation, as assigned on August 25, 1981 to Zilog,
Inc., ("Tenant") for the premises located at 210-220 Hacienda Avenue, Campbell,
California ("Building C" and "Building D"), and any addendums thereof, whereby
Landlord and Tenant agree to amend the lease as follows:
1. The term of the lease for the premises located at 210-220 Hacienda
Avenue, Campbell, California ("Building C" and "Building D", shall be
extended to March 10, 1990.
2. The rent for said premises shall e modified as follows:
January 1, 1987 to April 30, 1988 $65,090 per month
May 1, 1988 to March 10, 1990 $81,090 per month
3. Paragraph 19 shall be modified to 300 parking spaces instead of 320.
The reduction of 20 parking spaces shall be modified at Landlord's
discretion.
4. All other terms and conditions shall remain the same.
LANDLORD: TENANT:
M.J.H.M. Partnership II, Zilog, Inc.
a California general
partnership
By: /s/ JAMES D. MAIR By: /s/ W.R. WALKER
-------------------------- --------------------------------
James D. Mair
Its: General Partner Its: Senior Vice President
-------------------------- --------------------------------
Dated: Dec. 26, 1987 Dated: Dec. 26, 1986
------------------------- -----------------------------
<PAGE> 13
FOURTH ADDENDUM TO LEASE
Fourth Addendum to that certain lease dated march 31, 1981, between M.J.H.M.
Partnership II, a California general partnership, ("Landlord") and ADDA
Corporation, a California corporation, as assigned on August 25, 1981 to Zilog,
Inc. ("Tenant") for premises located at 210-220 Hacienda Avenue, Campbell,
California and any addendums thereof, whereby Landlord and Tenant agree to amend
the lease as follows:
1. The term of the lease for the premises located at 210-220 Hacienda Avenue,
Campbell, California ("Building C" and "Building B") shall be extended to
March 10, 1993.
2. The rent for said premises shall be modified as follows:
March 11, 1990 to March 10, 1991: $80,800.00/month
March 11, 1991 to March 10, 1992: $84,800.00/month
March 11, 1992 to March 10, 1993: $88,800.00/month
3. All other terms and conditions of the lease shall remain the same.
LANDLORD: TENANT:
M.J.H.M. Partnership II, Zilog
California general partnership
By: /s/ JAMES D. MAIR By: /s/ W. R. WALKER
----------------------------- -----------------------------
Its: General Partner Its: Sr. Vice President
----------------------------- -----------------------------
Dated: 15/23/92 Dated: May 22, 1992
-------------------------- --------------------------
<PAGE> 14
FIFTH ADDENDUM TO LEASE
Fifth Addendum to that certain lease dated March 31, 1981, between M.J.H.M.
Partnership II, a California general partnership ("Landlord") and ADDA
Corporation, a California corporation as assigned on August 25, 1981 to Zilog,
Inc. ("Tenant") for premises located at 210-220 Hacienda Avenue, Campbell
California and any addendums thereof, whereby Landlord and Tenant agree to amend
the lease as follows:
1. The term of the lease for premises located at 221-220 Hacienda Avenue,
Campbell California ("Building C" and "Building D") shall be extended for
five years to March 10, 1998.
2. The rent for said premises shall be modified as follows:
March 11, 1993 to March 10, 1994: $68,000.00/month
March 11, 1994 to March 10, 1995: $68,000.00/month
March 11, 1995 to March 10, 1996: $72,000.00/month
March 11, 1996 to March 10, 1997: $76,000.00/month
March 11, 1997 to March 10, 1998: $76,000.00/month
3. All other terms and conditions of the lease shall remain the same.
LANDLORD: TENANT:
M.J.H.M. Partnership II, a Zilog, Inc.
California general partnership
By: /s/ JAMES D. MAIR By: [SIG]
------------------------------ -------------------------------
Its: Gen Partner Its: Sr. VP
----------------------------- -------------------------------
Dated: 5/23/92 Dated: May 22, 1992
<PAGE> 15
ASSIGNMENT OF LEASE AND PROMISE TO PAY
Adda Corporation (Adda) hereby assigns all of its' rights under that certain
lease dated March 3, 1981 and addendum thereto, by and between Adda and
M.J.H.M. Partnership II, a California General Partnership (Landlord), for those
two 40,000 square foot office buildings know as 210 and 222 Hacienda Avenue,
Campbell, California, to Zilog, Inc. (Zilog). Zilog hereby agrees to conform to
the terms and conditions of said lease as of the date specified below.
As consideration for this "Assignment of Lease", Zilog agrees to pay to Adda
the sum of $250,000.00. Such sum shall be due and payable on January 4th, 1982.
Zilog, Inc. and Adda Corporation recognize that Adda Corporation may assign to
Bank of California its' right to receive from Zilog, Inc. the $250,000.00
payment above described. In the event of such assignment and notification
thereof by Adda Corporation and Bank of California, Zilog, Inc. agrees that it
shall not assert against the Bank of California any defenses which Zilog may
possess and which might have been asserted against Adda.
Zilog hereby agrees that if they fail to pay the $250,000.00 payment described
above on or before January 4th, 1982, they must also pay all interest that has
accumulated from the date of "Assignment of Lease" to the date payment is made
at the rate of nineteen percent (19%) per annum.
In the event any action is commenced to enforce the right of Adda Corporation
to payment, Zilog, Inc. hereby agrees to pay to Adda Corporation reasonable
attorney's fees and expenses, whether said action is prosecuted to judgment or
not.
Landlord hereby consents to said assignment and releases and agrees to hold Adda
harmless from any liability, suit, claim or any other action related to the
lease or property. It is further agreed by Adda that they will hold Landlord
harmless from any liability, suit, claim or any other action related to the
lease of the property as well.
It is understood that Landlord now holds $68,000.00 which represents Adda's
first months rent. Zilog herewith tenders its' check to Landlord in the amount
or $136,000.00 which sum shall become Zilog's first months rent ($68,000.00),
as well as security deposit ($68,000.00). Landlord hereby acknowledges receipt
of the $136,000.00 form Zilog and also agrees that the $68,000.00 now held by
Landlord as Adda's first months rent will be returned to Adda upon approval of
"Lease Assignment".
<PAGE> 16
Zilog hereby understands that the additional monies referenced in Exhibit B of
the lease are $102,762.00 and not $121,065.00. Also, Zilog understands that the
occupancy of the buildings are:
Building D ........................... September 11, 1981
Building C ........................... September 18, 1981
Any delays caused by this assignment shall not release Zilog from commencement
of rent on those dates.
A copy of this agreement is hereby acknowledged.
Date: 8/24/81 Date: August 24, 1981
----------------------------- -----------------------------
[SIG] [SIG]
----------------------------- -----------------------------
Adda Corporation Zilog, Inc.
[SIG] This assignment is hereby approved.
Date: 5-25-81
-----------------------------
/s/ JAMES D. MAIR
----------------------------------
M.J.H.M. Partnership II
<PAGE> 17
First Addendum to Lease
In consideration of $10 paid to tenant, it is hereby agreed by the undersigned
that the lease dated March 3, 1981 between M.J.H.M. Partnership II, a California
general partnership as landlord, and ADDA corporation, as tenant, for property
located at 210 - 220 Hacienda Avenue and 222 - 236 Hacienda Avenue, Campbell,
California is amended as follows:
11. Indemnity - Add the words "and the lessor under any ground or underlying
lease which now exists or may hereafter be executed affecting the Premises from
and after notice of such lease to Tenant (such lessor being hereinafter referred
to as the "Ground Lessor") after the first appearance of the word "Landlord" in
the first line. Add the words "and the Ground Lessor" after the word "Landlord"
wherever else it appears in subparagraphs 11.1 and 11.2.
12.1 Liability Insurance - Add the words "and Ground Lessor" after the word
"Landlord" as it appears in lines 2, 6, 7, 8, 10, 11 and 12 of this
subparagraph. Additionally, the amounts of $300,000, $500,000, and $50,000 shall
be amended to read $500,000, $1,000,000, and $500,000 respectively.
22. Right of First Refusal to Lease - The following sentence shall be added
to the end of this paragraph: "Tenant understands that the existing lessor(s)
under leases for buildings A, B, E, F, and G may have the option to extend the
present lease terms. Tenant's ability to exercise its "First Right of Refusal"
is subject to the expiration of the existing leases. Tenant may exercise said
right with regard to any or all buildings.
By: /s/ JAMES D. MAIR By: [SIG]
------------------------------- -----------------------------
James D. Mair, general partner
By: /s/ W. F. JURY Title: Pres.
------------------------------- --------------------------
W. F. Jury, general partner
Dated: 7-16-81
---------------------------- By: [SIG]
-----------------------------
Title: VP MFG OPER
--------------------------
Dated: 7/31/81
--------------------------
<PAGE> 1
EXHIBIT 10.3
1997
EMPLOYEE PERFORMANCE
INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
PAGE
Purpose of Plan ............................................4
Eligibility ................................................4
Term of Plan ...............................................4
Determination of Award .....................................4
Payout of Award ............................................5
Eligibility for Payout .....................................5
Promotion, Transfer, Termination,
Retirement, Death & Disability .............................5
New Employees ..............................................6
Limitations ................................................6
Disclosure, Compensation Committee
Decisions Final ............................................7
Taxable Status .............................................7
Review/Approval ............................................7
Amendment & Termination of Plan ............................7
2
<PAGE> 3
TABLE OF CONTENTS
PAGE
Not a Contract of Employment ...............................8
Definitions ................................................8
Important Information ......................................9
3
<PAGE> 4
GENERAL INFORMATION
PURPOSE OF THE PLAN
The purpose of the Zilog Employee Performance Incentive Plan (EPIP) is to
provide eligible employees with an increased incentive to meet and exceed the
Company Business Plan as measured by the Pretax Profit line.
WHO IS ELIGIBLE FOR EPIP?
You are eligible if you are a full-time regular domestic exempt employee of
Zilog, Inc. and are not included in any other regular incentive program of the
Company. Awardees under the General Manager's Award program are still eligible
to participate in EPIP. Certain international employees are also eligible, as
noted in the Administrative Guide.
WHAT IS THE TERM OF EPIP?
The base period and term of this plan is January 1 through December 31,
1997.
GENERAL PROVISIONS
HOW IS THE AWARD DETERMINED?
The EPIP awards up to 7.5% of Pretax Profit to the participants when the
Business Plan Profit and Revenue are achieved or exceeded. If the Business Plan
Profit and Revenue are not achieved, incentive Awards are still possible, but
the Awards decline with Company performance and there is no Award at 20% or less
of the Business Plan Profit.
4
<PAGE> 5
The individual Award is dependent upon your base salary and classification
level as of January 1, 1997, company performance (profit and revenue) to the
1997 Business Plan, and your individual performance in 1997.
WHEN IS THE AWARD PAID?
The Award is payable during the first quarter of 1998.
TERMS AND CONDITIONS
ELIGIBILITY FOR PAYOUT
To be eligible for the Payout of an Award, you must be on the active payroll
at the time the Payouts are made by the Company, with the exception of
retirement or certain conditions of death or disability as defined in the EPIP
Administrative Guide. If you resign or are terminated for any reason, you will
not be eligible for any subsequent Payouts under EPIP.
PROMOTION, TRANSFER, TERMINATION, RETIREMENT, DEATH & DISABILITY
If you, as an eligible employee, are promoted or transferred during 1997
into a non-eligible position, or retire (pursuant to the company's then-current
retirement policy) you will be eligible to receive a prorata Award up to the
date of promotion, transfer, or retirement. You will receive the amount awarded,
provided you are on the active payroll of Zilog or on retiree status at the time
the Payouts are made.
If you, as a non-eligible employee, are promoted or transferred during 1997
into an eligible position, you will be eligible to receive a prorata Award from
the date of transfer or promotion.
5
<PAGE> 6
If an eligible employee dies during 1997 while an active employee of the
Company, such employee's estate shall be eligible to receive a prorata Award to
the date of the employee's death.
If an eligible employee is disabled during 1997, such employee shall be
eligible to receive a prorata Award for the period of time actively employed and
not absent due to disability.
Prorata Awards shall be based on total length of active eligible service
during the term of EPIP expressed as a percentage of the 1997 fiscal year.
An employee who terminates or is terminated during 1997 will not be eligible
for an Award.
Awards prior to becoming Payouts under the provisions of EPIP remain in the
general obligation account of the Company.
NEW EMPLOYEES
Employees hired after January 1, 1997 who otherwise meet all eligibility
requirements will be considered for Awards on the same prorata basis as for
employees who transfer or are promoted into assignments considered eligible for
EPIP.
Limitations
No Award will be made for any year in which:
* the Profit does not exceed 20% of the Plan Profit.
* the Business Plan Pretax Return on Capital Employed is less than 2%.
The Total Award for 1997 may not be more than 7.5% of 1997 Pretax Profit. If
the sum of the Awards exceeds the Total Award, the Compensation Committee will
factor all Awards by an equal multiplier such that the total of all Awards does
not exceed 7.5% of Pretax Profit.
6
<PAGE> 7
DISCLOSURE, COMPENSATION COMMITTEE DECISIONS FINAL
The Compensation Committee will periodically advise employees eligible under
EPIP of the Company's progress toward achievement of Plan Profit. Employees are
encouraged to discuss the factors which influence their MBO and individual
performance ratings with their supervision.
The decision of the Compensation Committee as to an Award is final and is
not subject to adjustment.
TAXABLE STATUS
All Payouts will have appropriate deductions for any taxes required by law
and the net amount shall be paid to the employee. Awards under EPIP shall remain
a general obligation of the Company.
REVIEW/APPROVAL
The general provisions and the estimated costs of implementation of EPIP are
prepared by the Compensation Committee and approved by the Board of Directors of
the company prior to the 1997 fiscal year. The recommendations of the
Compensation Committee as to the amount of the Award to each eligible employee
and the total costs of EPIP are reviewed and approved by the Board of Directors
in the first quarter following the end of the fiscal year.
AMENDMENT AND TERMINATION OF EPIP
EPIP applies to January 1 through December 31, 1997 only (with Payouts in
1998). EPIP may be continued, discontinued or amended by the Board of Directors
of the Company at any time.
7
<PAGE> 8
NOT A CONTRACT OF EMPLOYMENT
Participation in EPIP will not constitute a contract of employment.
Inclusion in EPIP will not convey to any employee a right to continue in the
employment of the Company or to continue to be involved in any business in which
the Company may engage.
DEFINITIONS FOR PURPOSES OF EPIP
ANNUALIZED BASE SALARY - the employee's regular base salary as of January 1,
1997 (or such later date in 1997 when the employee becomes eligible to
participate in EPIP) , annualized (excluding any one time bonus or incentive
payments under this or any other plan or any Performance Unit Plan payouts).
AVERAGE CAPITAL EMPLOYED - will be calculated in the same manner as defined in
the annual Step II Business Plan approved by the Board of Directors of the
Company.
AWARD - the incentive amount credited to the employee subject to and in
consequence of the provisions of EPIP.
COMPENSATION COMMITTEE - The Compensation Committee of Zilog shall consist of
the CEO, the Vice President of Human Resources and Administration, and the Vice
President and CFO.
DOMESTIC EXEMPT EMPLOYEE - a full-time regular employee on the U.S. payroll of
Zilog in position Classification Level 21 and above.
PAYOUT - the payment of the Award to the eligible employee subject to and in
consequence of the provisions of EPIP.
8
<PAGE> 9
PLAN PROFIT - the profit before interest and taxes and before any provision for
Payout under EPIP as stated in the 1997 Step II Business Plan approved by the
Board of Directors of the Company.
PRETAX RETURN ON CAPITAL EMPLOYED - Plan Profit divided by Average Capital
Employed.
PROFIT - book profit after provision for all other costs including the Company
401(k) matching funds and discretionary Company contribution, but excluding
interest, taxes and any provision for Awards under EPIP.
RETIREMENT - as defined in PM 60-05.
REVENUE - net revenue as stated in the 1997 Step II Business Plan as approved by
the Board of Directors of the Company.
TOTAL AWARD - the sum of all Awards credited to all eligible employees under the
provisions of EPIP for 1997.
IMPORTANT INFORMATION
This summary of the Zilog Employee Performance Incentive Plan includes
references to most of the important conditions of the Plan. The 1997 Zilog
Employee Performance Incentive Plan Administrative Guide contains the exact
terms and conditions which govern operation of the Plan. If a conflict occurs
between the abstract and the actual Plan, the Plan applies.
9
<PAGE> 1
EXHIBIT 10.4
1997
ZILOG EMPLOYEE PERFORMANCE INCENTIVE PLAN
ADMINISTRATIVE GUIDE
1.0 Purpose of the Plan
The purpose of the Zilog Employee Performance Incentive Plan
(hereinafter the "Incentive Plan") is to provide eligible employees of
Zilog (hereinafter the "Company") with an increased incentive to meet
and exceed the Company profit before interest and taxes and revenue
goals.
2.0 Objective of the Administrative Guide
The objective of this guide is to detail the specific provisions of the
Plan. This guide will serve as the source document to be used in
interpretation, administration and implementation of the Incentive Plan.
3.0 Definitions
3.1 An "Eligible Employee" for the purposes of the Incentive Plan is a
full-time regular employee on the U.S. payroll of the Company in
position Classification Level (CL) 21 and above or a Zilog Philippines
employee in Classification Level 25B and above. Non-U.S. sales office
employees in CL 21 and above may be eligible upon approval of the
Compensation Committee.
3.2 "Profit" for the purposes of this Incentive Plan is book profit after
provision for all other costs including the Company 401(k) matching
funds and discretionary Company contribution, but excluding any interest
and taxes and provision for Awards under this Incentive Plan.
3.3 "Plan Profit" for the purposes of this Incentive Plan is the profit
before interest and taxes and any provision for Payout under this
Incentive Plan, as stated in the 1997 Step II Business Plan as approved
by the Board of Directors of the Company.
3.4 "Operating Return" for the purposes of this Incentive Plan is Profit
less Interest divided by Average Capital Employed less Cash.
- 1 -
<PAGE> 2
3.5 "Revenue" for the purposes of this Incentive Plan is net revenue as
stated in the 1997 Step II Business Plan as approved by the Board of
Directors of the Company.
3.6 "Average Capital Employed" for the purposes of this Incentive Plan will
be calculated in the same manner as defined in the 1997 Step II Business
Plan approved by the Board of Directors of the Company.
3.7 "Award" for the purposes of this Incentive Plan is the incentive amount
credited to the eligible employee subject to and in consequence of the
provisions of this Incentive Plan.
3.8 "Total Award" for the purposes of this Incentive Plan is the sum of all
Awards credited to all eligible employees under the provisions of this
Incentive Plan for January 1 through December 31, 1997.
3.9 "Payout" for the purposes of this Incentive Plan is the payment of an
Award to the eligible employee subject to and in consequence of the
provisions of this Incentive Plan.
3.10 "Annualized Base Salary" for the purposes of this Incentive Plan is the
employee's regular salary as of January 1, 1997 (or such later date in
1997 when the employee becomes eligible to participate in the Incentive
Plan pursuant to either Section 9.2 or Section 10.0), annualized
(excluding any one time bonus or incentive payments under this or any
other plan).
3.11 "Employee Classification Factor" for the purposes of this Incentive Plan
is a factor dependent upon the employee's exempt Classification Level as
of January 1, 1997 (or such later date in 1997 when the employee becomes
eligible to participate in the Incentive Plan pursuant to either Section
9.2 or Section 10.0).
3.12 "Company Performance Factor" for the purposes of this Incentive Plan is
the sum of the factor determined by the Company's performance against
Plan Profit goals, per Exhibit II A, plus the factor determined by the
Company's performance against Revenue goals, per Exhibit II B.
3.13 "Individual Employee Performance Factor" for the purposes of this
Incentive Plan is a factor dependent upon the Individual Employee
Performance Rating as determined by the Compensation Committee. The
Individual Employee Performance Rating for members of the Compensation
Committee will be approved by the Board of Directors of the Company.
3.14 "Proration Factor" for the purposes of this Incentive Plan is the ratio
of the number of weeks an employee is an eligible active participant in
EPIP during the term of the Plan divided by 52 weeks.
- 2 -
<PAGE> 3
3.15 "Zilog Compensation Committee" shall consist of the CEO, the CFO, and
the Vice President of Human Resources and Administration.
3.16 "Board Compensation Committee" shall consist of two outside Board
members.
4.0 Eligibility and Participation
All domestic exempt employees who are not included in any other regular
incentive program of the Company are eligible to participate in this
Incentive Plan. However, awardees under the "General Managers Award"
program are not excepted from participation in the Incentive Plan.
Certain employees of Zilog Philippines are also eligible, as noted in
3.1 of this Guide. Non-U.S. sales office employees who are not included
in any other regular incentive program of the company are eligible upon
approval of the Compensation Committee.
5.0 Contract of Employment
Participation in this Incentive Plan shall not constitute a contract of
employment. Inclusion in the Incentive Plan shall not convey to any
employee a right to continue in the employment of the Company or to
continue to be involved in any business in which the Company may engage.
6.0 Base Period and Term of the Incentive Plan
The base period and term of this Incentive Plan is the 1997 fiscal year
of the Company; Payouts under this Incentive Plan shall occur in 1998,
as provided under the terms of this Incentive Plan. An employee shall
have no right to accelerate or defer the receipt of any payout under
this Incentive Plan.
7.0 Provisions of the Incentive Plan
7.1 The general provisions of the Incentive Plan including the Employee
Classification Factors (Exhibit I), the Company and individual Employee
Performance Factors (Exhibits II A, II B and III) , and the estimated
costs of implementation of the Incentive Plan are proposed by the Zilog
Compensation Committee and submitted for review and approval by the
Compensation Committee of the Board of Directors of the Company prior to
the Incentive Plan period (January 1 through December 31, 1997). The
recommendations of the Zilog Compensation Committee as to the amount of
the Award to each eligible employee and the total costs of the Incentive
Plan are submitted for review and approval by the Board of Directors in
the first quarter following the end of the Incentive Plan year.
- 3 -
<PAGE> 4
7.2 Eligible employees shall be grouped in Classification Factor levels in
accord with Exhibit I, dependent upon the employee's position
Classification Level as of January 1, 1997.
7.3 The amount of the 1997 Award to each eligible employee under the
Incentive Plan is the product of the employee's Annualized Base Salary
as of January 1, 1997 times the employee's Classification Factor times
a Company Performance Factor, per Exhibits II A and II B, times an
Individual Employee Performance Factor for 1997 per Exhibit III, times a
proration factor.
7.4 "Company Performance Factor" for the purposes of this Incentive Plan is
the sum of the factor determined by the Company's performance against
Plan Profit Goals, per Exhibit II A, plus the factor determined by the
Company's performance against Revenue goals, per Exhibit II B.
7.5 The "Individual Employee Performance Factors" for the purposes of the
1997 Awards are related to the Individual Employee Performance Ratings,
per Exhibit III. The Individual Employee Performance Rating is a number
between 1.00 (highest) and 4.00 (lowest) which will be determined by the
Zilog Compensation Committee at its sole discretion and will be related
to but need not be equal to the employee's MBO (Management By Objectives
- see PM 60-27) ratings.
7.6 The Award is payable during the first quarter of 1998.
8.0 Eligibility for Payout
To be eligible for the Payout of an Award, the employee must be on the
active payroll at the time the payments are made by the Company, with
the exception of conditions of retirement, death or disability as
defined in Section 9.0. Any eligible employee who is terminated for
cause or reduction of force, or who resigns prior to the time of a
Payout under this Incentive Plan will not be eligible for a Payout under
the terms of this Incentive Plan.
9.0 Promotion, Transfer, Retirement, Termination, Death and Disability
9.1 If an eligible employee is promoted or transferred during 1997 into a
non-eligible position, or retires (pursuant to the company's
then-current retirement policy), such employee shall be eligible to
receive a pro rata Award up to the date of promotion, transfer or
retirement.
- 4 -
<PAGE> 5
9.2 If a non-eligible employee is promoted or transferred during 1997 into
an eligible position, such employee shall be eligible to receive a pro
rata Award from the date of transfer or promotion.
9.3 If an eligible employee dies during 1997 while an active employee of the
Company, such employee's estate shall be eligible to receive a pro rata
Award to the date of the employee's death.
9.4 If an eligible employee is disabled during 1997, such employee shall be
eligible to receive a pro rata Award for the period of time actively
employed and not absent due to disability.
9.5 Payouts of pro rata Awards pursuant to this Section 9 shall be made as
provided in Section 7.6 of this Incentive Plan.
9.6 Pro rata Awards shall be based on total length of active covered service
during the 1997 term of the Incentive Plan expressed as a percentage of
the 1997 fiscal year.
9.7 An employee who resigns or is terminated for cause or reduction in force
during 1997 will not be eligible for an Award.
10.0 New Employees
Employees hired after January 1, 1997 may be designated eligible under
the provisions of Section 4.0. New employees will be considered for an
Award on the same pro rata basis as described in Section 9.2 for
employees who transfer or are promoted into assignments considered
eligible for the Incentive Plan.
11.0 Minimum Profit Requirement for Award
Notwithstanding any other provision of this Incentive Plan, no Award
will be made for any year in which the Profit does not exceed 20% of the
Plan Profit.
12.0 Minimum Business Plan Requirement for Award
Notwithstanding any other provision of this Incentive Plan, no Award
will be made for any year in which the Business Plan Operating Return is
less than 2%.
13.0 minimum operating Return Requirement for Dividend
Notwithstanding any other provision of this Incentive Plan, no Dividend
will be added to a Payout for any year in which Operating Return is less
than 2%.
- 5 -
<PAGE> 6
14.0 Total Award Limitation
Notwithstanding any other provision of this Incentive Plan, the Total
Award for 1997 may not be more than 7.5% of Profit. If the sum of the
Awards exceeds the Total Award, the Zilog Compensation Committee will
adjust the Awards such that the total of all Awards does not exceed 7.5%
of Profit.
15.0 Disclosure, Compensation Committee Decisions Final
The Zilog Compensation Committee will periodically advise employees
eligible under this Incentive Plan of progress toward achievement of
Plan Profit, using the Zilog Operations Review program as a vehicle.
Employees are encouraged to discuss the factors which influence their
MBO and Individual Employee Performance Ratings with their supervisor
but the decision of the Zilog Compensation Committee as to an Individual
Employee Performance Rating is final and is not subject to adjustment.
16.0 Awards Unfunded, Unsecured; Taxable Status
Any awards under this Incentive Plan shall be provisional until payout,
shall be unfunded and unsecured and shall represent a general obligation
of the Company. All payouts shall have appropriate amounts for any
federal, state or local income or other taxes withheld from such payouts
and the net amount thereof shall be paid to the employee.
17.0 Amendment and Termination of the Plan
17.1 This Incentive Plan applies to fiscal year 1997 only (with Payout in
1998).
17.2 The Incentive Plan may be continued, discontinued or amended by the
Board of Directors of the Company for fiscal years 1998 and beyond.
Amendments of this Incentive Plan after 1997 will not affect payout of
Awards granted under the 1997 Plan.
- 6 -
<PAGE> 7
ZILOG, INC.
1997
Employee Performance
Incentive Plan
APPROVED:
12-18-96 /s/ EDGAR A. SACK
- ------------------------------ ------------------------------------
Date Edgar A. Sack
Director
Zilog, Inc.
12-18-96 /s/ WILLIAM H. JANEWAY
- ------------------------------ ------------------------------------
Date William H. Janeway
Director
Zilog, Inc.
12-18-96 /s/ HENRY KRESSEL
- ------------------------------ ------------------------------------
Date Henry Kressel
Director
Zilog, Inc.
12-18-96 /s/ THOMAS J. CONNORS
- ------------------------------ ------------------------------------
Date Thomas J. Connors
Director
Zilog, Inc.
12-18-96 /s/ ROBERT M. WHITE
- ------------------------------ ------------------------------------
Date Robert M. White
Director
Zilog, Inc.
12-18-96
- ------------------------------ ------------------------------------
Date Larry W. Wangberg
Director
Zilog, Inc.
- 7 -
<PAGE> 1
EXHIBIT 10.5
1997
ZILOG EMPLOYEE PERFORMANCE INCENTIVE PLAN
EXECUTIVE BONUS
ADMINISTRATIVE GUIDE
1.0 Purpose of the Plan
The purpose of the Zilog Employee Performance Incentive Plan Executive
Bonus (hereinafter the "Plan") is to provide eligible employees of Zilog
(hereinafter the "Company") with an increased incentive to meet and
exceed the Company Profit before interest and taxes and revenue goals.
This Plan is a supplement to the Zilog Employee Performance Incentive
Plan (EPIP).
2.0 Objective of the Administrative Guide
The objective of this guide is to detail the specific provisions of the
Plan. This guide will serve as the source document to be used in
interpretation, administration and implementation of the Plan.
Unless otherwise noted, all terms and conditions of the 1997 Zilog
Employee Performance Incentive plan apply equally to the Executive Bonus
Plan.
3.0 Eligibility and Participation
3.1 All employees in Classification Level (CL) 29 and above who are not
included in the Field Sales Incentive Plan are eligible to participate
in this Plan. Certain employees in CL 27 may be eligible upon approval
of the Compensation Committee.
4.0 Base Period and Term of the Plan
The base period and term of this Plan is the 1997 fiscal year of the
Company; Payouts under the Plan shall occur in 1999 and 2000, as
provided under the terms of this plan.
5.0 Provisions of the Incentive Plan
5.1 The recommendations of the Zilog Compensation Committee as to the amount
of the Executive Bonus award to each eligible employee and the total
costs of the Plan are submitted for review and approval by the Board of
Directors in the first quarter following the end of the Plan year.
5.2 The amount of the 1997 Executive Bonus award to each eligible employee
under the Plan is a percentage of his/her 1997 Employee Performance
Incentive Plan Award, as follows: CL 27-30: 100%, CL 31 and above: 80%.
- 1 -
<PAGE> 2
5.3 The Executive Bonus award will be payable in two halves during the first
quarters of 1999 and 2000, and may be modified per paragraph 5.4
hereafter.
5.4 The award may be enhanced by "dividends" proposed by the Compensation
Committee and reviewed and approved by the Board. If so approved, any
such "dividend" for 1998 (which would enhance both the 1999 and the 2000
payouts) will be based upon, but will not be greater than, the Company
operating Return for fiscal year 1998; the "dividend" for 1999 (which
would enhance the 2000 payout) will be based upon, but will not be
greater than, the Company Operating Return for the fiscal year 1999.
5.5 Pro rata payments of Executive Bonus awards shall be made according to
the administrative guidelines established in Section 9 of the 1997 EPIP
Administrative Guide. Employees who become ineligible to participate in
the Plan for reasons specified in paragraph 9.1 of the 1997 EPIP
Administrative Guide still receive the Executive Bonus payments provided
that they meet the requirements of Section 8.0 of the 1997 EPIP
Administrative Guide.
6.0 Total Award Limitation
Notwithstanding any other provision of the Plan, the total of the
Executive Bonus Awards for 1997 may not exceed 100% of the 1997 EPIP
Awards for the Executive Bonus Plan participants in CL 27 through CL 30
plus 80% of the 1997 EPIP Awards for participants in CL 31 and above.
7.0 Amendment and Termination of the Plan
7.1 This Plan applies to fiscal year 1997 only (with payouts in 1999 and
2000).
7.2 The Plan may be continued, discontinued or amended by the Board of
Directors of the Company at any time for the remainder of 1997 after
written notice of termination is circulated or for fiscal years 1998 and
beyond. Amendments of this Incentive Plan after 1997 will not affect
payout of Awards granted under the 1997 Plan.
- 2 -
<PAGE> 3
ZILOG, INC.
1997
EMPLOYEE PERFORMANCE
INCENTIVE PLAN
EXECUTIVE BONUS
APPROVED:
12-18-96 /s/ EDGAR A. SACK
- ------------------------------ ------------------------------------
Date Edgar A. Sack
Director
Zilog, Inc.
12-18-96 /s/ WILLIAM A. JANEWAY
- ------------------------------ ------------------------------------
Date William A. Janeway
Director
Zilog, Inc.
12-18-96 /s/ HENRY KRESSEL
- ------------------------------ ------------------------------------
Date Henry Kressel
Director
Zilog, Inc.
12-18-96 /s/ THOMAS J. CONNORS
- ------------------------------ ------------------------------------
Date Thomas J. Connors
Director
Zilog, Inc.
12-18-96 /s/ ROBERT M. WHITE
- ------------------------------ ------------------------------------
Date Robert M. White
Director
Zilog, Inc.
12-18-96
- ------------------------------ ------------------------------------
Date Larry W. Wangberg
Director
Zilog, Inc.
- 3 -
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Michael J. Bradshaw (hereinafter "Bradshaw"), whereby
Zilog and Bradshaw agree that Bradshaw accepts employment as Senior Vice
President, Worldwide Operations of Zilog, under the following terms and
conditions:
1. Term. Zilog and Bradshaw agree that Bradshaw will be Senior Vice
President, Worldwide Operations of Zilog for a period of twenty four
(24) months, commencing on November 6, 1996 and ending November 5, 1998.
This Agreement may be extended upon written agreement of Zilog and
Bradshaw. If during the term of this Agreement a "Change in Control" of
Zilog occurs, the term of this Agreement will be extended for a period
of twenty four (24) months commencing on the earlier of the effective
date of the Change in Control or the date this Agreement would otherwise
expire; provided, however, in the case of a Change in Control that is
subject to an agreement that is executed before the date this Agreement
would otherwise expire but becomes effective on a closing date that will
occur after the date this Agreement would otherwise expire, there will
be no such automatic twenty four month extension if the closing date
does not occur within six (6) months after the date this Agreement would
otherwise expire. Under these circumstances the term of this Agreement
shall be extended six (6) months from the date it would otherwise
expire.
1
<PAGE> 2
For purposes of this Agreement, "Change in Control" shall mean the
occurrence of any of the following events:
(i) A change in the composition of the board of directors of Zilog,
Inc., as a result of which fewer than two-thirds of the
incumbent directors are directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24)
months prior to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of
at least a majority of the directors who had been
directors of Zilog, Inc. twenty-four (24) months prior
to such change and who were still in office at the time
of the election or nomination;
(ii) Any "person" (as such term is used in sections 13 (d) and 14(d)
of the Exchange Act) other than Zilog, Inc. (or its designee),
by the acquisition or aggregation of securities is or becomes
the beneficial owner, directly or indirectly, of securities of
Zilog, Inc. representing twenty percent (20%) or more of the
combined voting power of Zilog, Inc.'s then outstanding
securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of
directors;
2
<PAGE> 3
(iii) the sale of all or substantially all of the assets of Zilog,
Inc. to a third party who is not an affiliate (including a
parent or subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation,
sale, reorganization, dissolution or other such event or series
of events, which in the opinion of a majority of the members of
the board of Zilog, Inc. (as reflected in a written resolution
of the board of Zilog, Inc.) has resulted in a change of control
of Zilog, Inc.
2. Extent of Services. Bradshaw shall devote his entire time, attention and
energies to his position as Senior Vice President, Worldwide Operations
of Zilog and shall not, during the term of this Employment Agreement be
engaged in any other business activity whether or not such business
activity is pursued for gain, profit or other pecuniary advantage;
provided, that Bradshaw may engage in personal investment activities
consistent with Zilog's Conflict of Interest Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause
to be paid, to Bradshaw the sum of at least $18,375.00 as base
salary. Such sum will be paid in monthly installments or such
other normal periodic payment schedule
3
<PAGE> 4
as Zilog may establish for its executives. Bradshaw's salary
will be reviewed periodically in accordance with established
salary review procedures and adjustments to his salary, if any,
will be based upon such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan.
Bradshaw will be eligible to receive Awards and Payouts in
accordance with the terms of the Zilog Employee Performance
Incentive Plan (hereinafter "EPIP"), and the EPIP Executive
Bonus Plan (hereinafter "Executive Bonus") as such plans may be
modified from time to time and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Bradshaw
stock options under the 1990 Zilog Employee Stock Option Plan
(hereinafter "ZSOP") and the 1994 Long Term Incentive Plan
(hereinafter "LTIP"), copies of such plans being attached
hereto. Vesting will continue in accordance with the plan
provisions during the term of this Agreement.
4. Benefits. As an employee of Zilog, Bradshaw will be entitled to such
benefits as Zilog normally provides its employees. In addition, Zilog
will provide Bradshaw with Directors and Officers (D & O) insurance in
an amount deemed appropriate by the Company.
4
<PAGE> 5
5. Company Policies. Bradshaw agrees to be bound by all Zilog Company
Policies applicable to its employees including but not limited to
Business Ethics, Conflict of Interest, Proprietary Information and
Antitrust Compliance, and he agrees to sign any such documents as Zilog
requests evidencing such agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Bradshaw at any time during the term of this Agreement,
for any reason or for no reason, with or without cause, by giving
Bradshaw at least thirty (30) days written notice of such termination or
compensation in lieu of notice; and Bradshaw may terminate his
employment by giving at least thirty (30) days written notice to Zilog.
Zilog reserves the right to accelerate any deferred resignation date
given it by Bradshaw, and any such acceleration of such date will not
alter the character of such termination from voluntary to involuntary.
7. Payment Upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Bradshaw, if his
employment with Zilog is terminated prior to the end of this Agreement,
shall be as follows:
5
<PAGE> 6
A. If Bradshaw voluntarily resigns his employment for 1) other than
Good Reason (as defined in Paragraph 7.B. below) or 2) other
than Retirement (as defined in Paragraph 7.C. below) or 3) other
than the sale, merger or change in ownership of Zilog (as
defined in Paragraph 7.G below) prior to the termination date of
this Agreement, he will be entitled to: (1) base salary then due
and owing for services previously performed, (2) Payouts under
EPIP which become payable to Bradshaw pursuant to the terms of
EPIP prior to the effective date of resignation, and (3)
Payouts under the Executive Bonus which become payable to
Bradshaw pursuant to the terms of the Executive Bonus prior to
the effective date of resignation. Upon payment of the foregoing
items, Zilog will have no further obligation to Bradshaw.
B. If Bradshaw voluntarily resigns his employment for Good Reason,
as defined herein, prior to the termination date of this
Agreement, he will be entitled to the benefits provided in
Paragraph 7.D. below. Good Reason, as used herein, shall mean:
(i) a reduction in Bradshaw's authority, responsibility or
status as Senior Vice President, Worldwide Operations
such that Bradshaw ceases to be an "officer" as that
term is defined in the regulations under Section 16 of
the Securities Exchange Act of 1934;
6
<PAGE> 7
(ii) a reduction in Bradshaw's base salary other than in
connection with a general reduction applicable to the
Vice Presidents of Zilog who are members of the
Management Committee;
(iii) a reduction in form and effect or cessation of any
benefit or compensation plan, except EPIP, the Executive
Bonus, the Deferred Compensation Plan, or those that may
occur for the Zilog employee group in general in accord
with a general policy change;
(iv) a requirement to relocate, except for office relocations
that would not increase Bradshaw's oneway commute
distance by more than 20 miles;
(v) any material breach of this Agreement on the part of
Zilog not fully remedied by Zilog within sixty (60) days
after written notice by Bradshaw of such breach.
C. If Bradshaw retires as defined in PM60-05 prior to the
termination date of this Agreement, he will be entitled to the
following at the effective date of retirement: (1) base salary
then due and owing for services previously performed, (2)
Payouts under EPIP for Awards made prior to the effective date
of the retirement, and (3) Payouts under the Executive Bonus for
Awards made prior to the effective date
7
<PAGE> 8
of the retirement. EPIP and Executive Bonus Awards may also be
granted at Zilog's sole discretion for the year in which the
retirement occurs, prorated to the date of the retirement.
Payouts for all Awards will be made at the same time and on the
same schedule as those for active employees. Upon the payment of
the foregoing items, Zilog will have no further obligation to
Bradshaw.
D. If Zilog terminates Bradshaw's employment during the term of
this Agreement other than for Cause or Detrimental Activity as
defined in 7.E. below, he will be entitled to receive the
following: (1) the then current base salary for the period
remaining in this Agreement, (2) Payouts under EPIP for Awards
made prior to the effective date of termination of employment
which Payouts are payable to Bradshaw pursuant to the terms of
EPIP prior to expiration of the term of this Agreement, and (3)
Payouts under the Executive Bonus for Awards made prior to the
effective date of termination of employment which Payouts are
payable to Bradshaw pursuant to the terms of the Executive Bonus
prior to expiration of the term of this Agreement. Bradshaw will
not be eligible for Awards under EPIP or the Executive Bonus
made after the date on which his employment at Zilog ceased or
for Payouts made on any Awards after the
8
<PAGE> 9
expiration date of this Agreement. Vesting of common stock and
stock options granted under ZSOP and LTIP will continue for the
period remaining in this Agreement. Upon the payment of the
foregoing items, Zilog will have no further obligation to
Bradshaw.
E. If Zilog terminates Bradshaw during the term of this Agreement
for Cause, or for Detrimental Activity as defined herein, Zilog
will have no further monetary obligation to Bradshaw other than:
(1) any base salary then due and owing for services previously
performed, (2) Payouts under EPIP which become payable to
Bradshaw pursuant to the terms of EPIP prior to the effective
date of termination, and (3) Payouts under the Executive Bonus
which become payable to Bradshaw pursuant to the terms of the
Executive Bonus prior to the effective date of termination.
Cause or Detrimental Activity shall be a willful violation of a
major company policy, conviction of any criminal or civil law
involving moral turpitude, willful misconduct which results in a
material reduction in Bradshaw's effectiveness in the
performance of his duties, or willful and reckless disregard for
the best interests of the Company.
9
<PAGE> 10
F. If Bradshaw ceases to be an employee of Zilog during the term of
this Agreement because of total and permanent disability or
death, Zilog's obligations to Bradshaw or his beneficiaries will
be limited solely to: (1) any base salary then due and owing for
services previously performed, (2) Payouts in accordance with
the terms of EPIP, (3) Payouts in accordance with the terms of
the Executive Bonus, and (4) any benefits including ZSOP and
LTIP benefits normally provided by Zilog to its employees due to
or on account of total and permanent disability or death.
G. If Bradshaw leaves his employment, either voluntarily for Good
Reason or involuntarily for reasons other than for Cause or
Detrimental Activity, following the effective date of a Change
in Control prior to the termination date of this Agreement, he
will be entitled to receive the following; (1) the then current
base salary for the period remaining in this Agreement, payable
in a cash lump sum not more than five (5) business days
following the date of leaving employment, (2) Payouts under EPIP
for Awards made prior to the effective date of termination of
employment, and (3) Payouts under the Executive Bonus for Awards
made prior to the effective date of termination of employment.
EPIP and Executive Bonuses shall also be awarded for the year in
which the termination of employment occurs and shall be
10
<PAGE> 11
calculated in accordance with the terms of such arrangements
assuming the date of Bradshaw's termination is the last day of
Zilog's fiscal year and based on Zilog's financial performance
for the portion of such fiscal year that includes calculated
financials for Zilog as a separate entity. All of the above EPIP
and Executive Bonus Awards shall be paid in a cash lump sum
within five (5) business days of the date of Bradshaw's
termination of employment. All outstanding unvested stock
options whether granted under ZSOP and LTIP or otherwise will
continue to vest for the period of time remaining in the
Agreement (the "Continuation Period"). Regardless of the
provisions of ZSOP, LTIP or any other plans or agreements, the
Continuation Period shall be counted as employment with Zilog
for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by
Bradshaw when his employment terminates. During the remaining
term of this Agreement Bradshaw (and, where applicable, his
dependents) shall be entitled to continue participation in the
group insurance plans maintained by Zilog, including life,
disability and health insurance programs, as if he were still an
employee of Zilog. To the extent that Zilog finds it impossible
to cover Bradshaw under its group insurance policies during such
period, Zilog shall provide Bradshaw with individual policies
which offer at least
11
<PAGE> 12
the same level of coverage and which impose not more than the
same costs on him as if he were still an employee of Zilog. The
foregoing notwithstanding, in the event that Bradshaw becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by Zilog under this
paragraph shall terminate immediately. Any group health
continuation coverage that Zilog is otherwise required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
("COBRA") shall be offered when coverage under this paragraph
terminates.
Except as provided in the paragraph immediately following, upon
payment of the foregoing items, Zilog will have no further
obligation to Bradshaw.
In the event that it is determined that any payment or
distribution of any type to or for the benefit of Bradshaw made
by Zilog, by any of its affiliates, by any person who acquires
ownership or effective control of Zilog or ownership of a
substantial portion of Zilog's assets (within the meaning of
section 280G of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the "Code")) or by any affiliate
of such person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise
tax imposed by section 4999 of the Code or any interest or
penalties with respect to
12
<PAGE> 13
such excise tax (such excise tax, together with any such
interest or penalties, are collectively referred to as the
"Excise Tax"), then Bradshaw shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount that
shall fund the payment by Bradshaw of any Excise Tax on the
Total Payments as well as all income taxes imposed on the
Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment
and any interest or penalties imposed with respect to taxes on
the Gross-Up Payment or any Excise Tax.
All mathematical determinations and all determinations of
whether any of the Tota1 Payments are "parachute payments"
(within the meaning of section 280G of the Code) that are
required to be made hereunder, including all determinations of
whether a Gross-Up Payment is required and of the amount of such
Gross-Up Payment, shall be made by the independent auditors
retained by Zilog most recently prior to the Change in Control
(the "Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and
any other relevant matters, both to Zilog and to Bradshaw within
seven (7) business days of Bradshaw's termination date, if
applicable, or such earlier time as is requested by Zilog or by
Bradshaw (if Bradshaw reasonably believes that any of the Total
Payments may be subject to the Excise Tax) . If the Auditors
determine that no Excise Tax is payable by Bradshaw, it shall
furnish Bradshaw with
13
<PAGE> 14
a written statement that such Auditors have concluded that no
Excise Tax is payable (including the reasons therefor) and that
Bradshaw has substantial authority not to report any Excise Tax
on his federal income tax return. If a Gross-Up Payment is
determined to be payable, it shall be paid to Bradshaw within
five (5) business days after the Determination is delivered to
Zilog or Bradshaw. Any determination by the Auditors shall be
binding upon Zilog and Bradshaw, absent manifest error.
As a result of uncertainty in the application of section 4999 of
the Code at the time of the initial determination by the
Auditors hereunder, it is possible that Gross-Up Payments not
made by Zilog should have been made ("Underpayments") or that
Gross-Up Payments will have been made by Zilog which should not
have been made ("Overpayments"). In either event, the Auditors
shall determine the amount of the Underpayment or Overpayment
that has occurred. In the case of an Underpayment, the amount of
such Underpayment shall promptly be paid by Zilog to or for the
benefit of Bradshaw. In the case of an Overpayment, the Employee
shall, at the direction and expense of Zilog, take such steps as
are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and
procedures established by, Zilog and otherwise reasonably
cooperate with Zilog to correct such Overpayment; provided,
however, that (a.) Bradshaw shall in
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<PAGE> 15
no event be obligated to return to Zilog an amount greater than the
net after-tax portion of the Overpayment that Bradshaw has retained
or has recovered as a refund from the applicable taxing authorities
and (b.) this provision shall be interpreted in a manner consistent
with the intent of this excise tax restoration provision which is to
make Bradshaw whole, on an after-tax basis, for the application of
the Excise Tax, it being understood that the correction of an
Overpayment may result in Bradshaw's repaying to Zilog an amount
which is less than the Overpayment.
8. Bradshaw Representations. Bradshaw represents to Zilog that to the best of
his knowledge he is under no obligation to any employer or third party
which would preclude his full, complete and unfettered discharge of his
duties under this Agreement.
9. Notices. Any notices required to be given hereunder shall be in writing,
and if by Zilog shall be addressed to Bradshaw as indicated in Zilog's
personnel records or such other address as Bradshaw shall specify in
writing and if by Bradshaw to Zilog at:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
Attn: Vice President, Human Resources and
Administration
15
<PAGE> 16
Such addresses may be changed by written notice from either Zilog or
Bradshaw, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon Zilog, its successors and assigns. Bradshaw may not
assign, transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the business
and/or assets of Zilog to assume expressly and agree, in substance and
form satisfactory to Bradshaw, to perform this Agreement in the same
manner and to the same extent Zilog would be required to perform it if no
succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of this
Agreement by Bradshaw shall not operate or be construed as a waiver of any
subsequent breach by Bradshaw.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
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14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II:
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached as Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement, attached
as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI:
G. Statement addressed to "Human Resources," attached as Exhibit VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws of
the State of California, without regard to conflict of laws principles.
Executed effective May 22, 1997
By /s/ MICHAEL J. BRADSHAW By /s/ E. A. SACK, PRESIDENT AND CEO
-------------------------- -------------------------------------
Michael J. Bradshaw E. A. Sack, President and CEO
Dated: 22 May 1997 Dated: 5-22-97
----------------------- ----------------------------------
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Al Secor (hereinafter "Secor"), whereby Zilog and
Secor agree that Secor accepts employment as Vice President and General Manager,
Consumer & Peripherals Division of Zilog, under the following terms and
conditions:
1. Term. Zilog and Secor agree that Secor will be Vice President and General
Manager, Consumer & Peripherals Division of Zilog for a period of twenty
four (24) months, commencing on January 27, 1997 and ending November 5,
1998. This Agreement may be extended upon written agreement of Zilog and
Secor. If during the term of this Agreement a "Change in Control" of Zilog
occurs, the term of this Agreement will be extended for a period of twenty
four (24) months commencing on the earlier of the effective date of the
Change in Control or the date this Agreement would otherwise expire;
provided, however, in the case of a Change in Control that is subject to
an agreement that is executed before the date this Agreement would
otherwise expire but becomes effective on a closing date that will occur
after the date this Agreement would otherwise expire, there will be no
such automatic twenty four month extension if the closing date does not
occur within six (6) months after the date this Agreement would otherwise
expire. Under these circumstances the term of this Agreement shall be
extended six (6) months from the date it would otherwise expire.
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<PAGE> 2
For purposes of this Agreement, "Change in Control" shall mean the
occurrence of any of the following events:
(i) A change in the composition of the board of directors of Zilog,
Inc., as a result of which fewer than two-thirds of the incumbent
directors are directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24) months
prior to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of at
least a majority of the directors who had been directors of
Zilog, Inc. twenty-four (24) months prior to such change and
who were still in office at the time of the election or
nomination;
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) other than Zilog, Inc. (or its designee), by the
acquisition or aggregation of securities is or becomes the
beneficial owner, directly or indirectly, of securities of Zilog,
Inc. representing twenty percent (20%) or more of the combined
voting power of Zilog, Inc.'s then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors;
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<PAGE> 3
(iii) the sale of all or substantially all of the assets of Zilog, Inc. to
a third party who is not an affiliate (including a parent or
subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation, sale,
reorganization, dissolution or other such event or series of events,
which in the opinion of a majority of the members of the board of
Zilog, Inc. (as reflected in a written resolution of the board of
Zilog, Inc.) has resulted in a change of control of Zilog, Inc.
2. Extent of Services. Secor shall devote his entire time, attention and
energies to his position as vice President and General Manager, Consumer &
Peripherals Division of Zilog and shall not, during the term of this
Employment Agreement be engaged in any other business activity whether or
not such business activity is pursued for gain, profit or other pecuniary
advantage; provided, that Secor may engage in personal investment
activities consistent with Zilog's Conflict of Interest Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause to be
paid, to Secor the sum of at least $16,917.00 as base salary. Such
sum will be paid in monthly installments or such other normal
periodic payment schedule
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<PAGE> 4
as Zilog may establish for its executives. Secor's salary will be reviewed
periodically in accordance with established salary review procedures and
adjustments to his salary, if any, will be based upon such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan. Secor
will be eligible to receive Awards and Payouts in accordance with
the terms of the Zilog Employee Performance Incentive Plan
(hereinafter "EPIP"), and the EPIP Executive Bonus Plan (hereinafter
"Executive Bonus") as such plans may be modified from time to time
and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Secor stock
options under the 1990 Zilog Employee Stock Option Plan (hereinafter
"ZSOP") and the 1994 Long Term Incentive Plan (hereinafter "LTIP"),
copies of such plans being attached hereto. Vesting will continue in
accordance with the plan provisions during the term of this
Agreement.
4. Benefits. As an employee of Zilog, Secor will be entitled to such benefits
as Zilog normally provides its employees. In addition, Zilog will provide
Secor with Directors and Officers (D & O) insurance in an amount deemed
appropriate by the Company.
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<PAGE> 5
5. Company Policies. Secor agrees to be bound by all Zilog Company Policies
applicable to its employees including but not limited to Business Ethics,
Conflict of Interest, Proprietary Information and Antitrust Compliance,
and he agrees to sign any such documents as Zilog requests evidencing such
agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Secor at any time during the term of this Agreement, for any
reason or for no reason, with or without cause, by giving Secor at least
thirty (30) days written notice of such termination or compensation in
lieu of notice; and Secor may terminate his employment by giving at least
thirty (30) days written notice to Zilog. Zilog reserves the right to
accelerate any deferred resignation date given it by Secor, and any such
acceleration of such date will not alter the character of such termination
from voluntary to involuntary.
7. Payment Upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Secor, if his employment
with Zilog is terminated prior to the end of this Agreement, shall be as
follows:
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<PAGE> 6
A. If Secor voluntarily resigns his employment for 1) other than Good
Reason (as defined in Paragraph 7.B. below) or 2) other than
Retirement (as defined in Paragraph 7.C. below) or 3) other than the
sale, merger or change in ownership of Zilog (as defined in
Paragraph 7.G below) prior to the termination date of this
Agreement, he will be entitled to: (1) base salary then due and
owing for services previously performed, (2) Payouts under EPIP
which become payable to Secor pursuant to the terms of EPIP prior to
the effective date of resignation, and (3) Payouts under the
Executive Bonus which become payable to Secor pursuant to the terms
of the Executive Bonus prior to the effective date of resignation.
Upon payment of the foregoing items, Zilog will have no further
obligation to Secor.
B. If Secor voluntarily resigns his employment for Good Reason, as
defined herein, prior to the termination date of this Agreement, he
will be entitled to the benefits provided in Paragraph 7.D. below.
Good Reason, as used herein, shall mean:
(i) a reduction in Secor's authority, responsibility or status as
Vice President and General Manager, Consumer & Peripherals
Division such that Secor ceases to be an "officer" as that
term is defined in the regulations under Section 16 of the
Securities Exchange Act of 1934;
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<PAGE> 7
(ii) a reduction in Secor's base salary other than in connection
with a general reduction applicable to the Vice Presidents of
Zilog who are members of the Management Committee;
(iii) a reduction in form and effect or cessation of any benefit or
compensation plan, except EPIP, the Executive Bonus, the
Deferred Compensation Plan, or those that may occur for the
Zilog employee group in general in accord with a general
policy change;
(iv) a requirement to relocate, except for office relocations that
would not increase Secor's one-way commute distance by more
than 20 miles;
(v) any material breach of this Agreement on the part of Zilog not
fully remedied by Zilog within sixty (60) days after written
notice by Secor of such breach.
C. If Secor retires as defined in PM60-05 prior to the termination date
of this Agreement, he will be entitled to the following at the
effective date of retirement: (1) base salary then due and owing for
services previously performed, (2) Payouts under EPIP for Awards
made prior to the effective date of the retirement, and (3) Payouts
under the Executive Bonus for Awards made prior to the effective
date
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<PAGE> 8
of the retirement. EPIP and Executive Bonus Awards may also be
granted at Zilog's sole discretion for the year in which the
retirement occurs, prorated to the date of the retirement. Payouts
for all Awards will be made at the same time and on the same
schedule as those for active employees. Upon the payment of the
foregoing items, Zilog will have no further obligation to Secor.
D. If Zilog terminates Secor's employment during the term of this
Agreement other than for Cause or Detrimental Activity as defined in
7.E. below, he will be entitled to receive the following: (1) the
then current base salary for the period remaining in this Agreement,
(2) Payouts under EPIP for Awards made prior to the effective date
of termination of employment which Payouts are payable to Secor
pursuant to the terms of EPIP prior to expiration of the term of
this Agreement, and (3) Payouts under the Executive Bonus for Awards
made prior to the effective date of termination of employment which
Payouts are payable to Secor pursuant to the terms of the Executive
Bonus prior to expiration of the term of this Agreement. Secor will
not be eligible for Awards under EPIP or the Executive Bonus made
after the date on which his employment at Zilog ceased or for
Payouts made on any Awards after the
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<PAGE> 9
expiration date of this Agreement. Vesting of common stock and stock
options granted under ZSOP and LTIP will continue for the period
remaining in this Agreement. Upon the payment of the foregoing
items, Zilog will have no further obligation to Secor.
E. If Zilog terminates Secor during the term of this Agreement for
Cause, or for Detrimental Activity as defined herein, Zilog will
have no further monetary obligation to Secor other than: (1) any
base salary then due and owing for services previously performed,
(2) Payouts under EPIP which become payable to Secor pursuant to the
terms of EPIP prior to the effective date of termination, and (3)
Payouts under the Executive Bonus which become payable to Secor
pursuant to the terms of the Executive Bonus prior to the effective
date of termination. Cause or Detrimental Activity shall be a
willful violation of a major company policy, conviction of any
criminal or civil law involving moral turpitude, willful misconduct
which results in a material reduction in Secor's effectiveness in
the performance of his duties, or willful and reckless disregard for
the best interests of the Company.
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<PAGE> 10
F. If Secor ceases to be an employee of Zilog during the term of this
Agreement because of total and permanent disability or death,
Zilog's obligations to Secor or his beneficiaries will be limited
solely to: (1) any base salary then due and owing for services
previously performed, (2) Payouts in accordance with the terms of
EPIP, (3) Payouts in accordance with the terms of the Executive
Bonus, and (4) any benefits including ZSOP and LTIP benefits
normally provided by Zilog to its employees due to or on account of
total and permanent disability or death.
G. If Secor leaves his employment, either voluntarily for Good Reason
or involuntarily for reasons other than for Cause or Detrimental
Activity, following the effective date of a Change in Control prior
to the termination date of this Agreement, he will be entitled to
receive the following: (1) the then current base salary for the
period remaining in this Agreement, payable in a cash lump sum not
more than five (5) business days following the date of leaving
employment, (2) Payouts under EPIP for Awards made prior to the
effective date of termination of employment, and (3) Payouts under
the Executive Bonus for Awards made prior to the effective date of
termination of employment. EPIP and Executive Bonuses shall also be
awarded for the year in which the termination of employment occurs
and shall be
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<PAGE> 11
calculated in accordance with the terms of such arrangements
assuming the date of Secor's termination is the last day of Zilog's
fiscal year and based on Zilog's financial performance for the
portion of such fiscal year that includes calculated financials for
Zilog as a separate entity. All of the above EPIP and Executive
Bonus Awards shall be paid in a cash lump sum within five (5)
business days of the date of Secor's termination of employment. All
outstanding unvested stock options whether granted under ZSOP and
LTIP or otherwise will continue to vest for the period of time
remaining in the Agreement (the "Continuation Period"). Regardless
of the provisions of ZSOP, LTIP or any other plans or agreements,
the Continuation Period shall be counted as employment with Zilog
for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by Secor
when his employment terminates. During the remaining term of this
Agreement Secor (and, where applicable, his dependents) shall be
entitled to continue participation in the group insurance plans
maintained by Zilog, including life, disability and health insurance
programs, as if he were still an employee of Zilog. To the extent
that Zilog finds it impossible to cover Secor under its group
insurance policies during such period, Zilog shall provide Secor
with individual policies which offer at least
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<PAGE> 12
the same level of coverage and which impose not more than the same
costs on him as if he were still an employee of Zilog. The foregoing
notwithstanding, in the event that Secor becomes eligible for
comparable group insurance coverage in connection with new
employment, the coverage provided by Zilog under this paragraph
shall terminate immediately. Any group health continuation coverage
that Zilog is otherwise required to offer under the Consolidated
Omnibus Budget Reconciliation Act of 1986 ("COBRA") shall be offered
when coverage under this paragraph terminates.
Except as provided in the paragraph immediately following, upon
payment of the foregoing items, Zilog will have no further
obligation to Secor.
In the event that it is determined that any payment or distribution
of any type to or for the benefit of Secor made by Zilog, by any of
its affiliates, by any person who acquires ownership or effective
control of Zilog or ownership of a substantial portion of Zilog's
assets (within the meaning of section 280G of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid or payable
or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by section 4999 of the Code or any interest
or penalties with respect to
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<PAGE> 13
to such excise tax (such excise tax, together with any such interest
or penalties, are collectively referred to as the "Excise Tax"),
then Secor shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount that shall fund the payment by
Secor of any Excise Tax on the Total Payments as well as all income
taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the
Gross-Up Payment and any interest or penalties imposed with respect
to taxes on the Gross-Up Payment or any Excise Tax.
All mathematical determinations and all determinations of whether
any of the Total Payments are "parachute payments" (within the
meaning of section 280G of the Code) that are required to be made
hereunder, including all determinations of whether a Gross-Up
Payment is required and of the amount of such Gross-Up Payment,
shall be made by the independent auditors retained by Zilog most
recently prior to the Change in Control (the "Auditors"), who shall
provide their determination (the "Determination"), together with
detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matters, both to Zilog and
to Secor within seven (7) business days of Secor's termination date,
if applicable, or such earlier time as is requested by Zilog or by
Secor (if Secor reasonably believes that any of the Total Payments
may be subject to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by Secor, it shall furnish Secor with a
written statement
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<PAGE> 14
that such Auditors have concluded that no Excise Tax is payable
(including the reasons therefor) and that Secor has substantial
authority not to report any Excise Tax on his federal income tax
return. If a Gross-Up Payment is determined to be payable, it shall
be paid to Secor within five (5) business days after the
Determination is delivered to Zilog or Secor. Any determination by
the Auditors shall be binding upon Zilog and Secor, absent manifest
error.
As a result of uncertainty in the application of section 4999 of the
Code at the time of the initial determination by the Auditors
hereunder, it is possible that Gross-Up Payments not made by Zilog
should have been made ("Underpayments") or that Gross-Up Payments
will have been made by Zilog which should not have been made
("Overpayments"). In either event, the Auditors shall determine the
amount of the Underpayment or Overpayment that has occurred. In the
case of an Underpayment, the amount of such Underpayment shall
promptly be paid by Zilog to or for the benefit of Secor. In the
case of an Overpayment, the Employee shall, at the direction and
expense of Zilog, take such steps as are reasonably necessary
(including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, Zilog
and otherwise reasonably cooperate with Zilog to correct such
Overpayment; provided, however, that (a.) Secor shall in no event be
obligated to return to Zilog an amount greater than
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<PAGE> 15
the net after-tax portion of the Overpayment that Secor has retained
or has recovered as a refund from the applicable taxing authorities
and (b.) this provision shall be interpreted in a manner consistent
with the intent of this excise tax restoration provision which is to
make Secor whole, on an after-tax basis, for the application of the
Excise Tax, it being understood that the correction of an
Overpayment may result in Secor's repaying to Zilog an amount which
is less than the Overpayment.
8. Secor Representations. Secor represents to Zilog that to the
best of his knowledge he is under no obligation to any
employer or third party which would preclude his full,
complete and unfettered discharge of his duties under this
Agreement.
9. Notices. Any notices required to be given hereunder shall be
in writing, and if by Zilog shall be addressed to Secor as
indicated in Zilog's personnel records or such other address
as Secor shall specify in writing and if by Secor to Zilog at:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
Attn: Vice President, Human Resources and
Administration
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Such addresses may be changed by written notice from either Zilog or
Secor, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon Zilog, its successors and assigns. Secor may not assign,
transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the business
and/or assets of Zilog to assume expressly and agree, in substance and
form satisfactory to Secor, to perform this Agreement in the same manner
and to the same extent Zilog would be required to perform it if no
succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of this
Agreement by Secor shall not operate or be construed as a waiver of any
subsequent breach by Secor.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
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14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II;
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached as Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement, attached
as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI;
G. Statement addressed to "Human Resources," attached as Exhibit VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws of
the State of California, without regard to conflict of laws principles.
Executed effective May 22, 1997
By /s/ AL SECOR By /s/ E. A. SACK
------------------------------- --------------------------------
Al Secor E. A. Sack, President and CEO
Dated: 5/22/97 Dated: 5-22-97
---------------------------- -----------------------------
17
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Richard L. Moore (hereinafter "Moore"), whereby Zilog
and Moore agree that Moore accepts employment as Vice President, Worldwide
Technology of Zilog, under the following terms and conditions:
1. Term. Zilog and Moore agree that Moore will be Vice President,
Worldwide Technology of Zilog for a period of twenty four (24)
months, commencing on November 6, 1996 and ending November 5,
1998. This Agreement may be extended upon written agreement of
Zilog and Moore. If during the term of this Agreement a "Change
in Control" of Zilog occurs, the term of this Agreement will be
extended for a period of twenty four (24) months commencing on
the earlier of the effective date of the Change in Control or
the date this Agreement would otherwise expire; provided,
however, in the case of a Change in Control that is subject to
an agreement that is executed before the date this Agreement
would otherwise expire but becomes effective on a closing date
that will occur after the date this Agreement would otherwise
expire, there will be no such automatic twenty four month
extension if the closing date does not occur within six (6)
months after the date this Agreement would otherwise expire.
Under these circumstances the term of this Agreement shall be
extended six (6) months from the date it would otherwise expire.
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For purposes of this Agreement, "Change in Control" shall mean the occurrence of
any of the following events:
(i) A change in the composition of the board of directors of Zilog, Inc., as
a result of which fewer than two-thirds of the incumbent directors are
directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24) months prior
to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of at least
a majority of the directors who had been directors of Zilog,
Inc. twenty-four (24) months prior to such change and who were
still in office at the time of the election or nomination;
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of the
Exchange Act) other than Zilog, Inc. (or its designee), by the
acquisition or aggregation of securities is or becomes the beneficial
owner, directly or indirectly, of securities of Zilog, Inc. representing
twenty percent (20%) or more of the combined voting power of Zilog,
Inc.'s then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at
elections of directors;
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(iii) the sale of all or substantially all of the assets of Zilog,
Inc. to a third party who is not an affiliate (including a
parent or subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation,
sale, reorganization, dissolution or other such event or series
of events, which in the opinion of a majority of the members of
the board of Zilog, Inc. (as reflected in a written resolution
of the board of Zilog, Inc.) has resulted in a change of control
of Zilog, Inc.
2. Extent of Services. Moore shall devote his entire time, attention and
energies to his position as Vice President, Worldwide Technology of
Zilog and shall not, during the term of this Employment Agreement be
engaged in any other business activity whether or not such business
activity is pursued for gain, profit or other pecuniary advantage;
provided, that Moore may engage in personal investment activities
consistent with Zilog's Conflict of Interest Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause
to be paid, to Moore the sum of at least $17,917.00 as base
salary. Such sum will be paid in monthly installments or such
other normal periodic payment schedule
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as Zilog may establish for its executives. Moore's salary will
be reviewed periodically in accordance with established salary
review procedures and adjustments to his salary, if any, will be
based upon such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan.
Moore will be eligible to receive Awards and Payouts in
accordance with the terms of the Zilog Employee Performance
Incentive Plan (hereinafter "EPIP"), and the EPIP Executive
Bonus Plan (hereinafter "Executive Bonus") as such plans may be
modified from time to time and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Moore
stock options under the 1990 Zilog Employee Stock Option Plan
(hereinafter "ZSOP") and the 1994 Long Term Incentive Plan
(hereinafter "LTIP"), copies of such plans being attached
hereto. Vesting will continue in accordance with the plan
provisions during the term of this Agreement.
4. Benefits. As an employee of Zilog, Moore will be entitled to such
benefits as Zilog normally provides its employees. In addition, Zilog
will provide Moore with Directors and Officers (D & O) insurance in an
amount deemed appropriate by the Company.
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5. Company Policies. Moore agrees to be bound by all Zilog Company Policies
applicable to its employees including but not limited to Business
Ethics, Conflict of Interest, Proprietary Information and Antitrust
Compliance, and he agrees to sign any such documents as Zilog requests
evidencing such agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Moore at any time during the term of this Agreement, for
any reason or for no reason, with or without cause, by giving Moore at
least thirty (30) days written notice of such termination or
compensation in lieu of notice; and Moore may terminate his employment
by giving at least thirty (30) days written notice to Zilog. Zilog
reserves the right to accelerate any deferred resignation date given it
by Moore, and any such acceleration of such date will not alter the
character of such termination from voluntary to involuntary.
7. Payment upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Moore, if his
employment with Zilog is terminated prior to the end of this Agreement,
shall be as follows:
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A. If Moore voluntarily resigns his employment for 1) other than
Good Reason (as defined in Paragraph 7.B. below) or 2) other
than Retirement (as defined in Paragraph 7.C. below) or 3) other
than the sale, merger or change in ownership of Zilog (as
defined in Paragraph 7.G below) prior to the termination date of
this Agreement, he will be entitled to: (1) base salary then due
and owing for services previously performed, (2) Payouts under
EPIP which become payable to Moore pursuant to the terms of EPIP
prior to the effective date of resignation, and (3) Payouts
under the Executive Bonus which become payable to Moore pursuant
to the terms of the Executive Bonus prior to the effective date
of resignation. Upon payment of the foregoing items, Zilog will
have no further obligation to Moore.
B. If Moore voluntarily resigns his employment for Good Reason, as
defined herein, prior to the termination date of this Agreement,
he will be entitled to the benefits provided in Paragraph 7.D.
below. Good Reason, as used herein, shall mean:
(i) a reduction in Moore's authority, responsibility or
status as Vice President, Worldwide Technology such that
Moore ceases to be an "officer" as that term is defined
in the regulations under Section 16 of the Securities
Exchange Act of 1934;
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<PAGE> 7
(ii) a reduction in Moore's base salary other than in
connection with a general reduction applicable to the
Vice Presidents of Zilog who are members of the
Management Committee;
(iii) a reduction in form and effect or cessation of any
benefit or compensation plan, except EPIP, the Executive
Bonus, the Deferred Compensation Plan, or those that may
occur for the Zilog employee group in general in accord
with a general policy change;
(iv) a requirement to relocate, except for office relocations
that would not increase Moore's one-way commute distance
by more than 20 miles;
(v) any material breach of this Agreement on the part of
Zilog not fully remedied by Zilog within sixty (60) days
after written notice by Moore of such breach.
C. If Moore retires as defined in PM60-05 prior to the termination date of
this Agreement, he will be entitled to the following at the effective
date of retirement: (1) base salary then due and owing for services
previously performed, (2) Payouts under EPIP for Awards made prior to
the effective date of the retirement, and (3) Payouts under the
Executive Bonus for Awards made prior to the effective date
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<PAGE> 8
of the retirement. EPIP and Executive Bonus Awards may also be granted
at Zilog's sole discretion for the year in which the retirement occurs,
prorated to the date of the retirement. Payouts for all Awards will be
made at the same time and on the same schedule as those for active
employees. Upon the payment of the foregoing items, Zilog will have no
further obligation to Moore.
D. If Zilog terminates Moore's employment during the term of this Agreement
other than for Cause or Detrimental Activity as defined in 7.E. below,
he will be entitled to receive the following: (1) the then current base
salary for the period remaining in this Agreement, (2) Payouts under
EPIP for Awards made prior to the effective date of termination of
employment which Payouts are payable to Moore pursuant to the terms of
EPIP prior to expiration of the term of this Agreement, and (3) Payouts
under the Executive Bonus for Awards made prior to the effective date of
termination of employment which Payouts are payable to Moore pursuant to
the terms of the Executive Bonus prior to expiration of the term of this
Agreement. Moore will not be eligible for Awards under EPIP or the
Executive Bonus made after the date on which his employment at Zilog
ceased or for Payouts made on any Awards after the
8
<PAGE> 9
expiration date of this Agreement. Vesting of common stock and stock
options granted under ZSOP and LTIP will continue for the period
remaining in this Agreement. Upon the payment of the foregoing items,
Zilog will have no further obligation to Moore.
E. If Zilog terminates Moore during the term of this Agreement for Cause,
or for Detrimental Activity as defined herein, Zilog will have no
further monetary obligation to Moore other than: (1) any base salary
then due and owing for services previously performed, (2) Payouts under
EPIP which become payable to Moore pursuant to the terms of EPIP prior
to the effective date of termination, and (3) Payouts under the
Executive Bonus which become payable to Moore pursuant to the terms of
the Executive Bonus prior to the effective date of termination. Cause or
Detrimental Activity shall be a willful violation of a major company
policy, conviction of any criminal or civil law involving moral
turpitude, willful misconduct which results in a material reduction in
Moore's effectiveness in the performance of his duties, or willful and
reckless disregard for the best interests of the Company.
9
<PAGE> 10
F. If Moore ceases to be an employee of Zilog during the term of this
Agreement because of total and permanent disability or death, Zilog's
obligations to Moore or his beneficiaries will be limited solely to: (1)
any base salary then due and owing for services previously performed,
(2) Payouts in accordance with the terms of EPIP, (3) Payouts in
accordance with the terms of the Executive Bonus, and (4) any benefits
including ZSOP and LTIP benefits normally provided by Zilog to its
employees due to or on account of total and permanent disability or
death.
G. If Moore leaves his employment, either voluntarily for Good Reason or
involuntarily for reasons other than for Cause or Detrimental Activity,
following the effective date of a Change in Control prior to the
termination date of this Agreement, he will be entitled to receive the
following: (1) the then current base salary for the period remaining in
this Agreement, payable in a cash lump sum not more than five (5)
business days following the date of leaving employment, (2) Payouts
under EPIP for Awards made prior to the effective date of termination of
employment, and (3) Payouts under the Executive Bonus for Awards made
prior to the effective date of termination of employment. EPIP and
Executive Bonuses shall also be awarded for the year in which the
termination of employment occurs and shall be
10
<PAGE> 11
calculated in accordance with the terms of such arrangements assuming
the date of Moore's termination is the last day of Zilog's fiscal year
and based on Zilog's financial performance for the portion of such
fiscal year that includes calculated financials for Zilog as a separate
entity. All of the above EPIP and Executive Bonus Awards shall be paid
in a cash lump sum within five (5) business days of the date of Moore's
termination of employment. All outstanding unvested stock options
whether granted under ZSOP and LTIP or otherwise will continue to vest
for the period of time remaining in the Agreement (the "Continuation
Period"). Regardless of the provisions of ZSOP, LTIP or any other plans
or agreements, the Continuation Period shall be counted as employment
with Zilog for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by Moore when
his employment terminates. During the remaining term of this Agreement
Moore (and, where applicable, his dependents) shall be entitled to
continue participation in the group insurance plans maintained by Zilog,
including life, disability and health insurance programs, as if he were
still an employee of Zilog. To the extent that Zilog finds it impossible
to cover Moore under its group insurance policies during such period,
Zilog shall provide Moore with individual policies which offer at least
the same level
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<PAGE> 12
of coverage and which impose not more than the same costs on him as if
he were still an employee of Zilog. The foregoing notwithstanding, in
the event that Moore becomes eligible for comparable group insurance
coverage in connection with new employment, the coverage provided by
Zilog under this paragraph shall terminate immediately. Any group health
continuation coverage that Zilog is otherwise required to offer under
the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA")
shall be offered when coverage under this paragraph terminates.
Except as provided in the paragraph immediately following, upon payment
of the foregoing items, Zilog will have no further obligation to Moore.
In the event that it is determined that any payment or distribution of
any type to or for the benefit of Moore made by Zilog, by any of its
affiliates, by any person who acquires ownership or effective control of
Zilog or ownership of a substantial portion of Zilog's assets (within
the meaning of section 280G of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Code")) or by any
affiliate of such person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Total Payments"), would be subject to the excise tax imposed by section
4999 of the Code or any interest or penalties with respect to
12
<PAGE> 13
such excise tax (such excise tax, together with any such interest or
penalties, are collectively referred to as the "Excise Tax"), then Moore
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount that shall fund the payment by Moore of any
Excise Tax on the Total Payments as well as all income taxes imposed on
the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and
any interest or penalties imposed with respect to taxes on the Gross-Up
Payment or any Excise Tax.
All mathematical determinations and all determinations of whether any of
the Total Payments are "parachute payments" (within the meaning of
section 280G of the Code) that are required to be made hereunder,
including all determinations of whether a Gross-Up Payment is required
and of the amount of such Gross-Up Payment, shall be made by the
independent auditors retained by Zilog most recently prior to the Change
in Control (the "Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting calculations
regarding the amount of any Gross-Up Payment and any other relevant
matters, both to Zilog and to Moore within seven (7) business days of
Moore's termination date, if applicable, or such earlier time as is
requested by Zilog or by Moore (if Moore reasonably believes that any of
the Total Payments may be subject to the Excise Tax). If the Auditors
determine that no Excise Tax is payable by Moore, it shall furnish Moore
with a written statement
13
<PAGE> 14
that such Auditors have concluded that no Excise Tax is payable
(including the reasons therefor) and that Moore has substantial
authority not to report any Excise Tax on his federal income tax return.
If a Gross-Up Payment is determined to be payable, it shall be paid to
Moore within five (5) business days after the Determination is delivered
to Zilog or Moore. Any determination by the Auditors shall be binding
upon Zilog and Moore, absent manifest error.
As a result of uncertainty in the application of section 4999 of the
Code at the time of the initial determination by the Auditors hereunder,
it is possible that Gross-Up Payments not made by Zilog should have been
made ("Underpayments") or that Gross-Up Payments will have been made by
Zilog which should not have been made ("Overpayments"). In either event,
the Auditors shall determine the amount of the Underpayment or
Overpayment that has occurred. In the case of an Underpayment, the
amount of such Underpayment shall promptly be paid by Zilog to or for
the benefit of Moore. In the case of an Overpayment, the Employee shall,
at the direction and expense of Zilog, take such steps as are reasonably
necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by,
Zilog and otherwise reasonably cooperate with Zilog to correct such
Overpayment; provided, however, that (a.) Moore shall in no event be
obligated to return to Zilog an amount greater than
14
<PAGE> 15
the not after-tax portion of the Overpayment that Moore has retained or
has recovered as a refund from the applicable taxing authorities and
(b.) this provision shall be interpreted in a manner consistent with the
intent of this excise tax restoration provision which is to make Moore
whole, on an after-tax basis, for the application of the Excise Tax, it
being understood that the correction of an Overpayment may result in
Moore's repaying to Zilog an amount which is less than the Overpayment.
8. Moore Representations. Moore represents to Zilog that to the best of his
knowledge he is under no obligation to any employer or third party which
would preclude his full, complete and unfettered discharge of his duties
under this Agreement.
9. Notices. Any notices required to be given hereunder shall be in
writing, and if by Zilog shall be addressed to Moore as indicated in
Zilog's personnel records or such other address as Moore shall specify
in writing and if by Moore to Zilog at:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
Attn: Vice President, Human Resources and
Administration
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<PAGE> 16
Such addresses may be changed by written notice from either Zilog or
Moore, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon Zilog, its successors and assigns. Moore may not
assign, transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the business and/or assets of Zilog to assume expressly and agree, in
substance and form satisfactory to Moore, to perform this Agreement in
the same manner and to the same extent Zilog would be required to
perform it if no succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of
this Agreement by Moore shall not operate or be construed as a waiver of
any subsequent breach by Moore.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
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<PAGE> 17
14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II;
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached an Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement,
attached as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI;
G. Statement addressed to "Human Resources," attached as Exhibit
VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws
of the State of California, without regard to conflict of laws
principles.
Executed effective May 22, 1997
-------------
By /s/ RICHARD L. MOORE By /s/ E. A. SACK
------------------------------- -------------------------------
Richard L. Moore E. A. Sack, President and CEO
Dated 5/22/97 Dated: 5-22-97
---------------------------- --------------------------
17
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
(This Agreement supersedes any and all Employment Agreements which were executed
prior to May 22, 1997.)
This Agreement is made by and between Zilog, Inc., a Delaware corporation
(hereinafter "Zilog") and Thomas C. Carson (hereinafter "Carson"), whereby Zilog
and Carson agree that Carson accepts employment as Senior Vice President,
Worldwide Sales and Strategic Marketing of Zilog, under the following terms and
conditions:
1. Term. Zilog and Carson agree that Carson will be Senior Vice President,
Worldwide Sales and Strategic Marketing of Zilog for a period of twenty
four (24) months, commencing on March 31, 1997 and ending November 5,
1998. This Agreement may be extended upon written agreement of Zilog and
Carson. If during the term of this Agreement a "Change in Control" of
Zilog occurs, the term of this Agreement will be extended for a period
of twenty four (24) months commencing on the earlier of the effective
date of the Change in Control or the date this Agreement would otherwise
expire; provided, however, in the case of a Change in Control that is
subject to an agreement that is executed before the date this Agreement
would otherwise expire but becomes effective on a closing date that will
occur after the date this Agreement would otherwise expire, there will
be no such automatic twenty four month extension if the closing date
does not occur within six (6) months after the date this Agreement would
otherwise expire. Under these circumstances the term of this Agreement
shall be extended six (6) months from the date it would otherwise
expire.
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<PAGE> 2
For purposes of this Agreement, "Change in Control" shall mean the occurrence of
any of the following events:
(i) A change in the composition of the board of directors of Zilog,
Inc., as a result of which fewer than two-thirds of the
incumbent directors are directors who either:
(A) Had been directors of Zilog, Inc. twenty-four (24)
months prior to such change; or
(B) Were elected, or nominated for election, to the board of
directors of Zilog, Inc. with the affirmative votes of
at least a majority of the directors who had been
directors of Zilog, Inc. twenty-four (24) months prior
to such change and who were still in office at the time
of the election or nomination;
(ii) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) other than Zilog, Inc. (or its designee),
by the acquisition or aggregation of securities is or becomes
the beneficial owner, directly or indirectly, of securities of
Zilog, Inc. representing twenty percent (20%) or more of the
combined voting power of Zilog, Inc.'s then outstanding
securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of
directors;
2
<PAGE> 3
(iii) the sale of all or substantially all of the assets of Zilog,
Inc. to a third party who is not an affiliate (including a
parent or subsidiary) of Zilog, Inc.; or
(iv) Any acquisition of stock, tender offer, merger, consolidation,
sale, reorganization, dissolution or other such event or series
of events, which in the opinion of a majority of the members of
the board of Zilog, Inc. (as reflected in a written resolution
of the board of Zilog, Inc.) has resulted in a change of control
of Zilog, Inc.
2. Extent of Services. Carson shall devote his entire time, attention and
energies to his position as Senior Vice President, Worldwide Sales and
Strategic Marketing of Zilog and shall not, during the term of this
Employment Agreement be engaged in any other business activity whether
or not such business activity is pursued for gain, profit or other
pecuniary advantage; provided, that Carson may engage in personal
investment activities consistent with Zilog's Conflict of Interest
Policy.
3. Compensation.
A. Salary. For each month of employment, Zilog will pay, or cause
to be paid, to Carson the sum of at least $18,375.00 as base
salary. Such sum will be paid in monthly installments or such
other normal periodic payment schedule
3
<PAGE> 4
as Zilog may establish for its executives. Carson's salary will be
reviewed periodically in accordance with established salary review
procedures and adjustments to his salary, if any, will be based upon
such reviews.
B. Employee Performance Incentive Plan and Executive Bonus Plan.
Carson will be eligible to receive Awards and Payouts in
accordance with the terms of the Zilog Employee Performance
Incentive Plan (hereinafter "EPIP"), and the EPIP Executive
Bonus Plan (hereinafter "Executive Bonus") as such plans may be
modified from time to time and as modified by this Agreement.
C. Zilog Employee Stock Option Plan. Zilog has provided to Carson
stock options under the 1990 Zilog Employee Stock Option Plan
(hereinafter "ZSOP") and the 1994 Long Term Incentive Plan
(hereinafter "LTIP"), copies of such plans being attached
hereto. Vesting will continue in accordance with the plan
provisions during the term of this Agreement.
4. Benefits. As an employee of Zilog, Carson will be entitled to such
benefits as Zilog normally provides its employees. In addition, Zilog
will provide Carson with Directors and officers (D & O) insurance in an
amount deemed appropriate by the Company.
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<PAGE> 5
5. Company Policies. Carson agrees to be bound by all Zilog Company
Policies applicable to its employees including but not limited to
Business Ethics, Conflict of Interest, Proprietary Information and
Antitrust Compliance, and he agrees to sign any such documents as Zilog
requests evidencing such agreement.
6. Termination of Employment. Zilog reserves the right to terminate the
employment of Carson at any time during the term of this Agreement, for
any reason or for no reason, with or without cause, by giving Carson at
least thirty (30) days written notice of such termination or
compensation in lieu of notice; and Carson may terminate his employment
by giving at least thirty (30) days written notice to Zilog. Zilog
reserves the right to accelerate any deferred resignation date given it
by Carson, and any such acceleration of such date will not alter the
character of such termination from voluntary to involuntary.
7. Payment Upon Termination. Notwithstanding any other provisions of this
Agreement to the contrary, Zilog's obligations to Carson, if his
employment with Zilog is terminated prior to the end of this Agreement,
shall be as follows:
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<PAGE> 6
A. If Carson voluntarily resigns his employment for 1) other than
Good Reason (as defined in Paragraph 7.B. below) or 2) other
than Retirement (as defined in Paragraph 7.C. below) or 3) other
than the sale, merger or change in ownership of Zilog (as
defined in Paragraph 7.G below) prior to the termination date of
this Agreement, he will be entitled to: (1) base salary then due
and owing for services previously performed, (2) Payouts under
EPIP which become payable to Carson pursuant to the terms of
EPIP prior to the effective date of resignation, and (3) Payouts
under the Executive Bonus which become payable to Carson
pursuant to the terms of the Executive Bonus prior to the
effective date of resignation. Upon payment of the foregoing
items, Zilog will have no further obligation to Carson.
B. If Carson voluntarily resigns his employment for Good Reason, as
defined herein, prior to the termination date of this Agreement,
he will be entitled to the benefits provided in Paragraph 7.D.
below. Good Reason, as used herein, shall mean:
(i) a reduction in Carson's authority, responsibility or
status as Senior Vice President, Worldwide Sales and
Strategic Marketing such that Carson ceases to be an
"officer" as that term is defined in the regulations
under Section 16 of the Securities Exchange Act of 1934;
6
<PAGE> 7
(ii) a reduction in Carson's base salary other than in
connection with a general reduction applicable to the
Vice Presidents of Zilog who are members of the
Management Committee;
(iii) a reduction in form and effect or cessation of any
benefit or compensation plan, except EPIP, the Executive
Bonus, the Deferred Compensation Plan, or those that may
occur for the Zilog employee group in general in accord
with a general policy change;
(iv) a requirement to relocate, except for office relocations
that would not increase Carson's one-way commute
distance by more than 20 miles;
(v) any material breach of this Agreement on the part of
Zilog not fully remedied by Zilog within sixty (60) days
after written notice by Carson of such breach.
C. If Carson retires as defined in PM60-05 prior to the termination
date of this Agreement, he will be entitled to the following at
the effective date of retirement: (1) base salary then due and
owing for services previously performed, (2) Payouts under EPIP
for Awards made prior to the effective date of the retirement,
and (3) Payouts under the Executive Bonus for Awards made prior
to the effective date
7 05-22-97
<PAGE> 8
of the retirement. EPIP and Executive Bonus Awards may also be
granted at Zilog's sole discretion for the year in which the
retirement occurs, prorated to the date of the retirement.
Payouts for all Awards will be made at the same time and on the
same schedule as those for active employees. Upon the payment of
the foregoing items, Zilog will have no further obligation to
Carson.
D. If Zilog terminates Carson's employment during the term of this
Agreement other than for Cause or Detrimental Activity as
defined in 7.E. below, he will be entitled to receive the
following: (1) the then current base salary for the period
remaining in this Agreement, (2) Payouts under EPIP for Awards
made prior to the effective date of termination of employment
which Payouts are payable to Carson pursuant to the terms of
EPIP prior to expiration of the term of this Agreement, and (3)
Payouts under the Executive Bonus for Awards made prior to the
effective date of termination of employment which Payouts are
payable to Carson pursuant to the terms of the Executive Bonus
prior to expiration of the term of this Agreement. Carson will
not be eligible for Awards under EPIP or the Executive Bonus
made after the date on which his employment at Zilog ceased or
for Payouts made on any Awards after the
8 05-22-97
<PAGE> 9
expiration date of this Agreement. Vesting of common stock and
stock options granted under ZSOP and LTIP will continue for the
period remaining in this Agreement. Upon the payment of the
foregoing items, Zilog will have no further obligation to
Carson.
E. If Zilog terminates Carson during the term of this Agreement for
Cause, or for Detrimental Activity as defined herein, Zilog will
have no further monetary obligation to Carson other than: (1)
any base salary then due and owing for services previously
performed, (2) Payouts under EPIP which become payable to Carson
pursuant to the terms of EPIP prior to the effective date of
termination, and (3) Payouts under the Executive Bonus which
become payable to Carson pursuant to the terms of the Executive
Bonus prior to the effective date of termination. Cause or
Detrimental Activity shall be a willful violation of a major
company policy, conviction of any criminal or civil law
involving moral turpitude, willful misconduct which results in a
material reduction in Carson's effectiveness in the performance
of his duties, or willful and reckless disregard for the best
interests of the Company.
9 05-22-97
<PAGE> 10
F. If Carson ceases to be an employee of Zilog during the term of
this Agreement because of total and permanent disability or
death, Zilog's obligation to Carson or his beneficiaries will be
limited solely to: (1) any base salary then due and owing for
services previously performed, (2) Payouts in accordance with
the terms of EPIP, (3) Payouts in accordance with the terms of
the Executive Bonus, and (4) any benefits including ZSOP and
LTIP benefits normally provided by Zilog to its employees due to
or on account of total and permanent disability or death.
G. If Carson leaves his employment, either voluntarily for Good
Reason or involuntarily for reasons other than for Cause or
Detrimental Activity, following the effective date of a Change
in Control prior to the termination date of this Agreement, he
will be entitled to receive the following: (1) the then current
base salary for the period remaining in this Agreement, payable
in a cash lump sum not more than five (5) business days
following the date of leaving employment, (2) Payouts under EPIP
for Awards made prior to the effective date of termination of
employment, and (3) Payouts under the Executive Bonus for Awards
made prior to the effective date of termination of employment.
EPIP and Executive Bonuses shall also be awarded for the year in
which the termination of employment occurs and shall be
10 05-22-97
<PAGE> 11
calculated in accordance with the terms of such arrangements
assuming the date of Carson's termination is the last day of
Zilog's fiscal year and based on Zilog's financial performance
for the portion of such fiscal year that includes calculated
financials for Zilog as a separate entity. All of the above EPIP
and Executive Bonus Awards shall be paid in a cash lump sum
within five (5) business days of the date of Carson's
termination of employment. All outstanding unvested stock
options whether granted under ZSOP and LTIP or otherwise will
continue to vest for the period of time remaining in the
Agreement (the "Continuation Period"). Regardless of the
provisions of ZSOP, LTIP or any other plans or agreements, the
Continuation Period shall be counted as employment with Zilog
for purposes of vesting under all options and for purposes of
determining the expiration date of any stock options held by
Carson when his employment terminates. During the remaining term
of this Agreement Carson (and, where applicable, his dependents)
shall be entitled to continue participation in the group
insurance plans maintained by Zilog, including life, disability
and health insurance programs, as if he were still an employee
of Zilog. To the extent that Zilog finds it impossible to cover
Carson under its group insurance policies during such period,
Zilog shall provide Carson with individual policies which offer
at least
11 05-22-97
<PAGE> 12
the same level of coverage and which impose not more than the
same costs on him as if he were still an employee of Zilog. The
foregoing notwithstanding, in the event that Carson becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by Zilog under this
paragraph shall terminate immediately. Any group health
continuation coverage that Zilog is otherwise required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
("COBRA") shall be offered when coverage under this paragraph
terminates.
Except as provided in the paragraph immediately following, upon
payment of the foregoing items, Zilog will have no further
obligation to Carson.
In the event that it is determined that any payment or
distribution of any type to or for the benefit of Carson made by
Zilog, by any of its affiliates, by any person who acquires
ownership or effective control of Zilog or ownership of a
substantial portion of Zilog's assets (within the meaning of
section 280G of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the "Code")) or by any affiliate
of such person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise
tax imposed by section 4999 of the Code or any interest or
penalties with respect to
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<PAGE> 13
such excise tax (such excise tax, together with any such
interest or penalties, are collectively referred to as the
"Excise Tax"), then Carson shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount that
shall fund the payment by Carson of any Excise Tax on the Total
Payments as well as all income taxes imposed on the Gross-Up
Payment, any Excise Tax imposed on the Gross-Up Payment and any
interest or penalties imposed with respect to taxes on the
Gross-Up Payment or any Excise Tax.
All mathematical determinations and all determinations of
whether any of the Total Payments are "parachute payments"
(within the meaning of section 280G of the Code) that are
required to be made hereunder, including all determinations of
whether a Gross-Up Payment is required and of the amount of such
Gross-Up Payment, shall be made by the independent auditors
retained by Zilog most recently prior to the Change in Control
(the "Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting calculations
regarding the amount of any Gross-Up Payment and any other
relevant matters, both to Zilog and to Carson within seven (7)
business days of Carson's termination date, if applicable, or
such earlier time as is requested by Zilog or by Carson (if
Carson reasonably believes that any of the Total Payments may be
subject to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by Carson, it shall furnish Carson with a
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<PAGE> 14
written statement that such Auditors have concluded that no
Excise Tax is payable (including the reasons therefor) and that
Carson has substantial authority not to report any Excise Tax on
his federal income tax return. If a Gross-Up Payment is
determined to be payable, it shall be paid to Carson within five
(5) business days after the Determination is delivered to Zilog
or Carson. Any determination by the Auditors shall be binding
upon Zilog and Carson, absent manifest error.
As a result of uncertainty in the application of section 4999 of
the Code at the time of the initial determination by the
Auditors hereunder, it is possible that Gross-Up Payments not
made by Zilog should have been made ("Underpayments") or that
Gross-Up Payments will have been made by Zilog which should not
have been made ("Overpayments"). In either event, the Auditors
shall determine the amount of the Underpayment or Overpayment
that has occurred. In the case of an Underpayment, the amount of
such Underpayment shall promptly be paid by Zilog to or for the
benefit of Carson. In the case of an Overpayment, the Employee
shall, at the direction and expense of Zilog, take such steps as
are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and
procedures established by, Zilog and otherwise reasonably
cooperate with Zilog to correct such Overpayment; provided,
however, that (a.) Carson shall in no event be obligated to
return to Zilog an amount greater than
14
<PAGE> 15
the net after-tax portion of the overpayment that Carson has
retained or has recovered as a refund from the applicable taxing
authorities and (b.) this provision shall be interpreted in a
manner consistent with the intent of this excise tax restoration
provision which is to make Carson whole, on an after-tax basis,
for the application of the Excise Tax, it being understood that
the correction of an Overpayment may result in Carson's repaying
to Zilog an amount which is less than the Overpayment.
8. Carson Representations. Carson represents to Zilog that to the best of
his knowledge he is under no obligation to any employer or third party
which would preclude his full, complete and unfettered discharge of his
duties under this Agreement.
9. Notices. Any notices required to be given hereunder shall be in writing,
and if by Zilog shall be addressed to Carson as indicated in Zilog's
personnel records or such other address as Carson shall specify in
writing and if by Carson to Zilog at:
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600
Attn: Vice President, Human Resources and
Administration
15
<PAGE> 16
Such addresses may be changed by written notice from either Zilog or
Carson, to the other.
10. Amendment. This Agreement may be amended only in writing, signed by both
parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon Zilog, its successors and assigns. Carson may not
assign, transfer, pledge or hypothecate any of his rights or obligations
hereunder, Awards or Payouts under EPIP or the Executive Bonus or other
compensation to which he may be entitled hereunder. Zilog will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the business and/or assets of Zilog to assume expressly and agree, in
substance and form satisfactory to Carson, to perform this Agreement in
the same manner and to the same extent Zilog would be required to
perform it if no succession had taken place.
12. Waiver of Breach. The waiver by Zilog of a breach of any provision of
this Agreement by Carson shall not operate or be construed as a waiver
of any subsequent breach by Carson.
13. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof.
16
<PAGE> 17
14. Entire Agreement. This entire Agreement consists of this document,
together with the following documents:
A. EPIP, attached as Exhibit I;
B. Executive Bonus, attached as Exhibit II;
C. Zilog Employee Stock Option Plan, attached as Exhibit III;
D. Zilog 1994 Long Term Incentive Plan, attached as Exhibit IV;
E. Employee Proprietary Rights and Non-Disclosure Agreement,
attached as Exhibit V;
F. Conflict of Interest Statement, attached as Exhibit VI;
G. Statement addressed to "Human Resources," attached as Exhibit
VII;
H. Policy on Business Ethics, attached as Exhibit VIII; and
I. PM60-05, attached as Exhibit IX.
15. Governing Law. This Employment Agreement shall be governed by the laws
of the State of California, without regard to conflict of laws
principles.
Executed effective May 22, 1997
---------------
By /s/ THOMAS C. CARSON By /s/ E. A. SACK
------------------------------- -------------------------------
Thomas C. Carson E. A. Sack, President and CEO
Dated: 5/22/97 Dated: 5/22/97
---------------------------- ----------------------------
17
<PAGE> 1
EXHIBIT 10.10
================================================================================
CREDIT AGREEMENT
DATED AS OF FEBRUARY 27, 1998
AMONG
ZILOG, INC.
(FOLLOWING THE MERGER),
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
AS ARRANGER AND SYNDICATION AGENT,
AND
BANKBOSTON, N.A.,
AS ADMINISTRATIVE AGENT
================================================================================
<PAGE> 2
ZILOG, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1.
DEFINITIONS.................................... 2
1.1 Certain Defined Terms.............................................. 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement.................................................... 32
1.3 Other Definitional Provisions and Rules of Construction............ 32
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS
AND REVOLVING LOANS ................................ 33
2.1 Commitments; Making of Revolving Loans; the Register; Revolving
Notes.............................................................. 33
2.2 Interest on the Revolving Loans.................................... 37
2.3 Fees............................................................... 40
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments; Application of
Proceeds of Collateral and Payments Under Subsidiary Guaranty...... 40
2.5 Use of Proceeds.................................................... 44
2.6 Special Provisions Governing Eurodollar Rate Loans................. 44
2.7 Increased Costs; Taxes; Capital Adequacy........................... 47
2.8 Obligation of Lenders and Issuing Lender to Mitigate............... 51
SECTION 3.
LETTERS OF CREDIT................................. 52
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein............................................. 52
3.2 Letter of Credit Fees.............................................. 54
3.3 Drawings and Reimbursement of Amounts Paid Under Letters
of Credit ......................................................... 55
3.4 Obligations Absolute............................................... 57
3.5 Indemnification; Nature of Issuing Lender's Duties................. 58
3.6 Increased Costs and Taxes Relating to Letters of Credit............ 59
SECTION 4.
CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT................ 60
4.1 Conditions to be Satisfied on the Closing Date..................... 60
4.2 Conditions to All Revolving Loans.................................. 65
4.3 Conditions to Letters of Credit.................................... 66
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.
COMPANY'S REPRESENTATIONS AND WARRANTIES...................... 67
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries....................................................... 67
5.2 Authorization of Borrowing, etc.................................... 68
5.3 Financial Condition................................................ 69
5.4 No Material Adverse Change; No Restricted Payments................. 70
5.5 Title to Properties; Liens......................................... 70
5.6 Litigation; Adverse Facts.......................................... 70
5.7 Payment of Taxes................................................... 70
5.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.......................................................... 71
5.9 Governmental Regulation............................................ 71
5.10 Securities Activities.............................................. 71
5.11 Employee Benefit Plans............................................. 71
5.12 Certain Fees....................................................... 72
5.13 Environmental Protection........................................... 72
5.14 Employee Matters................................................... 73
5.15 Solvency........................................................... 74
5.16 Matters Relating to Collateral..................................... 74
5.17 Related Agreements................................................. 75
5.18 Disclosure......................................................... 75
SECTION 6.
COMPANY'S AFFIRMATIVE COVENANTS.......................... 75
6.1 Financial Statements and Other Reports............................. 76
6.2 Corporate Existence, etc........................................... 80
6.3 Payment of Taxes and Claims; Tax Consolidation..................... 81
6.4 Maintenance of Properties; Insurance; Application of Net
Insurance/Condemnation Proceeds.................................... 81
6.5 Inspection Rights; Audits of Inventory and Accounts Receivable;
Lender Meeting..................................................... 82
6.6 Compliance with Laws, etc.......................................... 82
6.7 Environmental Review and Investigation, Disclosure, Etc.; Company's
Actions Regarding Hazardous Materials Activities, Environmental
Claims and Violations of Environmental Laws........................ 83
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries.......... 85
6.9 Determination of Borrowing Base.................................... 86
6.10 Lockbox System..................................................... 87
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 7.
COMPANY'S NEGATIVE COVENANTS............................ 88
7.1 Indebtedness....................................................... 88
7.2 Liens and Related Matters.......................................... 90
7.3 Restricted Payments................................................ 91
7.4 Financial Covenants................................................ 94
7.5 Restriction on Fundamental Changes; Asset Sales.................... 95
7.6 Sales and Lease-Backs.............................................. 95
7.7 Sale of Receivables................................................ 95
7.8 Transactions with Shareholders and Affiliates...................... 96
7.9 Disposal of Subsidiary Stock....................................... 96
7.10 Amendments or Waivers of Certain Related Agreements................ 97
7.11 Fiscal Year........................................................ 97
SECTION 8.
EVENTS OF DEFAULT................................. 97
8.1 Failure to Make Payments When Due.................................. 97
8.2 Default in Other Agreements........................................ 98
8.3 Breach of Certain Covenants........................................ 98
8.4 Breach of Warranty................................................. 98
8.5 Other Defaults Under Loan Documents................................ 98
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc............... 99
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc................. 99
8.8 Judgments and Attachments.......................................... 99
8.9 Dissolution........................................................ 100
8.10 Employee Benefit Plans............................................. 100
8.11 Change in Control.................................................. 100
8.12 Invalidity of Subsidiary Guaranty; Failure of Security;
Repudiation of Obligations......................................... 100
SECTION 9.
AGENTS....................................... 102
9.1 Appointment........................................................ 102
9.2 Powers and Duties; General Immunity................................ 103
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness................................................... 104
9.4 Right to Indemnity................................................. 105
9.5 Successor Administrative Agent..................................... 105
9.6 Collateral Documents and Guaranties................................ 106
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 10.
MISCELLANEOUS................................... 107
10.1 Assignments and Participations in Revolving Loans and Letters of
Credit............................................................. 107
10.2 Expenses........................................................... 110
10.3 Indemnity.......................................................... 111
10.4 Set-Off; Security Interest in Deposit Accounts..................... 112
10.5 Ratable Sharing.................................................... 112
10.6 Amendments and Waivers............................................. 113
10.7 Independence of Covenants.......................................... 114
10.8 Notices............................................................ 114
10.9 Survival of Representations, Warranties and Agreements............. 114
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.............. 115
10.11 Marshalling; Payments Set Aside.................................... 115
10.12 Severability....................................................... 115
10.13 Obligations Several; Independent Nature of Lenders' Rights......... 115
10.14 Headings........................................................... 116
10.15 Applicable Law..................................................... 116
10.16 Successors and Assigns............................................. 116
10.17 Consent to Jurisdiction and Service of Process..................... 116
10.18 Waiver of Jury Trial............................................... 117
10.19 Confidentiality.................................................... 117
10.20 Maximum Amount..................................................... 118
10.21 Counterparts; Effectiveness........................................ 118
Signature pages S-1
</TABLE>
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<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF REVOLVING NOTE
V FORM OF COMPLIANCE CERTIFICATE
VI FORM OF OPINIONS OF COUNSEL TO LOAN PARTIES
VII FORM OF OPINION OF O'MELVENY & MYERS LLP
VIII FORM OF ASSIGNMENT AGREEMENT
IX FORM OF CERTIFICATE RE NON-BANK STATUS
X FORM OF COLLATERAL ACCOUNT AGREEMENT
XI FORM OF COMPANY SECURITY AGREEMENT
XII FORM OF SUBSIDIARY GUARANTY
XIII FORM OF SUBSIDIARY SECURITY AGREEMENT
XIV FORM OF CERTIFICATE OF DESIGNATIONS
XV FORM OF COLLATERAL ACCESS AGREEMENT
XVI FORM OF BORROWING BASE CERTIFICATE
</TABLE>
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<PAGE> 7
SCHEDULES
<TABLE>
<S> <C>
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1C CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT
5.1 SUBSIDIARIES OF COMPANY
5.12 CERTAIN FEES
5.13 ENVIRONMENTAL MATTERS
5.14 EMPLOYEE MATTERS
7.1 CERTAIN EXISTING INDEBTEDNESS
</TABLE>
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<PAGE> 8
ZILOG, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of February 27, 1998, and entered into
by and among ZILOG, INC., a Delaware corporation ("COMPANY"), GOLDMAN SACHS
CREDIT PARTNERS L.P. ("GSCP"), as arranger (in such capacity, "ARRANGER") and
syndication agent (in such capacity, "SYNDICATION AGENT"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "LENDER" and collectively as "LENDERS"), and BANKBOSTON, N.A.
("BANKBOSTON"), as administrative agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, TPG (this and other capitalized terms used in these recitals
without definition being used as defined in subsection 1.1) has formed Merger
Sub for the purpose of acquiring not less than 90% of the outstanding shares of
capital stock of Zilog;
WHEREAS, on or before the Closing Date, Merger Sub shall issue and sell
common and preferred equity with net Cash proceeds of not less than $117,500,000
which will be contributed by TPG and certain other investors to Company, which
equity shall after the Closing Date constitute the Company Common Stock and
Company Preferred Stock;
WHEREAS, on or before the Closing Date, Company shall issue and sell not
less than $280,000,000 in aggregate principal amount of Senior Secured Notes;
WHEREAS, on the Closing Date, Merger Sub will be merged with and into
Zilog pursuant to the Merger Agreement, with Zilog being the surviving
corporation in such merger;
WHEREAS, Lenders have agreed to extend certain credit facilities to
Company, the proceeds of which will be used to provide financing for working
capital and other general corporate purposes of Company and its Subsidiaries;
WHEREAS, Company desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a Lien on all of its Accounts Receivable and Inventory;
WHEREAS, all of the Domestic Subsidiaries of Company have agreed to
guarantee the Obligations hereunder and under the other Loan Documents and to
secure their guaranties by granting to Administrative Agent, on behalf of
Lenders, a Lien on all of their Accounts Receivable and Inventory;
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<PAGE> 9
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree as
follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACCOUNT RECEIVABLE" means, with respect to any Person, all
present and future rights of such Person to payment for goods sold or
leased or for services rendered no matter how evidenced, including, but
not limited to accounts receivable, contract rights, notes, drafts,
acceptances, instruments and other forms of obligations in accounts,
whether now existing or hereafter arising and wherever arising, and
whether or not they have been earned by performance.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with,
or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified
Person.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar
Rate Loan, the rate per annum obtained by dividing (i) (a) the per annum
rate for deposits in Dollars for the period corresponding to the
duration of the relevant Interest Period which appears on Telerate Page
3750 at approximately 11:00 A.M. (London time) on such Interest Rate
Determination Date or (b) if such rate does not appear on Telerate Page
3750 on such Interest Rate Determination Date, the per annum rate
(rounded upward to the nearest 1/16th of one percent) at which deposits
in Dollars are offered by Administrative Agent to first class banks in
the London interbank market, in the approximate amount of Administrative
Agent's relevant Eurodollar Loan and having a maturity approximately
equal to such Interest Period, at approximately 11:00 A.M. (London time)
on such Interest Rate Determination Date by (ii) a percentage equal to
100% minus the stated maximum rate of all reserve requirements
(including any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any
member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D (or any successor category of
liabilities under Regulation D). The reference to Telerate Page 3750 in
this definition shall be construed to be a reference to the relevant
page or any other page that may replace such page on the Telerate
service or any other service that may be nominated by the British
Bankers Association as the information vendor for the
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<PAGE> 10
purpose of displaying British Bankers' Association Interest Settlement
Rates for deposit in Dollars.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in
the introduction to this Agreement and also means and includes any
successor Administrative Agent appointed pursuant to subsection 9.5A.
"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFECTED LOANS" has the meaning assigned to that term in
subsection 2.6C.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies
of that Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or
more of the voting securities of a Person shall be deemed to be control.
"AGENT" means, individually, each of Arranger, Syndication Agent
and Administrative Agent and "AGENTS" means Arranger, Syndication Agent
and Administrative Agent, collectively.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in
subsection 10.5.
"AGREEMENT" means this Credit Agreement dated as of February 27,
1998, as it may be amended, supplemented or otherwise modified from time
to time.
"APPLICABLE MARGIN" means, with respect to any Pricing Period,
the percentage per annum set forth below corresponding to the Pricing
Level in effect for such Pricing Period:
<TABLE>
<CAPTION>
REVOLVING LOANS
---------------------------
PRICING BASE RATE EURODOLLAR
LEVEL LOANS LOANS
------- -------- ----------
<S> <C> <C>
I 1.25% 2.25%
II 1.50% 2.50%
</TABLE>
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<PAGE> 11
"ARRANGER" has the meaning assigned to that term in the
introduction to this Agreement.
"ASSET SALE" means (i) the sale, lease (other than an operating
lease), conveyance or other disposition of any assets or rights
(including, without limitation, by way of a sale and leaseback) other
than in the ordinary course of business consistent with past practices
and (ii) the sale by Company and the issue or sale by any of its
Subsidiaries of Equity Interests of any of Company's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction
or a series of related transactions that have a fair market value (as
determined in good faith by the Board of Directors of Company) in excess
of $1,000,0000 or for net cash proceeds in excess of $1,000,000.
Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Subsidiary Guarantor or by a Subsidiary Guarantor to Company or to
another Subsidiary Guarantor, (ii) an issuance of Equity Interests by a
Subsidiary Guarantor to Company or to another Subsidiary Guarantor,
(iii) a Restricted Payment that is permitted by subsection 7.3, (iv) a
Collateral Asset Sale (as defined in the Senior Secured Note Indenture)
and (v) the sale and leaseback of any assets within 90 days of the
acquisition of such assets, will not be deemed to be Asset Sales.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit VII annexed hereto.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback
transaction means, at the time of determination, the present value
(discounted at the rate of interest implicit in such transaction,
determined in accordance with GAAP) of the obligation of the lessee for
net rental payments during the remaining term of the lease included in
such sale and leaseback transaction (including any period for which such
lease has been extended or may, at the option of the lessor, be
extended).
"BANKBOSTON" has the meaning assigned to that term in the
introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.
"BASE RATE" means, at any time, the higher of (i) the annual rate
of interest announced from time to time by BankBoston at its head office
Boston, Massachusetts, as its "base rate" or (ii) the rate which is 1/2
of 1% in excess of the Federal Funds Effective Rate. The "base rate" of
BankBoston is a reference rate and does not necessarily represent the
lowest or best rate charged to any customer. BankBoston or any other
Lender may make commercial loans or other loans at rates of interest at,
above or below such base rate.
"BASE RATE LOANS" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.2A.
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<PAGE> 12
"BORROWING BASE" means as at any date of determination, an amount
equal to (i) the sum of 80% of the Dollar value of (a) Eligible Accounts
Receivable plus (b) 40% of Eligible Inventory minus (ii) the aggregate
amount of any reserves established by Administrative Agent, in its
reasonable judgment and in accordance with its customary commercial
lending practices, against Eligible Accounts Receivable and Eligible
Inventory.
"BORROWING BASE CERTIFICATE" means a certificate substantially in
the form of Exhibit XVI annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 4.1H(v), or subsection
6.1(xvi).
"BUSINESS DAY" means (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or
Massachusetts or is a day on which banking institutions located in such
state are authorized or required by law or other governmental action to
close, and (ii) with respect to all notices, determinations, fundings
and payments in connection with the Adjusted Eurodollar Rate or any
Eurodollar Rate Loans, any day that is a Business Day described in
clause (i) above and that is also a day for trading by and between banks
in Dollar deposits in the interbank Eurodollar market.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a
partnership or limited liability company, partnership or membership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of
the profits and losses of, or distributions of assets of, the issuing
Person.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
securities issued or unconditionally and fully guaranteed or insured by
the full faith and credit of the United States Government or any agency
or instrumentality thereof having maturities of not more than one year
from the date of acquisition; (ii) obligations issued or unconditionally
and fully guaranteed by any state of the United States of America or any
political subdivision of any such state or any public instrumentality
thereof, maturing within one year from the date of acquisition thereof
and, at the time of the acquisition, having one of the two highest
ratings obtainable from either Standard & Poor's Ratings Group ("S&P")
or Moody's Investors Service, Inc. ("MOODY'S"); (iii) certificates of
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<PAGE> 13
deposit and Eurodollar time deposits with maturities of one year or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with any
Lender party to this Agreement or with any domestic commercial bank
having capital and surplus in excess of $250,000,000; (iv) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (iii) above entered
into with any financial institution meeting the qualifications specified
in clause (iii) above; (v) commercial paper having one of the two
highest ratings obtainable from either Moody's or S&P and in each case
maturing within one year after the date of acquisition; and (vi)
investments in funds investing exclusively in investments of the types
described in clauses (i) through (v) above.
"CERTIFICATE OF DESIGNATIONS" means the provisions of Company's
Certificate of Designations of Series A Cumulative Preferred Stock
substantially in the form of Exhibit XIV annexed hereto and as such
provisions may be amended from time to time thereafter to the extent
permitted under subsection 7.10.
"CERTIFICATE RE NON-BANK STATUS" means a certificate
substantially in the form of Exhibit IX annexed hereto delivered by a
Lender to Administrative Agent pursuant to subsection 2.7B(iii).
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Company and
its Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than TPG and its
Affiliates, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result
of which is that (a) any "person" (as defined above), other than TPG and
its Affiliates, becomes the "beneficial owner" (as such term is defined
in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of 40% or more of the Voting Stock of Company (measured by
voting power rather than number of shares) and (b) TPG and its
Affiliates beneficially own, directly or indirectly, in the aggregate a
lesser percentage of the Voting Stock of Company than such other
"person", (iv) the first day on which a majority of the members of the
Board of Directors of Company are not Continuing Directors or (v)
Company consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, Company, in any such
event pursuant to a transaction in which any of the outstanding Voting
Stock of Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where (a) the Voting
Stock of Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person and (b) either (1) the
"beneficial owners" (as defined above) of the Voting Stock of Company
immediately prior to such transaction own, directly or indirectly
through one or more Subsidiaries, not less than a majority of the total
Voting Stock of the surviving or transferee corporation
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<PAGE> 14
immediately after such transaction or (2) if, immediately prior to such
transaction Company is a direct or indirect Subsidiary of any other
Person (such other Person, the "Holding Company"), then the "beneficial
owners" (as defined above) of the Voting Stock of such Holding Company
immediately prior to such transaction own, directly or indirectly
through one or more Subsidiaries, not less than a majority of the Voting
Stock of the surviving or transferee corporation immediately after such
transaction.
"CLOSING DATE" means the date on or before February 28, 1998, on
which all of the conditions set forth in subsection 4.1 have been
satisfied.
"COLLATERAL" means, collectively, all of the Accounts Receivable
and Inventory and proceeds thereof and any amounts held in the
Collateral Account in which Liens are purported to be granted pursuant
to the Collateral Documents as security for the Obligations.
"COLLATERAL ACCESS AGREEMENT" means a Collateral Access Agreement
substantially in the form of Exhibit XV annexed hereto, executed by any
mortgagee, lessor or contract warehouseman of Company and its
Subsidiaries in connection with the Collateral.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in
the Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account
Agreement executed and delivered by Company and Administrative Agent on
the Closing Date, substantially in the form of Exhibit X annexed hereto,
as such Collateral Account Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
"COLLATERAL DOCUMENTS" means the Company Security Agreement, the
Collateral Account Agreement, the Subsidiary Security Agreement, and all
other instruments or documents delivered by any Loan Party pursuant to
this Agreement or any of the other Loan Documents in order to grant to
Administrative Agent, on behalf of Lenders, a Lien on any personal
property of that Loan Party as security for the Obligations.
"COMMITMENT PERCENTAGE" means, with respect to any Pricing
Period, the percentage per annum set forth below corresponding to the
Pricing Level in effect for such Pricing Period:
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<PAGE> 15
<TABLE>
<CAPTION>
COMMITMENT
PRICING LEVEL PERCENTAGE
------------- ----------
<S> <C>
I 0.25%
II 0.50%
</TABLE>
"COMMITMENTS" means the commitments of Lenders to make Loans as
set forth in subsection 2.1A.
"COMPANY" means Zilog after the consummation of the Merger, as
the surviving corporation in the Merger.
"COMPANY COMMON STOCK" means the common stock of Company upon and
following the consummation of the Merger, par value $.01 per share.
"COMPANY PREFERRED STOCK" means the Series A Cumulative Preferred
Stock of Company with the terms set forth in the Certificate of
Designations.
"COMPANY SECURITY AGREEMENT" means the Company Security Agreement
executed and delivered by Company on the Closing Date, substantially in
the form of Exhibit XI annexed hereto, as such Company Security
Agreement may thereafter be amended, supplemented or otherwise modified
from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of Exhibit V annexed hereto delivered to Administrative Agent and
Lenders by Company pursuant to subsection 6.1(iii).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of
the amounts for such period of Consolidated Net Income of such Person
for such period plus (i) an amount equal to any extraordinary loss plus
any net loss realized in connection with an Asset Sale (to the extent
such losses were deducted in computing such Consolidated Net Income),
plus (ii) provision for taxes based on income or profits of such Person
and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letters of credit or bankers'
acceptance financings, and net payments (if any) pursuant to obligations
under Hedge Agreements), to the extent that any such expense was
deducted in computing such Consolidated Net
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<PAGE> 16
Income, plus (iv) depreciation and amortization (including amortization
of goodwill and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income, plus (v)
Recapitalization Related Special Charges of such Person and its
Subsidiaries for such period, to the extent any such expense was
deducted in computing Consolidated Net Income of such Person for such
period, plus (vi) deferred compensation expense of such Person and its
Subsidiaries for such period (provided, however, that any payments
actually made with respect to the liabilities for which such charges
were created shall be deducted from Consolidated Adjusted EBITDA in the
period when made), to the extent any such expense was deducted in
computing Consolidated Net Income of such Person for such period, plus
(vii) the impact on Consolidated Adjusted EBITDA of such Person for such
period in an aggregate amount not to exceed $5,000,000 since the Closing
Date, of the deferral of recognition of revenue by Company until
products are shipped by Company's distributors, minus (viii) non-cash
items increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other
non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Adjusted EBITDA only to
the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the
date of determination to be dividended to Company by such 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 that
Subsidiary or its stockholders.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
sum of (i) the aggregate of all expenditures (whether paid in cash or
other consideration or accrued as a liability and including Capital
Lease Obligations but excluding capitalized interest) by Company and its
Subsidiaries during that period that, in conformity with GAAP, are
included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company
and its Subsidiaries plus (ii) to the extent not covered by clause (i)
of this definition, the aggregate of all expenditures by Company and its
Subsidiaries during that period (a) to purchase or develop computer
software or systems (but only to the extent such expenditures are
capitalized on the consolidated balance sheet of Company and its
Subsidiaries in conformity with GAAP) or (b) to acquire (by purchase or
otherwise) the business, property or fixed assets of any Person, or the
stock or other evidence of beneficial ownership of any Person that, as a
result of such acquisition, becomes a Subsidiary of Company (but only to
the extent such expenditures are capitalized on the consolidated balance
sheet of Company and its
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<PAGE> 17
Subsidiaries in conformity with GAAP), net of landlord contributions and
landlord allowances. "Consolidated Capital Expenditures" shall not
include (a) expenditures made in connection with the replacement,
substitution or restoration of assets (i) to the extent financed from
insurance proceeds paid on account of the loss or damage to the assets
being replaced or restored or (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being
replaced, (b) the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment to the extent and
only to the extent that the gross amount of such purchase price is
reduced by the credit granted by the seller of such equipment for the
equipment being traded in at such time and (c) the purchase of plant,
property or equipment made within one year of the sale of any assets to
the extent purchased with the proceeds of such sale.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
(without duplication) of the amounts for such period of (i) scheduled
repayments of principal of Indebtedness, (ii) Consolidated Interest
Expense, (iii) Maintenance Capital Expenditures, (iv) scheduled cash
dividends on any preferred stock, (v) cash payments for taxes based on
income, and (vi) Consolidated Rental Payments, all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, with
respect to any Person for any period, the sum, without duplication, of
(i) the consolidated interest expense (net of interest income) of such
Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest
component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letters of
credit or bankers' acceptance financings, and net payments (if any)
pursuant to obligations under Hedge Agreements); provided, however, that
in no event shall any of the following be included in Consolidated
Interest Expense (i) amortization of deferred financing costs incurred
in connection with the Merger, (ii) the consolidated interest expense of
such Person and its Subsidiaries that was capitalized during such
period, (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Subsidiaries or secured
by a Lien on assets of such Person or one of its Subsidiaries (whether
or not such guarantee or Lien is called upon) and (iv) the product of
(a) (without duplication) (1) all dividends paid or accrued in respect
of Disqualified Stock which are not treated as interest for tax purposes
and (2) all cash dividend payments, on any series of preferred stock of
such Person or any of its Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests (other than
Disqualified Stock) of Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
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<PAGE> 18
"CONSOLIDATED NET INCOME" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of
any Person that is not a Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person
or a Wholly Owned Subsidiary thereof that is a Subsidiary Guarantor,
(ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the amortization of (a)
any premiums, fees or expenses incurred in connection with the Merger
and related financings, or (b) any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets,
in each case arising in connection with the Merger) and 17 (including
non-cash charges relating to intangibles and goodwill arising in
connection with the Merger) shall be excluded.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the
aggregate amount of all rents paid or payable by Company and its
Subsidiaries on a consolidated basis during that period under all
capital leases and operating leases to which Company or any of its
Subsidiaries is a party.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness of Company
and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONTINUING DIRECTORS" means as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of
such Board of Directors immediately after consummation of the Merger or
(ii) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or
election, or any successor Continuing Directors appointed by such
Continuing Directors (or their successors).
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any
of its properties is bound or to which it or any of its properties is
subject.
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<PAGE> 19
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic
cap or other similar agreement or arrangement to which Company or any of
its Subsidiaries is a party.
"DEFERRED PREPAYMENT AMOUNT" has the meaning assigned such term
in subsection 2.4A(iv).
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable
certificate of deposit.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the
date on which the Senior Secured Notes mature; provided, however, that a
class of Capital Stock shall not be Disqualified Stock hereunder solely
as the result of any maturity or redemption that is conditioned upon,
and subject to, compliance with subsection 7.3; and provided, further,
that Capital Stock issued to any plan for the benefit of employees of
Company or its Subsidiaries or by any such plan to such employees shall
not constitute Disqualified Stock solely because it may be required to
be repurchased by Company in order to satisfy applicable statutory or
regulatory obligations.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"DOMESTIC SUBSIDIARY" means any Wholly Owned Subsidiary of
Company organized under the laws of the United States or any state
thereof.
"ELIGIBLE ACCOUNTS RECEIVABLE" means the Dollar value of the
Accounts Receivable of Company and its Wholly Owned Subsidiaries which
at all times continue to be acceptable to Administrative Agent in its
reasonable judgment and in accordance with its customary commercial
lending practices, less any returns, discounts, claims, credits, and
allowances of any nature (whether issued, owing, granted or
outstanding). An Account Receivable shall not be included in Eligible
Accounts Receivable if:
(i) it arises out of a sale made by such Loan Party to an
Affiliate; or
(ii) its payment terms are longer than 60 days from date of
invoice; or
(iii) it is unpaid (a) more than 60 days after the original
payment due date on payment terms of 30 days or less from date of
invoice, or (b) more than 30 days after the
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<PAGE> 20
original payment due date on payment terms of more than 30 days from
date of invoice; or
(iv) it is from the same account debtor (including any Affiliate
of such account debtor) and fifty percent (50%) or more of all Accounts
Receivable from that account debtor (and its Affiliates) are ineligible
under clause (iii) above; or
(v) when aggregated with all other Accounts Receivable of an
account debtor, such Account Receivable exceeds 25% in face value of all
Accounts Receivable of such Loan Party then outstanding, but only to the
extent of such excess, unless such excess is supported by an irrevocable
letter of credit reasonably satisfactory to Administrative Agent (as to
form, substance and issuer); or
(vi) the account debtor for such Account Receivable is a creditor
of such Loan Party, has or has asserted a right of setoff against such
Loan Party, or has disputed its liability or otherwise has made any
claim with respect to such Account Receivable or any other Account
Receivable which has not been resolved, in each case to the extent of
the amount owed by such Loan Party to such account debtor, the amount of
such actual or asserted right of setoff, or the amount of such dispute
or claim, as the case may be; or
(vii) such Account Receivable is owed by an account debtor which
has (a) commenced a voluntary case under the bankruptcy or insolvency
laws of any jurisdiction, or made an assignment for the benefit of
creditors, (b) against which a decree or order for relief has been
entered by a court in an involuntary case under the bankruptcy or
insolvency laws of any jurisdiction, or (c) against which any other
petition or any other application for relief under the bankruptcy or
insolvency laws of any jurisdiction has been filed and such petition or
application shall have continued unstayed or undischarged for 60 days,
or (d) which has suspended business or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs;
(viii) the sale to the account debtor is on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval or consignment basis
or was made pursuant to any other written agreement providing for
repurchase or return; or
(ix) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless such Loan Party
duly assigns its rights to payment of such Account Receivable to
Administrative Agent pursuant to the Assignment of Claims Act of 1940,
as amended (31 U.S.C. Sections 3727 et seq.); or
(x) the goods giving rise to such Account Receivable have not
been shipped and delivered to and accepted by the account debtor, the
services giving rise to such Account Receivable have not been performed
and accepted, or such Account Receivable otherwise does not represent a
final sale; or
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<PAGE> 21
(xi) such Account Receivable does not comply in all material
respects with all Governmental Authorizations and laws, rules or
regulations of any governmental authority, including the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal Reserve System; or
(xii) such Account Receivable is, as a result of the
creditworthiness, payment record or other similar circumstances of the
account debtor, subject to any security deposit, progress payment or
other similar advance made by or for the benefit of the applicable
account debtor; or
(xiii) such Account Receivable (a) in the case of Accounts
Receivable of Domestic Subsidiaries, is not subject to a valid and
perfected First Priority Lien in favor of Administrative Agent, (b) in
the case of Accounts Receivable of Foreign Subsidiaries, is subject to
any Lien, or (c) does not otherwise conform to the representations and
warranties contained in the Loan Documents; or
(xiv) any Account Receivable which Administrative Agent, in
accordance with its reasonable judgment and its customary criteria,
deems ineligible;
provided that notwithstanding anything herein to the contrary, Accounts
Receivable of Foreign Subsidiaries shall not constitute Eligible
Accounts Receivable to the extent the aggregate amount of Eligible
Accounts Receivable of Foreign Subsidiaries exceeds 33% of the total
aggregate amount of all Eligible Accounts Receivable.
"ELIGIBLE ASSIGNEE" means (i) (a) a commercial bank organized
under the laws of the United States or any state thereof; (b) a savings
and loan association or savings bank organized under the laws of the
United States or any state thereof; (c) a commercial bank organized
under the laws of any other country or a political subdivision thereof;
provided that (1) such bank is acting through a branch or agency located
in the United States or (2) such bank is organized under the laws of a
country that is a member of the Organization for Economic Cooperation
and Development or a political subdivision of such country; and (d) any
other entity which is an "accredited investor" (as defined in Regulation
D under the Securities Act) which extends credit or buys loans as one of
its businesses including insurance companies, mutual funds and lease
financing companies; and (ii) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Company shall be an Eligible
Assignee.
"ELIGIBLE INVENTORY" means the Dollar value of the Inventory of
Company and Subsidiary Guarantors which at all times continues to be
acceptable to Administrative Agent in its reasonable judgment and in
accordance with its customary commercial lending practices. In
determining the amount of Eligible Inventory to be so included,
Inventory shall be valued at the lower of cost or market on a basis
consistent with such
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<PAGE> 22
Loan Party's current and historical accounting practices. An item of
Inventory shall not be included in Eligible Inventory if:
(i) it is not owned solely by such Loan Party or such Loan Party
does not have good, valid and marketable title thereto; or
(ii) it is not located in the United States; or
(iii) it is not located on property owned or leased by such Loan
Party or in a contract warehouse, in each case segregated or otherwise
separately identifiable from goods of others, if any, stored on the
premises and, if requested by Administrative Agent, subject to a
Collateral Access Agreement executed by any applicable mortgagee, lessor
or contract warehouseman, as the case may be; or
(iv) it is not subject to a valid and perfected First Priority
Lien in favor of Administrative Agent; or
(v) it consists of goods returned or rejected by such Loan
Party's customers or goods in transit to third parties (other than to
warehouse sites); or
(vi) it is obsolete or does not otherwise conform to the
representations and warranties contained in the Loan Documents; or
(vii) any item of Inventory which Administrative Agent, in
accordance with its reasonable judgment and its customary criteria,
deems ineligible.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or
contributed to by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates (unless the context provides otherwise).
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or
other order, by any governmental authority or any other Person, arising
(i) pursuant to or in connection with any actual or alleged violation of
any Environmental Law, (ii) in connection with any Hazardous Materials
or any actual or alleged Hazardous Materials Activity, or (iii) in
connection with any actual or alleged damage, injury, threat or harm to
employee health or safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future
applicable statutes, ordinances, orders, rules, regulations, judgments,
Governmental Authorizations relating to (i) environmental matters,
including those relating to any Hazardous Materials Activity, or (ii)
occupational safety and health, in any manner applicable to Company or
any of its Subsidiaries or any Facility, including the Comprehensive
Environmental Response,
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<PAGE> 23
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251
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 136 et
seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq) and the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), each as amended or supplemented, any analogous present
or future applicable state or local statutes or laws, and any applicable
regulations promulgated pursuant to any of the foregoing.
"EQUITY INTERESTS" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of
which that Person is a member; (ii) any trade or business (whether or
not incorporated) which is a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is a member; and (iii) any
member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member. Any former ERISA Affiliate
of Company or any of its Subsidiaries shall continue to be considered an
ERISA Affiliate of Company or such Subsidiary within the meaning of this
definition with respect to the period such entity was an ERISA Affiliate
of Company or such Subsidiary and with respect to liabilities arising
after such period for which Company or such Subsidiary could be liable
under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for
30-day notice to the PBGC has been waived by regulation); (ii) the
failure to meet the minimum funding standard of Section 412 of the
Internal Revenue Code with respect to any Pension Plan (whether or not
waived in accordance with Section 412(d) of the Internal Revenue Code)
or the failure to make by its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension
Plan or the failure to make any required contribution to a Multiemployer
Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to
terminate such plan in a distress termination described in Section
4041(c) of ERISA; (iv) the withdrawal by Company, any
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<PAGE> 24
of its Subsidiaries or any of their respective ERISA Affiliates from any
Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in a material liability pursuant to
Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any
event or condition which might constitute grounds under ERISA for the
termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of a material liability on Company,
any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal of
Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is
any potential material liability therefor, or the receipt by Company,
any of its Subsidiaries or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends
to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could give rise to the
imposition on Company, any of its Subsidiaries or any of their
respective ERISA Affiliates of material fines, penalties, taxes or
related charges under Chapter 43 of the Internal Revenue Code or under
Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in
respect of any Employee Benefit Plan; (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or
against Company, any of its Subsidiaries or any of their respective
ERISA Affiliates in connection with any Employee Benefit Plan; (x)
receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any
trust forming part of any Pension Plan to qualify for exemption from
taxation under Section 501(a) of the Internal Revenue Code; or (xi) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.
"EURODOLLAR RATE LOANS" means Revolving Loans bearing interest
at rates determined by reference to the Adjusted Eurodollar Rate as
provided in subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in
Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"FACILITIES" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Company or
any of its Subsidiaries or any of their respective predecessors or
Affiliates.
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"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"FINANCIAL PLAN" has the meaning assigned to that term in
subsection 6.1(xiii).
"FIRST PRIORITY" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i)
such Lien has priority over any other Lien on such Collateral and (ii)
such Lien is the only Lien (other than Permitted Encumbrances) to which
such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its
Subsidiaries ending on December 31 of each calendar year. For purposes
of this Agreement, any particular Fiscal Year shall be designated by
reference to the calendar year in which such Fiscal Year ends.
"FOREIGN SUBSIDIARY" means any Wholly Owned Subsidiary of Company
organized under the laws of a country or jurisdiction other than the
United States or a state thereof.
"FUNDING AND PAYMENT OFFICE" means (i) the office of
Administrative Agent located at 100 Federal Street, Boston,
Massachusetts 02110 or (ii) such other office of Administrative Agent as
may from time to time hereafter be designated as such in a written
notice delivered by Administrative Agent to Company and each Lender.
"FUNDING DATE" means the date of the funding of a Revolving Loan
and does not include any date such Revolving Loan is continued or
converted.
"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting
principles set forth in opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances
as of the date of determination.
"GOVERNMENTAL ACTS" has the meaning assigned to that term in
subsection 3.5A.
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"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or
court.
"GSCP" has the meaning assigned to that term in the introduction
to this Agreement.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "acutely hazardous waste", "radioactive waste",
"biohazardous waste", "pollutant", "toxic pollutant", "contaminant",
"restricted hazardous waste", "infectious waste", "toxic substances", or
any other term or expression intended to define, list or classify
substances by reason of properties harmful to health, safety or the
indoor or outdoor environment under any applicable Environmental Laws;
(ii) any oil, petroleum, petroleum fraction or petroleum derived
substance; (iii) any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) any asbestos-containing
materials; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls; and (ix) pesticides.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, or
threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, storage, presence, Release,
threatened Release, generation, transportation, processing, treatment or
handling of any Hazardous Materials, and any corrective action or
response or remedial action with respect to any of the foregoing.
"HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"INDEBTEDNESS" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any obligations under Hedge Agreements,
except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and obligations under Hedge Agreements) would
appear as a liability
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<PAGE> 27
upon a balance sheet of such Person prepared in accordance with GAAP, as
well as all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such indebtedness is assumed by such Person)
and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in
the case of any Indebtedness that does not require current payments of
interest, and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term
in subsection 10.3.
"INDEMNITEE" has the meaning assigned to that term in subsection
10.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or
necessary for the conduct of the business of Company and its
Subsidiaries as currently conducted that are material to the condition
(financial or otherwise), business or operations of Company and its
Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate
Loan, each March 15, June 15, September 15 and December 15 of each year,
commencing on the first such date to occur after the Closing Date, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Revolving Loan; provided that in the
case of each Interest Period of longer than three months "Interest
Payment Date" shall also include each date that is three months after
the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended to the date hereof and from time to time hereafter, and any
successor statute.
"INVENTORY" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which
are then held by such Person for sale or lease, including raw materials
and work in process.
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<PAGE> 28
"INVESTMENTS" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of
direct or indirect loans (including guarantees of Indebtedness or other
obligations) advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities,
together with all items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP. If Company or any
Subsidiary of Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Company such that,
after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of Company, Company shall be deemed to have made an
Investment on the date of such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph
of subsection 7.3.
"ISSUING LENDER" means BankBoston or any Person serving as
successor Administrative Agent hereunder, in its capacity as Issuing
Lender.
"JOINT VENTURE" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal
form; provided that in no event shall any corporate Subsidiary of any
Person be considered to be a Joint Venture to which such Person is a
party.
"LENDER" and "LENDERS" means the persons identified as "Lenders"
and listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Standby Letters
of Credit issued or to be issued by Issuing Lender for the account of
Company pursuant to subsection 3.1.
"LETTER OF CREDIT USAGE" means, as at any date of determination,
the sum of (i) the maximum aggregate amount which is or at any time
thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under
Letters of Credit honored by Issuing Lender and not theretofore
reimbursed by Company (either directly or as a result of any such
reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B).
"LEVERAGE RATIO" has the meaning assigned such term in
subsection 7.4C.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any
option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
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<PAGE> 29
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of Issuing Lender
relating to, the Letters of Credit), the Subsidiary Guaranty and the
Collateral Documents.
"LOAN PARTY" means each of Company and any of Company's
Subsidiaries from time to time executing a Loan Document, and "LOAN
PARTIES" means all such Persons, collectively.
"MAINTENANCE CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of all Consolidated Capital Expenditures made by
Company and its Subsidiaries during that period for repair or
maintenance of property, plant or equipment.
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as
in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Company or any of its Subsidiaries or (ii)
the material impairment of the ability of any Loan Party to perform, or
of Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means any contract or other arrangement to
which Company or any of its Subsidiaries is a party (other than the Loan
Documents) for which breach, nonperformance, cancellation or failure to
renew would reasonably be expected to have a Material Adverse Effect.
"MAXIMUM AMOUNT" has the meaning assigned to that term in
subsection 10.20.
"MERGER" means (i) the merger of Merger Sub with and into Zilog
in accordance with the terms of the Merger Agreement, with Zilog being
the surviving corporation in such Merger and (ii) the recapitalization
of Company effected concurrently with the Merger.
"MERGER AGREEMENT" means that certain Agreement and Plan of
Merger by and among TPG, Zilog, and Merger Sub dated as of July 20,
1997, as amended by Amendments Number One, Two and Three to the
Agreement and Plan of Merger, dated as of November 18, 1997, December
10, 1997 and January 26, 1998, respectively, in the form delivered to
Arranger, Administrative Agent and Lenders prior to their execution of
this Agreement and as such agreement may be amended from time to time
thereafter to the extent permitted under subsection 7.10.
"MERGER SUB" means TPG Zeus Acquisition Corporation, a Delaware
corporation existing prior to the Merger.
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<PAGE> 30
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however,
(i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any
Asset Sale or Collateral Asset Sale (as defined in the Senior Secured
Note Indenture) (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"NON-U.S. LENDER" has the meaning assigned to that term in
subsection 2.7(iii).
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent
pursuant to subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially
in the form of Exhibit II annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 2.2D with respect to a
proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Revolving Loans
specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of Exhibit III annexed hereto delivered by
Company to Administrative Agent pursuant to subsection 3.1B(i) with
respect to the proposed issuance of a Letter of Credit.
"OBLIGATIONS" means all obligations of every nature of each Loan
Party from time to time owed to Agents, Lenders or their respective
Affiliates or any of them under the Loan Documents whether for
principal, interest, reimbursement of amounts drawn under Letters of
Credit, fees, expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of
the board (if an officer) or its president or one of its vice presidents
and by its chief financial officer or its treasurer; provided that every
Officers' Certificate with respect to the compliance with a condition
precedent to the making of any Revolving Loans hereunder shall include
(i) a statement that the officer or officers making or giving such
Officers' Certificate have read such condition and any definitions or
other provisions contained in this Agreement relating thereto, (ii) a
statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to
enable them to express
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<PAGE> 31
an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of
the signers, such condition has been complied with.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal
Revenue Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens:
(i) Liens existing as of the Closing Date to the extent and in
the manner such Liens are in effect on the Closing Date; (ii) Liens on
assets other than Collateral securing the Senior Secured Notes and the
Subsidiary guarantees thereof; (iii) Liens of Company or a Subsidiary
Guarantor on assets of any Subsidiary of Company; (iv) Liens securing
any permitted refinancing indebtedness which is incurred in accordance
with subsection 7.1(vii) to refinance any Indebtedness which has been
secured by a Lien permitted under this Agreement and which has been
incurred in accordance with the provisions of this Agreement; provided,
however, that such Liens (a) are not materially less favorable to the
Lenders and are not materially more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness
being refinanced and (b) do not extend to or cover any property or
assets of Company or any of its Subsidiaries not securing the
Indebtedness so refinanced; (v) Liens for taxes, assessments or
governmental charges or claims either (a) not delinquent or (b)
contested in good faith by appropriate proceedings and as to which
Company or its Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP; (vi) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent for a period of
more than 60 days or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof; (vii) Liens incurred or deposits made
in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
or similar obligations, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice
in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money); (viii) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired; (ix)
easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances
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<PAGE> 32
in respect of real property not interfering in any material respect with
the ordinary conduct of the business of Company or any of its
Subsidiaries; (x) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating; provided that such
Liens do not extend to any property or assets which is not leased
property subject to such lease; (xi) Liens securing Capital Lease
Obligations and purchase money Indebtedness incurred in accordance with
subsection 7.1(iv); provided, however, that in the case of purchase
money Indebtedness (a) the Indebtedness shall not exceed the cost of
such property or assets being acquired or constructed and shall not be
secured by any property or assets of Company or any Subsidiary of
Company other than the property and assets being acquired or constructed
and (b) the Lien securing such Indebtedness shall be created within 90
days of such acquisition or construction; (xii) Liens securing
reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit
and products and proceeds thereof; (xiii) Liens encumbering deposits
made to secure obligations arising from statutory, regulatory,
contractual, or warranty requirements of Company or any of its
Subsidiaries, including rights of offset and set-off; (xiv) Liens
securing obligations under Hedge Agreements which obligations relate to
Indebtedness that is otherwise permitted under this Agreement; (xv)
Liens securing Acquired Debt incurred in accordance with subsection
7.1(vi); provided that (a) such Liens secured such Acquired Debt at the
time of and prior to the incurrence of such Acquired Debt by Company or
a Subsidiary of Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Debt by Company or a
Subsidiary of Company and (b) such Liens do not extend to or cover any
property or assets of Company or of any of its Subsidiaries other than
the property or assets that secured Acquired Debt prior to time such
Indebtedness became Acquired Debt of Company or a Subsidiary of Company
and are no more favorable to the lienholders than those securing the
Acquired Debt prior to the incurrence of such Acquired Debt by Company
or a Subsidiary of Company; (xvi) leases or subleases granted to others
not interfering in any material respect with the business of Company or
its Subsidiaries; (xvii) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by Company or any
Subsidiary in the ordinary course of business; (xiii) Liens incurred in
the ordinary course of business of Company or any Subsidiary of Company
with respect to obligations that do not exceed $5,000,000 at any one
time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the
aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by
Company or such Subsidiary and (xix) Liens granted pursuant to the
Collateral Documents.
"PERMITTED INVESTMENTS" means (i) any Investment in Company or in
a Subsidiary; (ii) any Investment in Cash and Cash Equivalents; (iii)
any Investment by Company or any Subsidiary in a Person, if as a result
of such Investment (a) such Person becomes a Subsidiary or (b) such
Person is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into,
Company or a Subsidiary; (iv) any Restricted Investment made as a result
of the receipt
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<PAGE> 33
of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the Senior Secured Note Indenture or a
transaction not constituting an Asset Sale by reason of the $1,000,000
threshold contained in the definition thereof; (v) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other
than Disqualified Stock) of Company; (vi) obligations under Hedge
Agreements entered into the ordinary course of business by Company or
its Subsidiaries and otherwise in accordance with this Agreement; (vii)
loans and advances to employees and officers of Company and its
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $5,000,000 at any one time outstanding; (viii)
Investments in securities of trade creditors or customers received in
settlement of obligations or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; and (ix) other Investments in any Person having
an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to
this clause (ix) that are at that time outstanding, not to exceed
$25,000,000.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of
Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, prepay, retire, renew,
replace, defease or refund Indebtedness of Company or any of its
Subsidiaries (other than such Indebtedness described in clauses (i),
(v), (viii), (x), (xi), (xii), (xiii), (xiv) and (xv) of subsection
7.1), provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, prepaid, retired,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith including premiums paid, if
any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, prepaid, retired, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, prepaid, retired, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Revolving Loans,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment
to, the Revolving Loans on terms at least as favorable to the Lenders as
those contained in the documentation governing the Indebtedness being
extended, refinanced, prepaid, retired, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company
or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, prepaid, retired, renewed, replaced, defeased or
refunded.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies,
limited liability partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land
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<PAGE> 34
trusts, business trusts or other organizations, whether or not legal
entities, and governments (whether federal, state or local, domestic or
foreign, and including political subdivisions thereof) and agencies or
other administrative or regulatory bodies thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of
Default.
"PRICING DETERMINATION DATE" means any date after the six month
anniversary of the Closing Date on which Company delivers financial
statements to Administrative Agent and Lenders pursuant to clause (i) or
(ii) of subsection 6.1 (accompanied by a Compliance Certificate
delivered by Company pursuant to clause (iii) of subsection 6.1).
"PRICING LEVEL" means Pricing Level I or Pricing Level II as may
be in effect for a Pricing Period; provided that Pricing Level II shall
be in effect for the initial Pricing Period commencing on the Closing
Date until the first Pricing Determination Date.
"PRICING LEVEL I" means the Pricing Level in effect if the
Leverage Ratio for the most recently ended four-Fiscal Quarter period is
equal to or less than 3.5:1.
"PRICING LEVEL II" means the Pricing Level in effect if the
Leverage Ratio for the most recently ended four-Fiscal Quarter period
(i) exceeds 3.5:1 or (ii) an Event of Default shall have occurred and be
continuing.
"PRICING PERIOD" means (i) initially, the period commencing on
the Closing Date and ending on the initial Pricing Determination Date
and (ii) thereafter, any period commencing on the day immediately
following a Pricing Determination Date and ending on the next succeeding
Pricing Determination Date.
"PRO RATA SHARE" means the percentage obtained by dividing (i)
the Revolving Loan Exposure of that Lender by (ii) the aggregate
Revolving Loan Exposure of all Lenders, as the applicable percentage may
be adjusted by assignments permitted pursuant to subsection 10.1. The
initial Pro Rata Share of each Lender is set forth opposite the name of
that Lender in Schedule 2.1 annexed hereto.
"QUALIFIED PROCEEDS" means any of the following or any
combination of the following: (i) Cash, (ii) Cash Equivalents, (iii)
long-term assets that are used or useful in the business of Company or
its Subsidiaries on the Closing Date or businesses reasonably related
thereto (the "Permitted Business"), (iv) the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the
receipt by Company or any Subsidiary of the Company of such Capital
Stock, (a) such Person becomes a Wholly Owned Subsidiary of Company and
a Subsidiary Guarantor or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, Company or any Wholly Owned
Subsidiary of Company that is a Subsidiary Guarantor.
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<PAGE> 35
"RECAPITALIZATION RELATED SPECIAL CHARGES" means (i) up to
$10,000,000 million of retention bonuses paid to employees of Company
within six months following the Closing Date, (ii) up to $5,000,000 of
(a) severance costs paid by Company within six months following the
Closing Date and (b) bonuses paid by Company to members of management of
Company retained effective on or after January 1, 1998 and paid within
six months following the Closing Date, (iii) expense incurred by Company
as a result of (a) payments made by the Company on the Closing Date in
respect of options to purchase common stock of Company outstanding on
the Closing Date and (b) the grant by Company on the Closing Date or
within six months thereafter of options to purchase common stock of
Company and (iv) consulting fees, not exceeding $1,500,000, paid by
Company within six months following the Closing Date.
"REGISTER" has the meaning assigned to that term in subsection
2.1D.
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELATED AGREEMENTS" means, collectively, the Merger Agreement,
the Certificate of Designations, the Stockholders Agreement, the Senior
Secured Note Indenture, the Senior Secured Notes, the Senior Secured
Note Purchase Agreement and the Senior Secured Registration Rights
Agreement.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), including the movement of any Hazardous Materials through
the air, soil, surface water or groundwater.
"REQUISITE LENDERS" means Lenders having or holding more than 50%
of the aggregate Revolving Loan Exposure of all Lenders.
"RESTRICTED INVESTMENT" means an Investment other than a
Permitted Investment.
"RESTRICTED PAYMENT" has the meaning assigned to that term in
subsection 7.3.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to
make Revolving Loans to Company pursuant to subsection 2.1A(iii), and
"REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders in
the aggregate.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means February 27,
2003.
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"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the termination of the Revolving
Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after
the termination of the Revolving Loan Commitments, the sum of (a) the
aggregate outstanding principal amount of the Revolving Loans of that
Lender plus (b) in the event that Lender is an Issuing Lender, the
aggregate Letter of Credit Usage in respect of all Letters of Credit
issued by that Lender (in each case net of any participations purchased
by other Lenders in such Letters of Credit or any unreimbursed drawings
thereunder) plus (c) the aggregate amount of all participations
purchased by that Lender in any outstanding Letters of Credit or any
unreimbursed drawings under any Letters of Credit.
"REVOLVING LOANS" means the Revolving Loans made by Lenders to
Company pursuant to subsection 2.1A(iii).
"REVOLVING NOTES" means any promissory notes issued by Company
pursuant to subsection 2.1E or the last sentence of subsection 10.1B(i)
in connection with assignments of the Revolving Loan Commitments and
Revolving Loans of any Lenders, in each case substantially in the form
of Exhibit IV annexed hereto, as they may be amended, supplemented or
otherwise modified from time to time.
"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in
any profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"SENIOR SECURED NOTE INDENTURE" means the indenture pursuant to
which the Senior Secured Notes are issued, as such indenture may be
amended from time to time to the extent permitted under subsection 7.10.
"SENIOR SECURED NOTES" means the $280,000,000 in aggregate
principal amount of 9.5% Senior Secured Notes due 2005 of Company issued
pursuant to the Senior Secured Note Indenture.
"SENIOR SECURED NOTE PURCHASE AGREEMENT" means the agreement or
agreements pursuant to which the Senior Secured Notes are purchased by
the initial purchasers thereof, as such agreement or agreements may be
amended from time to time to the extent permitted under subsection 7.10.
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"SENIOR SECURED NOTE REGISTRATION RIGHTS AGREEMENT" means the
registration rights agreement entered into by Company relating to the
Senior Secured Notes, as such agreement may be amended from time to time
to the extent permitted under subsection 7.10.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is
in effect on the date of this Agreement.
"SOLVENT" means, with respect to any Person, that as of the date
of determination both (i) (a) the then fair saleable value of the
property of such Person is (1) greater than the total amount of
liabilities (including contingent liabilities) of such Person and (2)
not less than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become absolute
and matured considering all financing alternatives and potential asset
sales reasonably available to such Person; (b) such Person's capital is
not unreasonably small in relation to its business or any contemplated
or undertaken transaction; and (c) such Person does not intend to incur,
or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such
Person is "solvent" within the meaning given that term and similar terms
under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that, in light of all of the
facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured
liability.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness
of Company or any of its Subsidiaries in respect of industrial revenue
or development bonds or financings, (ii) workers' compensation
liabilities of Company or any of its Subsidiaries, (iii) the obligations
of third party insurers of Company or any of its Subsidiaries arising by
virtue of the laws of any jurisdiction requiring third party insurers,
(iv) obligations with respect to capital leases or operating leases of
Company or any of its Subsidiaries, and (v) performance, payment,
deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in
accordance with custom and practice in the industry; provided that
Standby Letters of Credit may not be issued for the purpose of
supporting (a) trade payables or (b) any Indebtedness constituting
"antecedent debt" (as that term is used in Section 547 of the Bankruptcy
Code).
"STOCKHOLDERS AGREEMENT" means that certain Stockholders
Agreement, entered into in connection with the Merger, by and among
Company, TPG and the stockholders of Company party thereto, as such
agreement may be amended from time to time to the extent permitted by
subsection 7.10.
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"SUBORDINATED INDEBTEDNESS" means any Indebtedness of Company
subordinated in right of payment to the Obligations pursuant to
documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in
form and substance reasonably satisfactory to Administrative Agent and
Requisite Lenders.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or
other business entity of which more than 50% of the total voting power
of shares of stock or other ownership interests entitled (without regard
to the occurrence of any contingency) to vote in the election of the
Person or Persons (whether directors, managers, trustees or other
Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination
thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that
executes and delivers a counterpart of the Subsidiary Guaranty on the
Closing Date or from time to time thereafter pursuant to subsection 6.8.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and
delivered by existing Subsidiaries of Company on the Closing Date and to
be executed and delivered by additional Subsidiaries of Company from
time to time thereafter in accordance with subsection 6.8, substantially
in the form of Exhibit XII annexed hereto, as such Subsidiary Guaranty
may hereafter be amended, supplemented or otherwise modified from time
to time.
"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security
Agreement executed and delivered by each existing Subsidiary Guarantor
on the Closing Date and to be executed and delivered by any additional
Subsidiary Guarantor from time to time thereafter in accordance with
subsection 6.8, substantially in the form of Exhibit XIII annexed
hereto, as such Subsidiary Security Agreement may be amended,
supplemented or otherwise modified from time to time.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that
term in subsection 9.1B.
"SYNDICATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement.
"TAX" or "TAXES" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "TAX ON THE OVERALL NET
INCOME" of a Person shall be construed as a reference to a tax imposed
by the jurisdiction in which that Person is organized or in which that
Person's
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principal office (and/or, in the case of a Lender, its lending office)
is located or in which that Person (and/or, in the case of a Lender, its
lending office) is deemed to be doing business on all or part of the net
income, profits or gains (whether worldwide, or only insofar as such
income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) of that Person (and/or, in the
case of a Lender, its lending office).
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount
of all outstanding Revolving Loans (other than Revolving Loans made for
the purpose reimbursing the applicable Issuing Lender for any amount
drawn under any Letter of Credit but not yet so applied) plus (ii) the
Letter of Credit Usage.
"TPG" means TPG Partners II, L.P.
"TRANSACTION COSTS" means the fees, costs and expenses payable by
Company on or before the Closing Date in connection with the
transactions contemplated by the Loan Documents and the Related
Agreements.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
"VOTING STOCK" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership
interest of which (other than directors' qualifying shares) shall at the
time be owned by such Person or by one or more Wholly Owned Subsidiaries
of such Person or a combination thereof.
"ZILOG" means Zilog, Inc., a Delaware corporation; provided that,
after the consummation of the Merger, Zilog shall be referred to herein
as "Company".
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1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii) and (xii) of
subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(iv)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
References to "Sections" and "subsections" shall be to Sections and subsections,
respectively, of this Agreement unless otherwise specifically provided. The use
herein of the word "include" or "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not nonlimiting language (such
as "without limitation" or "but not limited to" or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that fall within the broadest possible scope of such general
statement, term or matter.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND REVOLVING LOANS
2.1 COMMITMENTS; MAKING OF REVOLVING LOANS; THE REGISTER; REVOLVING NOTES.
A. REVOLVING LOAN COMMITMENTS. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Company herein set forth, each Lender severally agrees, subject to the
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time, to lend to Company from
time to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date an aggregate amount not exceeding its
Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be
used for the purposes identified in subsection 2.5A. The original amount of each
Lender's Revolving Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate original amount of the Revolving Loan
Commitments is $25,000,000; provided that the Revolving Loan Commitments of
Lenders shall be adjusted to give effect to any assignments of the Revolving
Loan Commitments pursuant to subsection 10.1B; and provided, further that the
amount of the Revolving Loan Commitments shall be reduced from time to time by
the amount of any
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reductions thereto made pursuant to subsection 2.4A. Each Lender's Revolving
Loan Commitment shall expire on the Revolving Loan Commitment Termination Date
and all Revolving Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be paid in full no
later than that date; provided that each Lender's Revolving Loan Commitment
shall expire immediately and without further action on February 28, 1998 if the
Closing Date has not occurred on or before that date. Amounts borrowed under
this subsection 2.1A may be repaid and reborrowed to but excluding the Revolving
Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be
subject to the following limitations in the amounts and during the periods
indicated:
(a) in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan
Commitments then in effect or the Borrowing Base then in effect;
and
(b) no Revolving Loans shall be made on the Closing Date.
B. BORROWING MECHANICS. Revolving Loans made on any Funding Date (other
than Revolving Loans made pursuant to subsection 3.3B for the purpose of
reimbursing Issuing Lender for the amount of a drawing under a Letter of Credit)
shall be in an aggregate minimum amount of $500,000 and integral multiples of
$100,000 in excess of that amount; provided that Revolving Loans made on any
Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be
in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000
in excess of that amount. Whenever Company desires that Lenders make Revolving
Loans it shall deliver to Administrative Agent a Notice of Borrowing no later
than 12:00 noon (Eastern Standard Time) at least three Business Days in advance
of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least
one Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). The Notice of Borrowing shall specify (i) the proposed Funding Date
(which shall be a Business Day), (ii) the amount of Revolving Loans requested,
(iii) whether such Revolving Loans shall be Base Rate Loans or Eurodollar Rate
Loans, (iv) in the case of any Revolving Loans requested to be made as
Eurodollar Rate Loans, the initial Interest Period requested therefor and (v)
that after giving effect to the requested Revolving Loans, the Total Utilization
of Revolving Loan Commitments will not exceed the Borrowing Base then in effect.
Revolving Loans may be continued as or converted into Base Rate Loans or
Eurodollar Rate Loans, as applicable, in the manner provided in subsection 2.2D.
In lieu of delivering the above-described Notice of Borrowing, Company may give
and hereby authorizes Administrative Agent to accept telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good
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faith to have been given by a duly authorized officer or other person authorized
to borrow on behalf of Company or for otherwise acting in good faith under this
subsection 2.1B, and upon funding of Revolving Loans by Lenders in accordance
with this Agreement pursuant to any such telephonic notice Company shall have
effected Revolving Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
Revolving Loans in the event that any of the matters to which Company is
required to certify in the applicable Notice of Borrowing is no longer true and
correct as of the applicable Funding Date, and the acceptance by Company of the
proceeds of any Revolving Loans shall constitute a re-certification by Company,
as of the applicable Funding Date, as to the matters to which Company is
required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this Agreement shall
be made by Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make a
Revolving Loan requested hereunder nor shall the Commitment of any Lender to
make the particular type of Revolving Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Revolving Loan requested hereunder. Promptly after receipt by
Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), Administrative Agent shall notify each
Lender of the proposed borrowing. Each Lender shall make the amount of its
Revolving Loan available to Administrative Agent not later than 1:00 P.M.
(Eastern Standard Time) on the applicable Funding Date in same day funds in
Dollars, at the Funding and Payment Office. Except as provided in subsection
3.3B with respect to Revolving Loans used to reimburse Issuing Lender for the
amount of a drawing under a Letter of Credit issued by it, upon satisfaction or
waiver of the conditions precedent specified in subsection 4.2 (in the case of
all Revolving Loans), Administrative Agent shall make the proceeds of such
Revolving Loans available to Company as soon as reasonably practicable on the
applicable Funding Date by causing an amount of same day funds in Dollars equal
to the proceeds of all such Revolving Loans received by Administrative Agent
from Lenders to be credited to the account of Company at the Funding and Payment
Office.
Unless Administrative Agent shall have been notified by any Lender prior
to the Funding Date for any Revolving Loans that such Lender does not intend to
make available to Administrative Agent the amount of such Lender's Revolving
Loan requested on such Funding Date, Administrative Agent may assume that such
Lender has made such amount available to Administrative Agent on such Funding
Date and Administrative Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to
Administrative
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Agent by such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER.
(i) Administrative Agent shall maintain, at its address referred
to in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Revolving Loans of each
Lender from time to time (the "REGISTER"). The Register shall be
available for inspection by Company or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Revolving Loan Commitment and Revolving Loans from time to time of each
Lender, and each repayment or prepayment in respect of the principal
amount of the Revolving Loans of each Lender. Any such recordation shall
be prima facie evidence of the amount of such Loans; provided that
failure to make any such recordation, or any error in such recordation,
shall not affect any Lender's Commitments or Company's Obligations in
respect of any applicable Revolving Loans.
(iii) Each Lender shall record on its internal records (including
the Revolving Notes held by such Lender) the amount of each Revolving
Loan made by it and each payment in respect thereof. Any such
recordation shall be prima facie evidence of the amount of such Loans;
provided that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or Company's
Obligations in respect of any applicable Revolving Loans; and provided,
further that in the event of any inconsistency between the Register and
any Lender's records, the recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and
treat the Persons listed as Lenders in the Register as the holders and
owners of the corresponding Commitments and Revolving Loans listed
therein for all purposes hereof, and no assignment or transfer of any
such Commitment or Revolving Loan shall be effective, in each case
unless and until an Assignment Agreement effecting the assignment or
transfer thereof shall have been accepted by Administrative Agent and
recorded in the Register
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as provided in subsection 10.1B(ii). Prior to such recordation, all
amounts owed with respect to the applicable Commitment or Revolving Loan
shall be owed to the Lender listed in the Register as the owner thereof,
and any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding
Commitments or Revolving Loans.
(v) Company hereby designates BankBoston to serve as Company's
agent solely for purposes of maintaining the Register as provided in
this subsection 2.1D, and Company hereby agrees that, to the extent
BankBoston serves in such capacity, BankBoston and its officers,
directors, employees, agents and affiliates shall constitute Indemnitees
for all purposes under subsection 10.3.
E. REVOLVING NOTES. Upon request of any Lender, Company shall execute
and deliver on to each Lender (or to Administrative Agent for that Lender) a
Revolving Note substantially in the form of Exhibit IV annexed hereto to
evidence that Lender's Revolving Loans, in the principal amount of that Lender's
Revolving Loan Commitment and with other appropriate insertions.
2.2 INTEREST ON THE REVOLVING LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the Adjusted
Eurodollar Rate. The applicable basis for determining the rate of interest with
respect to any Revolving Loan shall be selected by Company initially at the time
a Notice of Borrowing is given with respect to such Revolving Loan pursuant to
subsection 2.1B; provided that for the first 30 days following the Closing Date,
no Eurodollar Rate Loans shall be available. The basis for determining the
interest rate with respect to any Revolving Loan may be changed from time to
time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding
with respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day that Revolving Loan shall
bear interest determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Revolving
Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate
plus the Applicable Margin in effect from time to time; or
(b) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin in effect
from time to time during the applicable Interest Period.
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B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Revolving Loan, which Interest
Period shall be, at Company's option, either a one-, two-, three- or six-month
period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Revolving Loan, in
the case of a Revolving Loan initially made as a Eurodollar Rate Loan,
or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Revolving Loan converted to a
Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that 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;
(iv) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the
Revolving Loans shall extend beyond the Revolving Loan Commitment
Termination Date;
(vi) there shall be no more than 5 Interest Periods outstanding
at any time; and
(vii) in the event Company fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, Company shall be deemed to have
selected an Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Revolving Loan shall be payable in arrears on and to each
Interest Payment Date applicable to that Revolving Loan, upon any prepayment of
that Revolving Loan (to the extent accrued on the amount being prepaid) and at
maturity (including final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding
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Revolving Loans equal to $1,000,000 and integral multiples of $100,000 in excess
of that amount from Revolving Loans bearing interest at a rate determined by
reference to one basis to Revolving Loans bearing interest at a rate determined
by reference to an alternative basis or (ii) upon the expiration of any Interest
Period applicable to a Eurodollar Rate Loan, to continue all or any portion of
such Revolving Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 11:00 A.M. (Eastern Standard Time) at least
one Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of
Conversion/Continuation shall specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount and type of the Revolving
Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case
of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Company may give Administrative Agent telephonic notice by the required time of
any proposed conversion/continuation under this subsection 2.2D; provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Revolving Loans in accordance with this Agreement pursuant to any
such telephonic notice Company shall have effected a conversion or continuation,
as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to effect a conversion or continuation in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default under subsection 8.1, the outstanding principal amount of all
Revolving Loans and, to the extent permitted by applicable law, any interest
payments thereon not paid when due and any
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fees and other amounts then due and payable hereunder, shall thereafter bear
interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a
rate that is 2% per annum in excess of the interest rate otherwise payable under
this Agreement with respect to the applicable Revolving Loans (or, in the case
of any such fees and other amounts, at a rate which is 2% per annum in excess of
the interest rate otherwise payable under this Agreement for Base Rate Loans);
provided that, in the case of Eurodollar Rate Loans, upon the expiration of the
Interest Period in effect at the time any such increase in interest rate is
effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and
shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Revolving Loans shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on any
Revolving Loan, the date of the making of such Revolving Loan or the first day
of an Interest Period applicable to such Revolving Loan or, with respect to a
Base Rate Loan being converted from a Eurodollar Rate Loan, the date of
conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may
be, shall be included, and the date of payment of such Revolving Loan or the
expiration date of an Interest Period applicable to such Revolving Loan or, with
respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date
of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case
may be, shall be excluded; provided that if a Revolving Loan is repaid on the
same day on which it is made, one day's interest shall be paid on that Revolving
Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the sum of (i) the
aggregate principal amount of outstanding Revolving Loans plus (ii) the Letter
of Credit Usage multiplied by the Commitment Percentage per annum, such
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable quarterly in arrears on each of the
Interest Payment Dates with respect to Base Rate Loans, commencing on the first
such date to occur after the Closing Date, and on the Revolving Loan Commitment
Termination Date.
B. OTHER FEES. Company agrees to pay to Arranger and Administrative
Agent such other fees in the amounts and at the times separately agreed upon
between Company, Arranger and Administrative Agent.
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2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF
COLLATERAL AND PAYMENTS UNDER SUBSIDIARY GUARANTY.
A. PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon not less than one
Business Day's prior written or telephonic notice, in the case of Base
Rate Loans, and three Business Days' prior written or telephonic notice,
in the case of Eurodollar Rate Loans, in each case given to
Administrative Agent by 12:00 Noon (Eastern Standard Time) on the date
required and, if given by telephone, promptly confirmed in writing to
Administrative Agent (which original written or telephonic notice
Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time prepay any
Revolving Loans on any Business Day in whole or in part in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess
of that amount; provided, however, that with respect to any Eurodollar
Rate Loan prepaid prior to the expiration of the Interest Period
applicable thereto, Company shall pay all amounts payable pursuant to
subsection 2.6D. Notice of prepayment having been given as aforesaid,
the principal amount of the Revolving Loans specified in such notice
shall become due and payable on the prepayment date specified therein.
Any such voluntary prepayment shall be applied as specified in
subsection 2.4A(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit
by telefacsimile or telephone to each Lender), at any time and from time
to time terminate in whole or permanently reduce in part, without
premium or penalty, the Revolving Loan Commitments in an amount up to
the amount by which the Revolving Loan Commitments exceed the Total
Utilization of Revolving Loan Commitments at the time of such proposed
termination or reduction; provided that any such partial reduction of
the Revolving Loan Commitments shall be in an aggregate minimum amount
of $500,000 and integral multiples of $100,000 in excess of that amount.
Company's notice to Administrative Agent shall designate the date (which
shall be a Business Day) of such termination or reduction and the amount
of any partial reduction, and such termination or reduction of the
Revolving Loan Commitments shall be effective on the date specified in
Company's notice and shall reduce the Revolving Loan Commitment of each
Lender proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitments or Due to Insufficient Borrowing Base.
Company shall from time to time prepay the Revolving Loans to the extent
necessary so that the Total Utilization of Revolving Loan Commitments
shall not at any time exceed the Revolving Loan
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Commitments then in effect or the Borrowing Base then in effect.
Prepayments pursuant to this subsection 2.4A(iii) shall be applied as
provided in subsection 2.4A(iv).
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments . Any voluntary
prepayments pursuant to subsection 2.4A(i) shall be applied to
repay outstanding Revolving Loans to the full extent thereof.
(b) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Any prepayment shall be applied first to
Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes
the amount of any payments required to be made by Company
pursuant to subsection 2.6D. In the event that the amount of any
prepayment required to be made pursuant to subsection 2.4A(iii)
exceeds the aggregate principal amount of the Base Rate Loans
outstanding required to be prepaid (the amount of any such excess
being called the "DEFERRED PREPAYMENT AMOUNT"), Company shall
have the right, in lieu of making such prepayment in full, to
prepay all the outstanding Base Rate Loans and to deposit an
amount equal to the Deferred Prepayment Amount with the
Administrative Agent in the Collateral Account. Any amount so
deposited shall be held by Administrative Agent as Collateral for
the Obligations and applied to the prepayment of the applicable
Eurodollar Rate Loans at the end of the expiration of the
Interest Periods applicable thereto and Company hereby authorizes
Administrative Agent to apply such Deferred Prepayment Amount to
repay outstanding Revolving Loans at the end of the expiration of
the Interest Periods applicable thereto. As long as the Deferred
Prepayment Amount is deposited in the Collateral Account on the
date the applicable prepayment is required to be made pursuant to
subsection 2.4(A)(iii), Company shall not be required to pay
interest pursuant to subsection 2.2E or compensation for breakage
pursuant to subsection 2.6D.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. Except as expressly provided in
subsection 2.7B with respect to Taxes, all payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Revolving Notes shall be made in Dollars in same day funds, without
defense, setoff or counterclaim, free of any restriction or condition,
and delivered to Administrative Agent not later than 1:00 P.M. (Eastern
Standard Time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that
time on such due date shall be deemed to have been paid by Company on
the next succeeding Business Day. Company hereby authorizes
Administrative Agent to charge its accounts with Administrative Agent in
order to cause timely payment to be made to Administrative Agent of all
principal, interest, fees
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and expenses due hereunder (subject to sufficient funds being available
in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Revolving Loan shall
include payment of accrued interest on the principal amount being repaid
or prepaid, and all such payments shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Revolving Loans shall be apportioned among all
outstanding Revolving Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its primary address
set forth below its name on the appropriate signature page hereof or at
such other address as such Lender may request, its Pro Rata Share of all
such payments received by Administrative Agent and the commitment fees
of such Lender when received by Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C,
any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its
Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall
give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(v) Notation of Payment. Each Lender agrees that before disposing
of any Revolving Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Revolving Loans evidenced by that Revolving Note and all
principal payments previously made thereon and of the date to which
interest thereon has been paid; provided that the failure to make (or
any error in the making of) a notation of any Revolving Loan made under
such Revolving Note shall not limit or otherwise affect the obligations
of Company hereunder or under such Revolving Note with respect to any
Revolving Loan or any payments of principal or interest on such
Revolving Note.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER SUBSIDIARY
GUARANTY.
(i) Application of Proceeds of Collateral. All proceeds received
by Administrative Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral under any
Collateral Document may, in the discretion of
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Administrative Agent, be held by Administrative Agent as Collateral for,
and/or (then or at any time thereafter) applied in full or in part by
Administrative Agent against, the applicable Secured Obligations (as
defined in such Collateral Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable
compensation to Administrative Agent and its agents and counsel,
and all other expenses, liabilities and advances made or incurred
by Administrative Agent in connection therewith, and all amounts
for which Administrative Agent is entitled to indemnification
under such Collateral Document and all advances made by
Administrative Agent thereunder for the account of the applicable
Loan Party, and to the payment of all costs and expenses paid or
incurred by Administrative Agent in connection with the exercise
of any right or remedy under such Collateral Document, all in
accordance with the terms of this Agreement and such Collateral
Document;
(b) thereafter, to the extent of any excess such proceeds,
to the payment of all other such Secured Obligations for the
ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds,
to the payment to or upon the order of such Loan Party or to
whosoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct.
(ii) Application of Payments Under Subsidiary Guaranty. All
payments received by Administrative Agent under the Subsidiary Guaranty
shall be applied promptly from time to time by Administrative Agent in
the following order of priority:
(a) To the payment of the costs and expenses of any
collection or other realization under the Subsidiary Guaranty,
including reasonable compensation to Administrative Agent and its
agents and counsel, and all expenses, liabilities and advances
made or incurred by Administrative Agent in connection therewith,
all in accordance with the terms of this Agreement and the
Subsidiary Guaranty;
(b) thereafter, to the extent of any excess such payments,
to the payment of all other Guarantied Obligations (as defined in
the Subsidiary Guaranty) for the ratable benefit of the holders
thereof; and
(c) thereafter, to the extent of any excess such payments,
to the payment to the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct.
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2.5 USE OF PROCEEDS.
A. REVOLVING LOANS. The proceeds of any Revolving Loans shall be applied
by Company for general corporate purposes, which may include capital
expenditures and the making of intercompany loans to any Subsidiary Guarantor,
in accordance with subsection 7.1(v), for their own general corporate purposes.
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (Eastern Standard Time) on each Interest Rate Determination
Date, Administrative Agent shall determine (which determination shall be prima
facie evidence of such rate) the interest rate that shall apply to the
Eurodollar Rate Loans for which an interest rate is then being determined for
the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have reasonably determined, on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Revolving
Loans on the basis provided for in the definition of Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Revolving Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Revolving Loans in respect of which such
determination was made shall be deemed to be rescinded by Company.
C. ILLEGALITY OR MATERIAL HARDSHIP OF EURODOLLAR RATE LOANS. In the
event that on any date any Lender (after consultation with Company and
Administrative Agent) shall have reasonably determined that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty,
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governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) would
cause such Lender material hardship, as a result of contingencies occurring
after the date of this Agreement which materially and adversely affect the
interbank Eurodollar market or the position of such Lender in that market, then,
and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on
that day give notice (by telefacsimile or by telephone confirmed in writing) to
Company and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Revolving Loans as, or to
convert Revolving Loans to, Eurodollar Rate Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Revolving Loan as
(or convert such Revolving Loan to, as the case may be) a Base Rate Loan, (c)
the Affected Lender's obligation to maintain its outstanding Eurodollar Rate
Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall
have the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Revolving Loans as, or to convert Revolving Loans to, Eurodollar
Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by that
Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate
Loans and any loss, expense or liability sustained by that Lender in connection
with the liquidation or re-employment of such funds) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a borrowing
of any Eurodollar Rate Loan does not occur on a date specified therefor in a
Notice of Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including any prepayment
pursuant to subsection 2.4B(i)) or other principal payment or any conversion of
any of its Eurodollar Rate Loans occurs on a date prior to the last day of an
Interest Period applicable to that Revolving Loan, (iii) if any prepayment of
any of its Eurodollar Rate Loans is not made on any date
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specified in a notice of prepayment given by Company, or (iv) as a consequence
of any other default by Company in the repayment of its Eurodollar Rate Loans
when required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Revolving Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest Period
then in effect for that Revolving Loan and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall reasonably determine that
any change in any law, treaty or governmental rule, regulation or order, or any
change in the interpretation, administration or application thereof (including
the adoption of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by such Lender (at its
applicable lending office) with any guideline, request or directive issued or
made after the date hereof by any central bank or other governmental or
quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its
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applicable lending office) of principal, interest, fees or any other
amount payable hereunder; or
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan, FDIC insurance or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, such Lender (other than any such reserve
or other requirements with respect to Eurodollar Rate Loans that are
reflected in the definition of Adjusted Eurodollar Rate);
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Revolving Loans hereunder or to reduce
any amount received or receivable by such Lender (or its applicable lending
office) with respect thereto; then, in any such case, Company shall pay to such
Lender, within five days after receipt of the statement referred to below, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder; provided that the foregoing shall apply only to the extent that such
Lender's Revolving Loan is a Eurodollar Rate Loan; and provided further, that
Company shall not be liable in respect of any such increased cost for any period
during which such Lender had actual knowledge thereof and failed to notify
Company as soon as reasonably practicable in accordance with the next sentence
if and to the extent such earlier notice would have avoided or lessened the
payments required by Company hereunder relating to such period. Such Lender
shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be prima facie evidence of such additional amounts.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on the
overall net income of any Lender) imposed, levied, collected, withheld
or assessed by or within the United States of America or any political
subdivision in or of the United States of America or any other
jurisdiction from or to which a payment is made by or on behalf of
Company or by any federation or organization of which the United States
of America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid
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or payable by Company to Administrative Agent or any Lender under any of
the Loan Documents:
(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Company) for its own account or
(if that liability is imposed on Administrative Agent or such
Lender, as the case may be) on behalf of and in the name of
Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment, Administrative
Agent or such Lender, as the case may be, receives on the due
date a net sum equal to what it would have received had no such
deduction, withholding or payment been required or made,
provided, however, that no such additional amounts shall be
payable in respect of (i) any Taxes imposed on a Lender by reason
of any connection between the Lender and the taxing jurisdiction
other than by reason of being a party to the Loan Documents and
receiving payments thereunder or (ii) any Taxes imposed by reason
of the Lender's failure to comply with the provisions of
subsection 2.7B(iii)(a) and (b) hereof as set forth in subsection
2.7B(iii)(c); and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within
30 days after the due date of payment of any Tax which it is
required by clause (b) above to pay, Company shall deliver to
Administrative Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each other
Lender) in any such requirement for a deduction, withholding or payment
as is mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date of
this Agreement or at the date of such Assignment Agreement, as the case
may be, in respect of payments to such Lender.
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(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "NON-US LENDER") shall deliver to Administrative
Agent for transmission to Company, on or prior to the Closing
Date (in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Company or Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies
of Internal Revenue Service Form 1001 or 4224 (or any successor
forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to any payments to such Lender of principal, interest,
fees or other amounts payable under any of the Loan Documents or
(2) if such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (1) above, a Certificate re Non-Bank Status together with
two original copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Lender shall
promptly (1) deliver to Administrative Agent for transmission to
Company two new original copies of Internal Revenue Service Form
1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case
may be, properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal
income tax with respect to payments to such Lender under the Loan
Documents or (2) notify Administrative Agent and Company of its
inability to deliver any such forms, certificates or other
evidence.
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(c) Company shall not be required to pay any additional
amount to any Non-US Lender under clause (c) of subsection
2.7B(ii) if such Lender shall have failed to satisfy the
requirements of clause (a) or (b)(1) of this subsection
2.7B(iii); provided that if such Lender shall have satisfied the
requirements of subsection 2.7B(iii)(a) on the Closing Date (in
the case of each Lender listed on the signature pages hereof) or
on the date of the Assignment Agreement pursuant to which it
became a Lender (in the case of each other Lender), nothing in
this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c)
of subsection 2.7B(ii) in the event that, as a result of any
change in any applicable law, treaty or governmental rule,
regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described in subsection
2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have reasonably
determined that any law, rule or regulation (or any provision thereof) regarding
capital adequacy, which is adopted or phased in, or becomes effective or
applicable, after the date hereof, or any change in any such law, rule or
regulation, or in the interpretation or administration thereof, made after the
date hereof by any governmental authority, central bank, the National
Association of Insurance Commissioners, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
applicable lending office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, the National Association of Insurance
Commissioners or comparable agency issued or made after the date hereof, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of, or with
reference to, such Lender's Revolving Loans or Commitments or Letters of Credit
or participations therein or other obligations hereunder with respect to the
Revolving Loans or the Letters of Credit to a level below that which such Lender
or such controlling corporation would have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard to capital adequacy), then from time to time, within five Business Days
after receipt by Company from such Lender of the statement referred to in the
next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Company (with a
copy to Administrative Agent) a written statement, setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be prima facie evidence of such additional amounts.
D. SUBSTITUTE LENDERS. In the event Company is required under the
provisions of subsections 2.7 or 3.6 to make payments in a material amount to
any Lender or an Affected Lender has given notice thereof to Company under
subsection 2.6C, or in the event any Lender fails to lend to Company in
accordance with this Agreement, Company may, so long as no Event of Default
shall have occurred and be continuing, elect to terminate such Lender as a party
to
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this Agreement; provided that, concurrently with such termination, (i) Company
shall pay that Lender all principal, interest and fees and other amounts
(including without limitation, amounts, if any, owed under this subsection 2.7)
owed to such Lender through such date of termination, (ii) another financial
institution reasonably satisfactory to Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the reasonable judgment of
Administrative Agent (or if Administrative Agent is also the Lender to be
terminated, the successor Administrative Agent), to evidence the substitution of
such Lender shall have been received and approved by Administrative Agent as of
such date.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDER TO MITIGATE.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Revolving Loans or Letters of Credit of such Lender or Issuing Lender, as
the case may be, becomes aware of the occurrence of an event or the existence of
a condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender or Issuing Lender to receive payments under subsection
2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Revolving Loans or Letters of Credit
of such Lender or Issuing Lender through another lending or letter of credit
office of such Lender or Issuing Lender, or (ii) take such other reasonable
measures if as a result thereof the circumstances which would cause such Lender
to be an Affected Lender would cease to exist or the additional amounts which
would otherwise be required to be paid to such Lender or Issuing Lender pursuant
to subsection 2.7 or subsection 3.6 would be materially reduced and if, as
reasonably determined by such Lender or Issuing Lender in its sole discretion,
the making, issuing, funding or maintaining of such Commitments or Revolving
Loans or Letters of Credit through such other lending or letter of credit office
or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Revolving Loans or
Letters of Credit or the interests of such Lender or Issuing Lender; provided
that such Lender or Issuing Lender will not be obligated to utilize such other
lending or letter of credit office pursuant to this subsection 2.8 unless
Company agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by Company pursuant to this subsection 2.8 (setting forth
in reasonable detail the basis for requesting such amount) submitted by such
Lender or Issuing Lender to Company (with a copy to Administrative Agent) shall
be prima facie evidence of such amount.
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SECTION 3.
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. In addition to Company requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(iii), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that Issuing Lender issue Letters of Credit for the account of
Company for the purposes specified in the definition of Standby Letter of
Credit. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, Issuing
Lender shall issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Company shall not request that Issuing Lender
issue and Issuing Lender shall not issue:
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $25,000,000;
(iii) any Letter of Credit having an expiration date later than
the earlier of (a) the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Letter
of Credit; provided that the immediately preceding clause (b) shall not
prevent Issuing Lender from agreeing that a Letter of Credit will
automatically be extended for one or more successive periods not to
exceed one year each unless Issuing Lender elects not to extend for any
such additional period; and provided, further that Issuing Lender shall
elect not to extend such Letter of Credit if it has knowledge that an
Event of Default has occurred and is continuing (and has not been waived
in accordance with subsection 10.6) at the time Issuing Lender must
elect whether or not to allow such extension; or
(iv) any Letter of Credit denominated in a currency other than
Dollars.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of
a Letter of Credit, it shall deliver to Issuing Lender a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit III
annexed hereto no later than 1:00 P.M. (Eastern Standard Time) at least
three Business Days or in such shorter period as may be agreed to by
Issuing Lender in any particular instance, in advance of the proposed
date of issuance. The Notice of Issuance of Letter of Credit shall
specify (a) the proposed date of issuance (which shall be a Business
Day), (b) the face amount of the Letter of Credit,
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(c) the expiration date of the Letter of Credit, (d) the name and
address of the beneficiary, (e) either the verbatim text of the proposed
Letter of Credit or the proposed terms and conditions thereof, including
a precise description of any documents to be presented by the
beneficiary which, if presented by the beneficiary prior to the
expiration date of the Letter of Credit, would require Issuing Lender to
make payment under the Letter of Credit, and (f) that, after giving
effect to the issuance of the Letter of Credit, the Total Utilization of
Revolving Loan Commitments will not exceed the Borrowing Base then in
effect; provided that Issuing Lender, in its reasonable discretion, may
require changes in the text of the proposed Letter of Credit or any such
documents; and provided, further that no Letter of Credit shall require
payment against a conforming draft to be made thereunder on the same
business day (under the laws of the jurisdiction in which the office of
Issuing Lender to which such draft is required to be presented is
located) that such draft is presented if such presentation is made after
10:00 A.M. (in the time zone of such office of Issuing Lender) on such
business day.
Company shall notify Issuing Lender (and Administrative Agent, if
Administrative Agent is not Issuing Lender) prior to the issuance of any
Letter of Credit in the event that any of the matters to which Company
is required to certify in the applicable Notice of Issuance of Letter of
Credit is no longer true and correct as of the proposed date of issuance
of such Letter of Credit, and upon the issuance of any Letter of Credit
Company shall be deemed to have recertified, as of the date of such
issuance, as to the matters to which Company is required to certify in
the applicable Notice of Issuance of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver
(in accordance with subsection 10.6) of the conditions set forth in
subsection 4.3, Issuing Lender shall issue the requested Letter of
Credit in accordance with Issuing Lender's standard operating procedures
and using Issuing Lender's standard form of Standby Letter of Credit.
(iii) Notification to Lenders. Upon the issuance of any Letter of
Credit Issuing Lender shall promptly notify Administrative Agent (if
Administrative Agent is not Issuing Lender) and each other Lender of
such issuance, which notice shall be accompanied by a copy of such
Letter of Credit. Promptly after receipt of such notice (or, if
Administrative Agent is Issuing Lender, together with such notice),
Administrative Agent shall notify each Lender of the amount of such
Lender's respective participation in such Letter of Credit, determined
in accordance with subsection 3.1C.
(iv) Reports to Lenders. Within 20 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, Issuing
Lender shall deliver to each other Lender a report setting forth for
such calendar quarter the daily aggregate amount available to be drawn
under the Letters of Credit issued by such Issuing Lender that were
outstanding during such calendar quarter.
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C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased
from Issuing Lender a participation in such Letter of Credit and any drawings
honored thereunder in an amount equal to such Lender's Pro Rata Share (with
respect to the Revolving Loan Commitments) of the maximum amount which is or at
any time may become available to be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
Company agrees to pay the following amounts with respect to Letters of
Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to Issuing Lender for its own account, equal to the
greater of (1) $500 and (2) 0.125% per annum of the daily amount
available to be drawn under such Letter of Credit and (b) a letter of
credit fee, payable to Administrative Agent for the account of Lenders,
equal to the product of (1) the Applicable Margin with respect to
Revolving Loans that are Eurodollar Rate Loans and (2) the daily amount
available to be drawn under such Letter of Credit, each such fronting
fee or letter of credit fee to be payable in arrears on and to (but
excluding) each Interest Payment Date with respect to Base Rate Loans
and computed on the basis of a 360-day year for the actual number of
days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges payable directly to Issuing Lender for its own
account in accordance with Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or
payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2, the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination. Promptly
upon receipt by Administrative Agent of any amount described in clause (i)(b) of
this subsection 3.2, Administrative Agent shall distribute to each Lender its
Pro Rata Share of such amount.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
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B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In
the event Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse Issuing Lender on or before
the Business Day immediately following the date on which such drawing is honored
(the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal
to the amount of such honored drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Administrative Agent and Issuing Lender prior to 1:00 P.M. (Eastern
Standard Time) on the date such drawing is honored that Company intends to
reimburse Issuing Lender for the amount of such honored drawing with funds other
than the proceeds of Revolving Loans, Company shall be deemed to have given a
timely Notice of Borrowing to Administrative Agent requesting Lenders to make
Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount
in Dollars equal to the amount of such honored drawing and (ii) subject to
satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders
shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans
in the amount of such honored drawing, the proceeds of which shall be applied
directly by Administrative Agent to reimburse Issuing Lender for the amount of
such honored drawing; and provided, further that if for any reason proceeds of
Revolving Loans are not received by Issuing Lender on the Reimbursement Date in
an amount equal to the amount of such honored drawing, Company shall reimburse
Issuing Lender, on demand, in an amount in same day funds equal to the excess of
the amount of such honored drawing over the aggregate amount of such Revolving
Loans, if any, which are so received. Nothing in this subsection 3.3B shall be
deemed to relieve any Lender from its obligation to make Revolving Loans on the
terms and conditions set forth in this Agreement, and Company shall retain any
and all rights it may have against any Lender resulting from the failure of such
Lender to make such Revolving Loans under this subsection 3.3B.
C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS OF
CREDIT.
(i) Payment by Lenders. In the event that Company shall fail for
any reason to reimburse Issuing Lender as provided in subsection 3.3B in
an amount equal to the amount of any drawing honored by Issuing Lender
under a Letter of Credit issued by it, Issuing Lender shall promptly
notify each other Lender of the unreimbursed amount of such honored
drawing and of such other Lender's respective participation therein
based on such Lender's Pro Rata Share of the Revolving Loan Commitments.
Each Lender shall make available to Issuing Lender an amount equal to
its respective participation, in Dollars and in same day funds, at the
office of such Issuing Lender specified in such notice, not later than
12:00 Noon (Eastern Standard Time) on the first business day (under the
laws of the jurisdiction in which such office of Issuing Lender is
located) after the date notified by Issuing Lender. In the event that
any Lender fails to make available to Issuing Lender on such business
day the amount of such Lender's participation in such Letter of Credit
as provided in this subsection 3.3C, Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by Issuing Lender for the
correction of errors among banks for three Business Days and thereafter
at the Base Rate. Nothing in this subsection 3.3C shall be
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deemed to prejudice the right of any Lender to recover from Issuing
Lender any amounts made available by such Lender to Issuing Lender
pursuant to this subsection 3.3C in the event that it is determined by
the final judgment of a court of competent jurisdiction that the payment
with respect to a Letter of Credit by Issuing Lender in respect of which
payment was made by such Lender constituted gross negligence or willful
misconduct on the part of Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Company. In the event Issuing Lender shall have been reimbursed by other
Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by Issuing Lender under a Letter of Credit issued by it,
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such
honored drawing such other Lender's Pro Rata Share of all payments
subsequently received by Issuing Lender from Company in reimbursement of
such honored drawing when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by Issuing Lender in
respect of each such honored drawing from the date such drawing is
honored to but excluding the date such amount is reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B) at a rate equal to (a) for the period from
the date such drawing is honored to but excluding the Reimbursement
Date, the Base Rate plus the Applicable Margin with respect to Revolving
Loans that are Base Rate Loans and (b) thereafter, a rate which is 2%
per annum in excess of the rate of interest otherwise payable under this
Agreement with respect to Revolving Loans that are Base Rate Loans.
Interest payable pursuant to this subsection 3.3D(i) shall be computed
on the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues and shall be payable on demand or, if
no demand is made, on the date on which the related drawing under a
Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under a
Letter of Credit issued by it, (a) Issuing Lender shall distribute to
each other Lender, out of the interest received by Issuing Lender in
respect of the period from the date such drawing is honored to but
excluding the date on which Issuing Lender is reimbursed for the amount
of such drawing (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B), the amount that such other
Lender would have been entitled to receive in respect of the letter of
credit fee that would have been payable in respect of such Letter of
Credit for such
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period pursuant to subsection 3.2 if no drawing had been honored under
such Letter of Credit, and (b) in the event Issuing Lender shall have
been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all
or any portion of such honored drawing, Issuing Lender shall distribute
to each other Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing such other
Lender's Pro Rata Share of any interest received by Issuing Lender in
respect of that portion of such honored drawing so reimbursed by other
Lenders for the period from the date on which Issuing Lender was so
reimbursed by other Lenders to but excluding the date on which such
portion of such honored drawing is reimbursed by Company. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Company to reimburse Issuing Lender for drawings
honored under the Letters of Credit issued by it and to repay any Revolving
Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders
under subsection 3.3C(i) shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Lender may have at any time against a beneficiary
or any transferee of any Letter of Credit (or any Persons for whom any
such transferee may be acting), Issuing Lender or other Lender or any
other Person or, in the case of a Lender, against Company, whether in
connection with this Agreement, the transactions contemplated herein or
any unrelated transaction (including any underlying transaction between
Company or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft or 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) payment by Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not substantially
comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or
any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
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(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by Issuing Lender under the applicable
Letter of Credit shall not have constituted gross negligence or willful
misconduct of Issuing Lender under the circumstances in question.
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance or payment of any Letter of Credit by
Issuing Lender, other than as a result of (a) the gross negligence or willful
misconduct of Issuing Lender or (b) subject to the following clause (ii), the
wrongful dishonor by Issuing Lender of a proper demand for payment made under
any Letter of Credit issued by it or (ii) the failure of Issuing Lender to honor
a drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDER'S DUTIES. As between Company and Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by Issuing Lender by, the respective beneficiaries of
such Letters of Credit. In furtherance and not in limitation of the foregoing,
Issuing Lender shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) failure of the beneficiary of any such Letter of Credit to
comply fully with any conditions required in order to draw upon such Letter of
Credit; (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) errors in interpretation of technical terms; (vi)
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of Issuing Lender,
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including any Governmental Acts, and none of the above shall affect or impair,
or prevent the vesting of, any of Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by Issuing Lender under or in connection with the Letters of
Credit issued by it or any documents and certificates delivered thereunder, if
taken or omitted in good faith and not constituting gross negligence or willful
misconduct, shall not put Issuing Lender under any resulting liability to
Company.
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against Issuing Lender
for any liability arising solely out of the gross negligence or willful
misconduct of Issuing Lender, as determined by a final judgment of a court of
competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to the matters covered thereby), in the event that Issuing Lender
or any Lender shall reasonably determine that any change in any law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof (including the adoption of any new law,
treaty or governmental rule, regulation or order), or any determination of a
court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by Issuing Lender or any Lender (at its applicable
lending office) with any guideline, request or directive issued or made after
the date hereof by any central bank or other governmental or quasi-governmental
authority (whether or not having the force of law):
(i) subjects Issuing Lender or such Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than
any Tax on the overall net income of Issuing Lender or such Lender) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being
imposed on or suffered by Issuing Lender; or
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan, FDIC insurance or similar requirement
in respect of any Letters of Credit issued by Issuing Lender or
participations therein purchased by such Lender;
and the result of any of the foregoing is to increase the cost to Issuing Lender
or such Lender of agreeing to issue, issuing or maintaining any Letter of Credit
or agreeing to purchase, purchasing or maintaining any participation therein or
to reduce any amount received or receivable by such Issuing Lender or such
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall pay to Issuing Lender or such Lender,
within five days after receipt of the statement referred to below, such
additional amount
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or amounts as may be necessary to compensate Issuing Lender or such Lender for
any such increased cost or reduction in amounts received or receivable
hereunder; provided that Company shall not be liable in respect of any such
increased cost for any period during which such Lender had actual knowledge
thereof and failed to notify Company as soon as reasonably practicable in
accordance with the next sentence if and to the extent such earlier notice would
have avoided or lessened the payments required by Company hereunder relating to
such period. Issuing Lender or such Lender shall deliver to Company a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to Issuing Lender or such Lender under this subsection
3.6, which statement shall be prima facie evidence of such additional amounts.
SECTION 4.
CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Revolving Loans and of Issuing Lender
to the issue of Letters of Credit hereunder are subject to the satisfaction of
the following conditions.
4.1 CONDITIONS TO BE SATISFIED ON THE CLOSING DATE.
The obligations of Lenders to make Revolving Loans are, in addition to
the conditions precedent specified in subsection 4.2, subject to prior or
concurrent satisfaction of the following conditions on or before the Closing
Date:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall,
and shall cause each other Loan Party to, deliver to Lenders (or to
Administrative Agent for Lenders with sufficient originally executed copies,
where appropriate, for each Lender and its counsel) the following with respect
to Company or such Loan Party, as the case may be, each, unless otherwise noted,
dated the Closing Date:
(i) Certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation and
each other state in which such Person is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior
to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified
as of the Closing Date by the corporate
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secretary or an assistant secretary of such Person as being in full
force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of
such Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person
is a party; and
(vi) Such other documents as Arranger or Administrative Agent may
reasonably request.
B. NO MATERIAL ADVERSE EFFECT. Since December 31, 1997, no Material
Adverse Effect shall have occurred.
C. CORPORATE AND CAPITAL STRUCTURE
The corporate organizational structure and ownership and capital
structure of Company and its Subsidiaries, both before and after giving effect
to the Merger, shall be as set forth on Schedule 4.1C annexed hereto.
D. PROCEEDS OF DEBT AND EQUITY CAPITALIZATION OF COMPANY AND CASH
BALANCES.
(i) Debt and Equity Capitalization of Company. On or before the
Closing Date, (a) Company shall have received net Cash proceeds of not
less than $117,500,000 from the issuance of equity to TPG and certain
other investors of which not less than $92,500,000 shall be common
stock, and (b) Company shall have issued and sold not less than
$280,000,000 in aggregate principal amount of Senior Secured Notes.
(ii) Use of Proceeds by Company. Company shall have provided
evidence satisfactory to Arranger and Administrative Agent that the
proceeds of the debt and equity capitalization of Company described in
the immediately preceding clause have been irrevocably committed to the
payment of a portion of the costs of the Merger and Transaction Costs.
E. RELATED AGREEMENTS. (i) Administrative Agent and Arranger shall have
received executed and conformed copies of each of the Related Agreements and any
amendments thereto on or before the Closing Date, the forms, terms and
conditions of which shall be in all respects satisfactory to Administrative
Agent and Arranger, (ii) the Related Agreements shall be in full force and
effect and no term or condition thereof shall have been amended, modified or
waived after the execution thereof, except as provided in a written amendment
thereto delivered to and approved by Administrative Agent and Arranger, such
approval not to be unreasonably withheld, (iii) no Loan Party shall have failed
in any material respect to perform any material obligation or covenant required
by the Related Agreement to be performed or complied with by it on or
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before the Closing Date and (iv) Administrative Agent and Arranger shall have
received an Officers' Certificate from Company in form and substance
satisfactory to Administrative Agent and Arranger and to the effect set forth in
clauses (i), (ii) and (iii) above.
F. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Merger, the other transactions
contemplated by the Loan Documents and the Related Agreements, and the continued
operation of the business conducted by Zilog and its Subsidiaries in
substantially the same manner as conducted prior to the consummation of the
Merger, and each of the foregoing shall be in full force and effect, in each
case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. All applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the Merger or
the financing thereof. No action, request for stay, petition for review or
rehearing, reconsideration, or appeal with respect to any of the foregoing shall
be pending, and the time for any applicable agency to take action to set aside
its consent on its own motion shall have expired.
G. CONSUMMATION OF MERGER AND CASH BALANCES AT ZILOG.
(i) All conditions to the Merger set forth in the Merger
Agreement shall have been satisfied or the fulfillment of any such
conditions shall have been waived with the consent of Arranger and
Administrative Agent, such approval not to be unreasonably withheld.
(ii) the Merger shall have become effective on the Closing Date
in accordance with the terms of the Merger Agreement and the laws of the
State of Delaware;
(iii) The aggregate cash consideration paid to the holders of
equity interests in Zilog in respect of such equity interests in
connection with the Merger shall not exceed $20 per share of capital
stock of Zilog;
(iv) Transaction Costs shall not exceed $30,000,000, and Arranger
and Administrative Agent shall have received evidence to their
reasonable satisfaction to such effect;
(v) Immediately prior to the consummation of the Merger, Zilog
shall have not less than $100,000,000 in Cash on hand; and
(vi) Arranger and Administrative Agent shall have received an
Officers' Certificate of Company to the effect set forth in clauses
(i)-(v) above.
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H. SECURITY INTERESTS IN PERSONAL PROPERTY. Each of Arranger and
Administrative Agent shall have received evidence satisfactory to it that
Company and Subsidiary Guarantors shall have taken or caused to be taken all
such actions, executed and delivered or caused to be executed and delivered all
such agreements, documents and instruments, and made or caused to be made all
such filings and recordings (other than the filing or recording of items
described in clause (iii) and (iv) below) that may be necessary or, in the
reasonable opinion of Arranger and Administrative Agent, desirable in order to
create in favor of Administrative Agent, for the benefit of Lenders, a valid and
(upon such filing and recording) perfected First Priority security interest in
Collateral (other than Liens on Collateral located outside the United States
unless such Lien has been perfected in accordance with the laws of the
applicable foreign jurisdiction and Liens described in clause (vi) of the
definition of Permitted Encumbrances). Such actions shall include the following:
(i) Schedules to Collateral Documents. Delivery to Administrative
Agent of accurate and complete schedules to all of the applicable
Collateral Documents;
(ii) Lien Searches and UCC Termination Statements. Delivery to
Arranger and Administrative Agent of (a) the results of a recent search,
by a Person reasonably satisfactory to Arranger and Administrative
Agent, of all effective UCC financing statements and fixture filings and
all judgment and tax lien filings which may have been made with respect
to any personal property of any Loan Party, together with copies of all
such filings disclosed by such search, and (b) UCC termination
statements duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective
UCC financing statements or fixture filings disclosed in such search
(other than any such financing statements or fixture filings in respect
of Liens permitted to remain outstanding pursuant to the terms of this
Agreement);
(iii) UCC Financing Statements. Delivery to Administrative Agent
of UCC financing statements duly executed by each applicable Loan Party
with respect to all personal property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Arranger and Administrative Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral
Documents;
(iv) Other Filings. Delivery to Administrative Agent of all cover
sheets or other documents or instruments required to be filed with the
United States Copyright Office in order to create or perfect Liens in
respect of the Collateral; and
(v) Collateral Audit and Borrowing Base Certificate. Delivery to
Arranger and Administrative Agent an audit of all Inventory and Accounts
Receivable in form and substance reasonably satisfactory to Arranger and
Administrative Agent.
I. ENVIRONMENTAL REPORTS. Arranger and Administrative Agent shall have
received reports and other information as requested by Arranger and
Administrative Agent, regarding
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environmental matters relating to Company and its Subsidiaries and the
Facilities, in form and substance reasonably satisfactory to Arranger and
Administrative Agent.
J. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before the
Closing Date, Lenders shall have received from Company (i) audited financial
statements of Zilog and its Subsidiaries for Fiscal Years 1994, 1995, 1996 and
1997, consisting of balance sheets and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows for such
Fiscal Years, (ii) pro forma consolidated balance sheets of Company and its
Subsidiaries as at the Closing Date, prepared in accordance with GAAP and
reflecting the consummation of the Merger, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements,
which pro forma balance sheets shall be in form reasonably satisfactory to
Arranger and Administrative Agent and (iii) all management letters provided to
Zilog by its auditors during the last three Fiscal Years ended prior to the
Closing Date.
K. SOLVENCY ASSURANCES. On the Closing Date, Arranger, Administrative
Agent and Lenders shall have received a letter from Houlihan, Lokey, Howard &
Zukin, dated the Closing Date and addressed to Arranger, Administrative Agent
and Lenders, in form and substance reasonably satisfactory to Arranger and
Administrative Agent and with appropriate attachments.
L. EVIDENCE OF INSURANCE. Arranger and Administrative Agent shall have
received a certificate from Company's insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to
subsection 6.4 is in full force and effect and that Administrative Agent on
behalf of Lenders has been named as additional insured and/or loss payee
thereunder to the extent required under subsection 6.4.
M. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Pillsbury Madison & Sutro LLP, and Cleary,
Gottlieb, Steen & Hamilton, and Moffat, Thomas, Barrett, Rock & Fields, counsel
for Loan Parties, dated as of the Closing Date, and substantially in the forms
set forth in Exhibit VI annexed hereto and as to such other matters as
Administrative Agent or Arranger and acting on behalf of Lenders may reasonably
request and (ii) evidence satisfactory to Arranger and Administrative Agent that
Company has requested such counsel to deliver such opinions to Lenders.
N. OPINION OF ARRANGER'S AND ADMINISTRATIVE AGENT'S COUNSEL. Lenders
shall have received originally executed copies of one or more favorable written
opinions of O'Melveny & Myers LLP, counsel to Arranger and Administrative Agent,
dated as of the Closing Date, substantially in the form of Exhibit VII annexed
hereto and as to such other matters as Arranger and Administrative Agent may
reasonably request.
O. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS.
Administrative Agent and Arranger and its counsel shall have received (i) copies
of each of the opinions of counsel delivered to (a) the parties under the Merger
Agreement and to the purchaser(s) of the
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Senior Secured Notes, together with (ii) a letter from each such counsel
authorizing Lenders to rely upon such opinion to the same extent as though it
were addressed to Lenders.
P. FEES. Company shall have paid to Arranger and Administrative Agent,
for distribution (as appropriate) to Arranger, Administrative Agent and Lenders,
the fees payable on the Closing Date referred to in subsection 2.3B.
Q. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Arranger and Administrative Agent an Officers'
Certificate, in form and substance satisfactory to Arranger and Administrative
Agent, to the effect that the representations and warranties in Section 5 hereof
are true, correct and complete in all material respects on and as of the Closing
Date to the same extent as though made on and as of that date (or, to the extent
such representations and warranties specifically relate to an earlier date, that
such representations and warranties were true, correct and complete in all
material respects on and as of such earlier date) and that Company shall have
performed in all material respects all agreements and satisfied all conditions
which this Agreement provides shall be performed or satisfied by it on or before
the Closing Date except as otherwise disclosed to and agreed to in writing by
Arranger, Administrative Agent and Requisite Lenders.
R. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found reasonably acceptable by
Administrative Agent, acting on behalf of Lenders, or Arranger and its counsel
shall be reasonably satisfactory in form and substance to Administrative Agent
and Arranger and such counsel, and Administrative Agent, Arranger and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Administrative Agent or Arranger may reasonably request.
4.2 CONDITIONS TO ALL REVOLVING LOANS.
The obligations of Lenders to make Revolving Loans on each Funding Date
are subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing, in each case signed by the chief executive officer, the chief
financial officer or the treasurer of Company or by any executive officer of
Company designated by any of the above-described officers on behalf of Company
in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date,
in which
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case such representations and warranties shall have been true, correct
and complete in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Revolving Loans to be made by it on that Funding Date;
(v) The making of the Revolving Loans requested on such Funding
Date shall not violate any law including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System;
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries that has not been
disclosed by Company in writing pursuant to subsection 5.6 or 6.1(x)
prior to the making of the last preceding Revolving Loans (or, in the
case of the initial Revolving Loans, prior to the execution of this
Agreement), and there shall have occurred no development not so
disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed that, in either event, would
reasonably be expected to have a Material Adverse Effect; and
(vii) Since the last audited financial statements delivered to
Lenders pursuant to subsection 6.1(ii), no event or change has occurred
that caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder is subject to the
following conditions precedent:
A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the initial Revolving Loans shall
have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the
provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the
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chief executive officer, the chief financial officer or the treasurer of
Company or by any executive officer of Company designated by any of the
above-described officers on behalf of Company in a writing delivered to
Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as the
applicable Issuing Lender may reasonably require in connection with the
issuance of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.2B shall be satisfied to
the same extent as if the issuance of such Letter of Credit were the
making of a Revolving Loan and the date of issuance of such Letter of
Credit were a Funding Date.
SECTION 5.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Revolving Loans, to induce Issuing Lender to issue Letters of Credit and to
induce other Lenders to purchase participations therein, Company hereby
represents and warrants to each Lender, on the date of this Agreement, on each
Funding Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business substantially as now conducted and as
proposed to be conducted, to enter into the Loan Documents and Related
Agreements to which it is a party and to carry out the transactions contemplated
thereby.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and would not reasonably be expected individually or in the aggregate to
have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Loan Parties are engaged only in the businesses
permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing
Date are identified in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be
supplemented from time to time pursuant to the provisions of subsection 6.1(xv).
The capital stock of each of the Subsidiaries of Company identified in Schedule
5.1 annexed hereto (as so supplemented) is duly
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authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock. Each of the Subsidiaries of Company
identified in Schedule 5.1 annexed hereto (as so supplemented) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority has not had and would not reasonably be
expected individually or in the aggregate to have a Material Adverse Effect.
Schedule 5.1 annexed hereto (as so supplemented) correctly sets forth the
ownership interest of Company and each of its Subsidiaries in each of the
Subsidiaries of Company identified therein.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate action on the part of each Loan Party that is a party
thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan Parties
of the Loan Documents and the Related Agreements to which they are parties and
the consummation of the transactions contemplated by the Loan Documents and such
Related Agreements do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to any Loan Party or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of any Loan
Party or any of its Subsidiaries or any order, judgment or decree of any court
or other agency of government binding on any Loan Party or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
any Loan Party or any of its Subsidiaries which would reasonably be expected
individually or in the aggregate to have a Material Adverse Effect, (iii) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of any Loan Party or any of its Subsidiaries (other than any Liens
created under any of the Loan Documents in favor of Administrative Agent on
behalf of Lenders), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of any Loan Party or
any of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Closing Date and disclosed in writing to Lenders and
except to the extent, with respect to any approvals or consents required under
any Contractual Obligations, the failure to obtain such approval or consent
would not reasonably be expected individually or in the aggregate to have a
Material Adverse Effect.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
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body (other than filings required in connection with the perfection of security
interests granted pursuant to the Collateral Documents and routine and customary
filings with, or consents or approvals of, or notices to, governmental or
regulatory bodies required in connection with the conduct of the business of
Company and its Subsidiaries or the absence of which would not individually or
in the aggregate be reasonably expected to have a Material Adverse Effect).
D. BINDING OBLIGATION. Each of the Loan Documents and Related Agreements
has been duly executed and delivered by each Loan Party that is a party thereto
and is the legally valid and binding obligation of such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
E. VALID ISSUANCE OF COMPANY COMMON STOCK, COMPANY PREFERRED STOCK AND
SENIOR SECURED NOTES.
(i) Company Common Stock and Company Preferred Stock. The Company
Common Stock and Company Preferred Stock to be sold on or before the
Closing Date, when issued and delivered, will be duly and validly
issued, fully paid and nonassessable. No stockholder of Company has or
will have any preemptive rights to subscribe for any additional equity
Securities of Company. The issuance and sale of such Company Common
Stock and Company Preferred Stock, upon such issuance and sale, will
either (a) have been registered or qualified under applicable federal
and state securities laws or (b) be exempt therefrom.
(ii) Senior Secured Notes. Company has the corporate power and
authority to issue the Senior Secured Notes. The Senior Secured Notes,
when issued and paid for, will be the legally valid and binding
obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating
to enforceability. The Senior Secured Notes, when issued and sold, will
either (a) have been registered or qualified under applicable federal
and state securities laws or (b) be exempt therefrom.
5.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at December 31, 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
of Company and its Subsidiaries for the Fiscal Year then ended. All such
statements were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated basis) of the
entities described in such financial statements as at the respective dates
thereof and the results of operations and cash flows (on a consolidated basis)
of the entities described therein for each of the periods then ended.
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Company does not have any Contingent Obligation, contingent liability or
liability for taxes, long-term lease or unusual forward or long-term commitment
that is not reflected in the foregoing financial statements or the notes thereto
and which individually or in the aggregate would reasonably be expected to have
a Material Adverse Effect.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED PAYMENTS.
As of the date hereof, since December 31, 1997, no event or change has
occurred that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect. Since December 31, 1997, neither Company nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made, or set
apart any sum or property for, any Restricted Payment or agreed to do so except
as permitted by subsection 7.3.
5.5 TITLE TO PROPERTIES; LIENS.
Loan Parties have (i) good, sufficient and legal title to (in the case
of fee interests in real property), (ii) valid leasehold interests in (in the
case of leasehold interests in real or personal property), or (iii) good title
to (in the case of all other personal property), all of their respective
properties and assets reflected in the financial statements referred to in
subsection 5.3 or in the most recent financial statements delivered pursuant to
subsection 6.1, in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7.5 and except as would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect. Except as
permitted by this Agreement, all such properties and assets are free and clear
of Liens.
5.6 LITIGATION; ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of any Loan Party or any of
its Subsidiaries) at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including any Environmental Claims) that
are pending or, to the knowledge of Company, threatened against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries and that, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect. No Loan Party nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect, or (ii) is subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
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5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all material tax
returns and reports of Company and its Subsidiaries required to be filed by any
of them have been timely filed, and all material taxes shown on such tax returns
to be due and payable and all assessments, fees and other governmental charges
upon Company and its Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and payable have been paid when
due and payable. No Loan Party knows of any proposed material tax assessment
against any Loan Party or any of its Subsidiaries which is not being actively
contested by such Loan Party or such Subsidiary in good faith and by appropriate
proceedings; provided that such reserves or other appropriate provisions, if
any, as shall be required in conformity with GAAP shall have been made or
provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
CONTRACTS.
A. No Loan Party nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not individually or in the aggregate
have a Material Adverse Effect.
B. No Loan Party nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
No Loan Party nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
A. No Loan Party nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Revolving Loan, not
more than 25% of the value of the assets (either of Company only or of Company
and its Subsidiaries on a consolidated basis) subject to the provisions of
subsection 7.2 or 7.5 or subject to any restriction contained in any agreement
or instrument, between Company and any Lender or any Affiliate of
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any Lender, relating to Indebtedness and within the scope of subsection 8.2,
will be Margin Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. Each of Company and its Subsidiaries is in material compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
of Company and its Subsidiaries, and have performed all their material
obligations under each such Employee Benefit Plan. Each Employee Benefit Plan of
Company and its Subsidiaries which is intended to qualify under Section 401(a)
of the Internal Revenue Code is so qualified.
B. No ERISA Event with respect to Company or its Subsidiaries has
occurred or is reasonably expected to occur and no ERISA Event with respect to
any ERISA Affiliate of Company and its Subsidiaries has occurred or is
reasonably expected to occur which would be reasonably expected to result in a
Material Adverse Effect.
C. As of the most recent valuation date for any Pension Plan maintained
or contributed to by Company and its Subsidiaries, the amount of unfunded
benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually
or in the aggregate for all such Pension Plans (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
liabilities), does not exceed $5,000,000. As of the most recent evaluation date
for any Pension Plan maintained or contributed by Company and its Subsidiaries
or any ERISA Affiliate, the amount of unfunded benefit liabilities (as defined
in Section 4001(a)(18) of ERISA), individually or in the aggregate for all such
Pension Plans (excluding for purposes of such computation any Pension Plans with
respect to which assets exceed benefit liabilities), if required to be fully
paid, would not reasonably be expected to have Material Adverse Effect.
D. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Loan Parties
for a complete withdrawal from such Multiemployer Plan (within the meaning of
Section 4203 of ERISA), when aggregated with such potential liability for a
complete withdrawal from all Multiemployer Plans, based on information available
pursuant to Section 4221(e) of ERISA, does not exceed $5,000,000. As of the most
recent valuation date for each Multiemployer Plan for which the actuarial report
is available, the potential liability of Loan Parties together with their
respective ERISA Affiliates for a complete withdrawal from such Multiemployer
Plan (within the meaning Section 4203 of ERISA), when aggregated with such
potential liability for a complete withdrawal from all Multiemployer Plans,
based on information available pursuant to Section 4221(e) of ERISA, would not
reasonably be expected to have Material Adverse Effect.
5.12 CERTAIN FEES.
Except as set forth on Schedule 5.12 annexed hereto, no broker's or
finder's fee or commission will be payable with respect to this Agreement or any
of the transactions
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contemplated hereby, and Company hereby indemnifies Lenders against, and agrees
that it will hold Lenders harmless from, any claim, demand or liability for any
such broker's or finder's fees alleged to have been incurred in connection
herewith or therewith and any expenses (including reasonable fees, expenses and
disbursements of counsel) arising in connection with any such claim, demand or
liability.
5.13 ENVIRONMENTAL PROTECTION.
Except as set forth in Schedule 5.13 annexed hereto,
(i) no Loan Party nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any written order,
consent decree or settlement agreement with any Person that is
outstanding (except for documentation retention or confidentiality
requirements) relating to (a) any Environmental Law, (b) any
Environmental Claim, or (c) any Hazardous Materials Activity;
(ii) No Loan Party nor any of its Subsidiaries has received any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9604) or any comparable state law;
(iii) there have been no conditions, occurrences, or Hazardous
Materials Activities which could reasonably be expected to form the
basis of an Environmental Claim against any Loan Party or any of its
Subsidiaries that could reasonably be expected individually or in the
aggregate to have a Material Adverse Effect;
(iv) Company has an environmental management system for its and
each of its Subsidiaries' operations with respect to environmental
compliance and includes procedures for (a) preparing and updating
written compliance manuals covering pertinent regulatory areas, (b)
tracking changes in applicable Environmental Laws and modifying
operations to comply with new requirements thereunder, (c) training
employees to comply with applicable environmental requirements and
updating such training as necessary, (d) ensuring correction of any
incidents of non-compliance and (e) reviewing the compliance status of
off-site waste disposal facilities;
(v) compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the contrary, no
event or condition has occurred or is occurring with respect to any Loan Party
or any of its Subsidiaries relating to any Environmental Law, any Release of
Hazardous Materials, or any Hazardous Materials Activity, including any matter
disclosed on Schedule 5.13 annexed hereto, which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
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5.14 EMPLOYEE MATTERS.
Except as set forth in Schedule 5.14 annexed hereto, no Loan Party or
any of its Subsidiaries is a party to any collective bargaining agreement and,
to the knowledge of any Loan Party, no union representation question exists with
respect to the employees of any Loan Party or any of its Subsidiaries. There is
no strike, work stoppage, slowdown, lockout or any other labor dispute pending,
or to the knowledge of Company, threatened, involving any Loan Party or any of
its Subsidiaries that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
5.15 SOLVENCY.
Each Loan Party is and, upon the incurrence of any Obligations by such
Loan Party on any date on which this representation is made, will be, Solvent.
5.16 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and
delivery of the Collateral Documents by Loan Parties, together with the actions
taken on or prior to the date hereof pursuant to subsections 4.1H and 6.8 are
effective to create in favor of Administrative Agent for the benefit of Lenders,
as security for the respective Secured Obligations (as defined in the applicable
Collateral Document in respect of any Collateral), a valid and perfected First
Priority Lien on all of the Collateral (other than Liens on Collateral located
outside the United States unless such Lien has been perfected in accordance with
the laws of the applicable foreign jurisdiction and Liens described in clause
(vi) of the definition of Permitted Encumbrances), and all filings and other
actions necessary or desirable to perfect and maintain the perfection and First
Priority status of such Liens (other than Liens on Collateral located outside
the United States unless such Lien has been perfected in accordance with the
laws of the applicable foreign jurisdiction and Liens described in clause (vi)
of the definition of Permitted Liens) have been duly made or taken and remain in
full force and effect, other than the filing of any UCC financing statements
delivered to Administrative Agent for filing (but not yet filed) and the
periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Administrative Agent
of any rights or remedies in respect of any Collateral (whether specifically
granted or created pursuant to any of the Collateral Documents or created or
provided for by applicable law), except for filings or recordings contemplated
by subsection 5.16A.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in
favor of Administrative Agent as contemplated by subsection 5.16A and in respect
of Liens permitted
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under subsection 7.2A, no effective UCC financing statement, fixture filing or
other instrument similar in effect covering all or any part of the Collateral is
on file in any filing or recording office.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to
Administrative Agent by or on behalf of any Loan Party with respect to any of
the Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects.
5.17 RELATED AGREEMENTS.
A. REPRESENTATIONS AND WARRANTIES IN MERGER AGREEMENT. Each of the
representations and warranties given by Zilog to Merger Sub and TPG and by
Merger Sub and TPG to Zilog in the Merger Agreement is true and correct in all
material respects as of the date hereof (or as of any earlier date to which such
representation and warranty specifically relates) and will be true and correct
in all material respects as of the Closing Date, or as of such earlier date (as
the case may be), in each case subject to the qualifications set forth in the
schedules to the Merger Agreement and as supplemented by the representations and
warranties in this Agreement and the information contained in Company's Offering
Circular relating to the Senior Secured Notes. Notwithstanding anything in the
Merger Agreement to the contrary, the representations and warranties set forth
in this subsection shall, solely for purposes of this Agreement, survive the
Closing Date for the benefit of Lenders.
5.18 DISCLOSURE.
The representations and warranties of the Loan Parties contained in the
Loan Documents and the Related Agreements and the information set forth in
Company's Offering Circular relating to the Senior Secured Notes (excluding any
projections or pro forma financial information), taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading as of
the date made and in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. As of the date hereof, there are no facts known (or
which should upon the reasonable exercise of diligence be known) to Company
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed in the documents referenced above.
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SECTION 6.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the
Revolving Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent and Lenders:
(i) Quarterly Financials: as soon as practicable and in any event
within 45 days after the end of each of the first three Fiscal Quarters
of each Fiscal Year, (a) the consolidated balance sheet of Company and
its Subsidiaries as at the end of such Fiscal Quarter and the related
consolidated statements of income, stockholders' equity and cash flows
of Company and its Subsidiaries for such Fiscal Quarter and for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
Fiscal Year and the corresponding figures from the Financial Plan for
the current Fiscal Year, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management
for such Fiscal Quarter and for the period from the beginning of the
then current Fiscal Year to the end of such Fiscal Quarter;
(ii) Year-End Financials: as soon as practicable and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Company and its Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for
such Fiscal Year, setting forth in each case in comparative form the
corresponding figures for the previous Fiscal Year and the corresponding
figures from the Financial Plan for the Fiscal Year covered by such
financial statements, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for
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presentation to senior management for such Fiscal Year, and (c) a report
thereon of Ernst & Young, LLP or other independent certified public
accountants of recognized national standing selected by Company and
reasonably satisfactory to Administrative Agent, which report shall be
unqualified as to scope of audit, shall express no doubts about the
ability of Company and its Subsidiaries to continue as a going concern,
and shall state that such consolidated financial statements fairly
present, in all material respects, the consolidated financial position
of Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior years (except as otherwise disclosed in such financial statements)
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (i) and (ii), (a) an Officers' Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of Company
and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance or noncompliance during
and at the end of the applicable accounting periods with the
restrictions contained in Section 7, in each case to the extent
compliance with such restrictions is required to be tested at the end of
the applicable accounting period;
(iv) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries
delivered pursuant to subdivisions (i), (ii) or (xii) of this subsection
6.1 will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions
had no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii) or (xii) of this subsection 6.1 following such
change, consolidated financial statements of Company and its
Subsidiaries for (1) the current Fiscal Year to the effective date of
such change and (2) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods,
and (b) together with each delivery of financial statements pursuant to
subdivision (i), (ii) or (xii) of this subsection 6.1 following such
change, a written
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statement of the chief accounting officer or chief financial officer of
Company setting forth the differences (including any differences that
would affect any calculations relating to the financial covenants set
forth in subsection 7.4) which would have resulted if such financial
statements had been prepared without giving effect to such change;
(v) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the terms
of this Agreement and the other Loan Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default
or Potential Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Event of Default or Potential Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention
that causes them to believe either or both that the information
contained in the certificates delivered therewith pursuant to
subdivision (iv) above is not correct or that the matters set forth in
the Compliance Certificates delivered therewith pursuant to clause (b)
of subdivision (iv) above for the applicable Fiscal Year are not stated
in accordance with the terms of this Agreement;
(vi) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including any comment letter submitted by such accountants to management
in connection with their annual audit;
(vii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by Company
to its security holders or by any Subsidiary of Company to its security
holders other than Company or another Subsidiary of Company, (b) all
regular and periodic reports and all registration statements (other than
on Form S-8 or a similar form) and prospectuses, if any, filed by
Company or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any governmental or private
regulatory authority, and (c) all press releases and other statements
made available generally by Company or any of its Subsidiaries to the
public concerning material developments in the business of Company or
any of its Subsidiaries;
(viii) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
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Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) of any
condition or event that would be required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the Exchange
Act, or (c) of the occurrence of any event or change that has caused or
evidences, either in any case or in the aggregate, a Material Adverse
Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or
condition, and what action Company has taken, is taking and proposes to
take with respect thereto;
(ix) Litigation or Other Proceedings: promptly upon any officer
of Company obtaining knowledge of (a) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting any Loan Party or any of its
Subsidiaries or any property of any Loan Party or any of its
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in
writing by Company to Lenders or (b) any material development in any
Proceeding that, in any case:
(1) could reasonably be expected to give rise to a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a
result of, the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;
(x) ERISA Events: promptly upon becoming aware of the occurrence
of or forthcoming occurrence of any ERISA Event which could reasonably
be expected to result in a liability to any Loan Party in excess of
$5,000,000 in any single case or $10,000,000 in the aggregate, a written
notice specifying the nature thereof, what action Loan Parties or any of
their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto;
(xi) ERISA Notices: with reasonable promptness, copies of (a)
each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Loan Parties with the Internal Revenue Service with
respect to each Pension Plan; (b) all notices received by Loan Parties
from a Multiemployer Plan sponsor concerning an ERISA Event; and (c)
copies of such other documents or governmental reports or filings
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relating to any Employee Benefit Plan of Company and its Subsidiaries as
Administrative Agent shall reasonably request;
(xii) Financial Plans: as soon as practicable and in any event no
later than 45 days after the beginning of each Fiscal Year, a
consolidated plan and financial forecast for such Fiscal Year, in the
form prepared for senior management and the Board of Directors,
including a forecasted consolidated balance sheet and forecasted
consolidated statements of income and cash flows of Company and its
Subsidiaries for such Fiscal Year, together with an explanation of the
assumptions on which such forecasts are based;
(xiii) Insurance: as soon as practicable and in any event by the
last day of each Fiscal Year, a report in form and substance reasonably
satisfactory to Administrative Agent outlining all material insurance
coverage maintained as of the date of such report by Company and its
Subsidiaries and all material insurance coverage planned to be
maintained by Company and its Subsidiaries in the immediately succeeding
Fiscal Year;
(xiv) Board of Directors: with reasonable promptness, written
notice of any change in the Board of Directors of Company;
(xv) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to
such Person (a) the date on which such Person became a Subsidiary of
Company and (b) all of the data required to be set forth in Schedule 5.1
annexed hereto with respect to all Subsidiaries of Company (it being
understood that such written notice shall be deemed to supplement
Schedule 5.1 annexed hereto for all purposes of this Agreement;
(xvi) Borrowing Base Certificates. (a) As soon as available and
in any event within ten (10) Business Days after the last Business Day
of (1) if any Revolving Loans or Letters of Credit are outstanding, each
month or (2) if no Revolving Loans or Letters of Credit are outstanding,
each Fiscal Quarter, in each case ending after the Closing Date, and (b)
upon the date of delivery of any Notice of Borrowing if a Borrowing Base
Certificate has not been delivered within the last 30 days prior to the
applicable Funding Date, a Borrowing Base Certificate dated as of the
last Business Day of such month or Fiscal Quarter or the date of the
Notice of Borrowing, as applicable, together with any additional
schedules and other information that Administrative Agent may reasonably
request (it being understood that (a) Company, in addition to such
monthly Borrowing Base Certificate, may from time to time deliver to
Administrative Agent and Lenders, on any Business Day after the Closing
Date, a Borrowing Base Certificate dated as of such Business Day,
together with any additional schedules and other information that
Administrative Agent may reasonably request, and (b) the most recent
Borrowing Base Certificate described in this subdivision (xvi) that is
delivered to Administrative Agent shall be used in calculating the
Borrowing Base as of any date of determination); and
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(xvii) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries
as from time to time may be reasonably requested by Administrative Agent
on behalf of any Lender.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.5, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect (i) its corporate existence and (ii) all rights and franchises material
to its business; provided, however that neither Company nor any of its
Subsidiaries shall be required to preserve any such right or franchise if the
Board of Directors of Company or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Company or such Subsidiary, as the case may be, and that the loss thereof would
not individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its income, businesses
or franchises before any penalty accrues thereon, and all material claims
(including claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or may become a Lien upon any
of its properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided that no such charge or claim need be
paid if it is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, so long as (1) such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor and (2) in the case of a charge or claim which has
or may become a Lien against any of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral to
satisfy such charge or claim.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company or any of its Subsidiaries).
6.4 MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET
INSURANCE/CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Company and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
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B. INSURANCE. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the generality
of the foregoing, Company will maintain or cause to be maintained casualty
insurance on the Collateral under such policies of insurance, with such
insurance companies, in such amounts, with such deductibles, and covering such
risks as are at all times satisfactory to Administrative Agent in its
commercially reasonable judgment. Each such policy of insurance on the
Collateral shall (a) name Administrative Agent for the benefit of Lenders as an
additional insured thereunder as its interests may appear and (b) in the case of
each casualty insurance policy, contain a loss payable clause or endorsement,
reasonably satisfactory in form and substance to Administrative Agent, that
names Administrative Agent for the benefit of Lenders as the loss payee
thereunder for any covered loss with respect to the Collateral provides for at
least 30 days prior written notice to Administrative Agent of any modification
or cancellation of such policy.
If Administrative Agent receives any insurance proceeds in respect of
the Collateral as loss payee, as long as no Event of Default has occurred and is
continuing, Administrative Agent shall deliver such insurance proceeds to
Company. If an Event of Default has occurred and is continuing Administrative
Agent shall, and Company hereby authorizes Administrative Agent to, apply such
insurance proceeds to prepay any outstanding Revolving Loans.
6.5 INSPECTION RIGHTS; AUDITS OF INVENTORY AND ACCOUNTS RECEIVABLE; LENDER
MEETING.
A. INSPECTION RIGHTS. Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and at such intervals as may reasonably be
requested and at the expense of Lenders.
B. AUDITS OF INVENTORY AND ACCOUNTS. Company shall, and shall cause each
of its Subsidiaries to, permit any authorized representatives designated by
Administrative Agent to conduct an audit of all Inventory and Accounts
Receivable of Loan Parties once during each twelve-month period after the
Closing Date and at any time an Event of Default has occurred and is continuing,
all upon reasonable notice and at such reasonable times during normal business
hours as may reasonably be requested.
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C. LENDER MEETING. Company will, upon the request of Arranger,
Administrative Agent or Requisite Lenders, participate in a meeting of
Administrative Agent and Lenders once during each Fiscal Year to be held at
Company's corporate offices (or at such other location as may be agreed to by
Company and Administrative Agent) at such time as may be agreed to by Company
and Administrative Agent, such meeting, as long as no Event of Default has
occurred and is continuing, to be at the expense of Lenders.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall comply, and shall cause each of its Subsidiaries to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Environmental Laws),
noncompliance with which would reasonably be expected to cause, individually or
in the aggregate, a Material Adverse Effect.
6.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S
ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS
AND VIOLATIONS OF ENVIRONMENTAL LAWS.
A. ENVIRONMENTAL REVIEW AND INVESTIGATION. Company agrees that in the
event (a) Administrative Agent reasonably believes that Company has breached any
representation, warranty or covenant contained in subsection 5.6, 5.13, 6.6 or
6.7 or that there has been a material violation of Environmental Laws at any
Facility or by Company or any of its Subsidiaries at any other location or (b)
an Event of Default has occurred and is continuing, Administrative Agent may
conduct, at Company's expense, its own investigation of any Facility; provided
that, in the case of any Facility no longer owned, leased, operated or used by
Company or any of its Subsidiaries, Company shall only be obligated to use its
best efforts to obtain permission for Administrative Agent's professional
consultant to conduct an investigation of such Facility. For purposes of
conducting such a review and/or investigation, Company hereby grants to
Administrative Agent and its agents, employees, consultants and contractors the
right to enter into or onto any Facilities currently owned, leased, operated or
used by Company or any of its Subsidiaries and to perform such tests on such
property (including taking samples of soil, groundwater and suspected
asbestos-containing materials) as are reasonably necessary in connection
therewith. Any such investigation of any Facility shall be conducted, unless
otherwise agreed to by Company and Administrative Agent, during normal business
hours and, to the extent reasonably practicable, shall be conducted so as not to
interfere with the ongoing operations at such Facility or to cause any damage or
loss to any property at such Facility. To the extent soil or ground water
samples are taken, Company may, at its option, take split samples for separate
testing. Company and Administrative Agent hereby acknowledge and agree that any
report of any investigation conducted at the request of Administrative Agent
pursuant to this subsection 6.7A will be obtained and shall be used by
Administrative Agent and Lenders for the purposes of Lenders' internal credit
decisions, to monitor and police the Revolving Loans and to protect Lenders'
security interests, if any, created by the Loan Documents. Administrative Agent
agrees to deliver a copy of any such report to Company with the understanding
that Company acknowledges and agrees that (1) it will indemnify and hold
harmless Administrative Agent and
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each Lender from any costs, losses or liabilities relating to Company's use of
or reliance on such report, (2) neither Administrative Agent nor any Lender
makes any representation or warranty with respect to such report, and (3) by
delivering such report to Company, neither Administrative Agent nor any Lender
is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. ENVIRONMENTAL DISCLOSURE. Company will deliver to Administrative
Agent and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character
(collectively, "REPORTS"), whether prepared by personnel of Company or
any of its Subsidiaries or by independent consultants, governmental
authorities or any other Persons, with respect to environmental matters
at any Facility which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect or with
respect to any Environmental Claims which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect; except to the extent such Reports are a privileged attorney
client communication or constitute privileged attorney work product,
provided that Company agrees to identify all privileged Reports and to
provide reasonable information concerning the facts or circumstances
giving rise to the Reports in order to enable Administrative Agent to
evaluate and assess the environmental matters covered by the Reports.
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly
upon the occurrence thereof, written notice describing in reasonable
detail (a) any Release required to be reported to any federal, state or
local governmental or regulatory agency under any applicable
Environmental Laws that could reasonably be expected to have a Material
Adverse Effect, (b) any remedial action taken by Company or any other
Person in response to any Hazardous Materials Activities or any
Environmental Claims that, individually or in the aggregate, have a
reasonable possibility of resulting in a Material Adverse Effect, and
(c) Company's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of any Facility that could
reasonably be expected to cause such Facility or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability
or use thereof under any Environmental Laws that could reasonably be
expected to have a Material Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
Releases, Etc. As soon as practicable following the sending or receipt
thereof by Company or any of its Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims
that, individually or in the aggregate, have a reasonable possibility of
giving rise to a Material Adverse Effect, and (b) any request for
information from any governmental agency that suggests such agency is
investigating whether Company or any of its Subsidiaries may be
potentially responsible for an Environmental Claim; except to the extent
such written communications are a privileged attorney client
communication
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or constitute privileged attorney work product, provided that Company
agrees to identify all privileged written communications and to provide
reasonable information concerning the facts or circumstances giving rise
to the communications in order to enable Administrative Agent to
evaluate and assess the environmental matters covered by the
communication.
(iv) Notice of Certain Proposed Actions Having Environmental
Impact. Prompt written notice describing in reasonable detail (a) any
proposed acquisition of stock, assets, or property by Company or any of
its Subsidiaries that could reasonably be expected to (1) expose Company
or any of its Subsidiaries to, or result in, Environmental Claims that
could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect or (2) affect the ability of Company or any of
its Subsidiaries to maintain in full force and effect all material
Governmental Authorizations required under any Environmental Laws for
their respective operations and (b) any proposed action to be taken by
Company or any of its Subsidiaries to modify current operations in a
manner that could reasonably be expected to subject Company or any of
its Subsidiaries to any additional obligations or requirements under any
Environmental Laws that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably
requested by Administrative Agent in relation to any matters disclosed
pursuant to this subsection 6.7.
C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES,
ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS.
(i) Remedial Actions Relating to Hazardous Materials Activities.
Company shall promptly undertake, and shall cause each of its
Subsidiaries promptly to undertake, any and all investigations, studies,
sampling, testing, abatement, cleanup, removal, remediation or other
response actions necessary to remove, remediate, clean up or abate any
Hazardous Materials Activity on, under or about any Facility that
presents a material risk of giving rise to an Environmental Claim. In
the event Company or any of its Subsidiaries undertakes any such action
with respect to any Hazardous Materials, Company or such Subsidiary
shall conduct and complete such action in compliance with all applicable
Environmental Laws and in accordance with the policies, orders and
directives of all federal, state and local governmental authorities
except when, and only to the extent that, Company's or such Subsidiary's
liability with respect to such Hazardous Materials Activity is being
contested in good faith by Company or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations
of Environmental Laws. Company shall promptly take, and shall cause each
of its Subsidiaries promptly to take, any and all actions necessary to
(i) cure any material violation of applicable Environmental Laws by
Company or its Subsidiaries and (ii) make
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an appropriate response to any Environmental Claim against Company or
any of its Subsidiaries and discharge any obligations it may have to any
Person thereunder where failure to do so could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
except when, and only to the extent that, Company is contesting in good
faith such violation of Environmental Law or such Environmental Claim.
6.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL
DOCUMENTS BY CERTAIN SUBSIDIARIES AND FUTURE SUBSIDIARIES.
A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL
DOCUMENTS. Except as otherwise provided below in subsection 6.8C with respect to
Foreign Subsidiaries, in the event that any Person becomes a Subsidiary of
Company after the date hereof in accordance with and to the extent permitted by
this Agreement, Company will promptly notify Administrative Agent of that fact
and cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty, Subsidiary Security Agreement and to
take all such further actions and execute all such further documents and
instruments (including actions, documents and instruments comparable to those
described in subsection 4.1H) as may be necessary or, in the opinion of
Administrative Agent, desirable to create in favor of Administrative Agent, for
the benefit of Lenders, a valid and perfected First Priority Lien (other than
Liens on Collateral located outside the United States unless such Lien has been
perfected in accordance with the laws of the applicable foreign jurisdiction and
Liens described in clause (vi) of the definition of Permitted Encumbrances) on
all of the personal property assets of such Subsidiary described in the
applicable forms of Collateral Documents.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall
deliver to Administrative Agent, together with such Loan Documents described in
subsection 6.8A, (i) certified copies of such Subsidiary's Certificate or
Articles of Incorporation, together with a good standing certificate from the
Secretary of State of the jurisdiction of its incorporation and each other state
in which such Person is qualified as a foreign corporation to do business and,
to the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such jurisdictions, each to be dated a
recent date prior to their delivery to Administrative Agent, (ii) a copy of such
Subsidiary's Bylaws, certified by its corporate secretary or an assistant
secretary as of a recent date prior to their delivery to Administrative Agent,
(iii) a certificate executed by the secretary or an assistant secretary of such
Subsidiary as to (a) the fact that the attached resolutions of the Board of
Directors of such Subsidiary approving and authorizing the execution, delivery
and performance of such Loan Documents are in full force and effect and have not
been modified or amended and (b) the incumbency and signatures of the officers
of such Subsidiary executing such Loan Documents, and (iv) a favorable opinion
of counsel to such Subsidiary, in form and substance reasonably satisfactory to
Administrative Agent and its counsel, as to (a) the due organization and good
standing of such Subsidiary, (b) the due authorization, execution and delivery
by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan
Documents against such Subsidiary, (d) such other matters (including matters
relating to the
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creation and perfection of Liens in any Collateral pursuant to such Loan
Documents) as Administrative Agent may reasonably request, all of the foregoing
to be satisfactory in form and substance to Administrative Agent and its
counsel.
C. FOREIGN SUBSIDIARIES. In the event that (i) any Person which becomes
a Subsidiary of Company is a Foreign Subsidiary and (ii) Company reasonably
determines that the execution of a counterpart of the Subsidiary Guaranty and
the Collateral Documents required to be executed by such Subsidiary pursuant to
subsection 6.8A would result in material negative tax consequences to Company,
then, notwithstanding anything in this subsection 6.8A to the contrary, such
Foreign Subsidiary shall not be required to execute counterparts of the Security
Guaranty and the Collateral Documents required to be executed pursuant to
subsection 6.8A.
6.9 DETERMINATION OF BORROWING BASE.
A. Company shall deliver a Borrowing Base Certificate to the
Administrative Agent in accordance with subsection 6.1(xvi) and upon request of
Administrative Agent. Each such Borrowing Base Certificate shall be dated as of
the last day of the applicable reporting period or such date as may be
reasonably requested by Administrative Agent from time to time. Promptly
following its receipt of each such Borrowing Base Certificate, the
Administrative Agent shall determine, or, as the case may be, re-determine the
Borrowing Base based on such Borrowing Base Certificate and the definitions of
Eligible Inventory and Eligible Accounts Receivable and deliver written notice
of such determination to Company. In the event Administrative Agent disagrees
with Company's determination of Eligible Receivables, Eligible Inventory or the
Borrowing Base, Administrative Agent shall notify Company and consult with
Company regarding Company's determination prior to determining or redetermining
the Borrowing Base. Each Borrowing Base so determined or re-determined by the
Administrative Agent shall remain in effect until a notice of a re-determined
Borrowing Base shall have been given by the Administrative Agent in accordance
with the provisions of this subsection 6.9. Administrative Agent shall consult
with Company prior to establishing or changing any reserves or standards of
eligibility of Accounts Receivable and Inventory.
B. Each such Eligible Account Receivable shown on each Borrowing Base
Certificate shall conform to the requirements set forth in the definition
thereof. All Inventory shown on each Borrowing Base Certificate shall conform to
the requirements of the definition of Eligible Inventory.
C. Company will, and will cause each of its Subsidiaries to, keep proper
books of record and account in which full, true and correct entries in
conformity with sound business practices shall be made of all dealings and
transactions in relation to the Accounts Receivable and Inventory. Company
agrees to furnish to Administrative Agent any information which it may
reasonably request regarding the determination and calculation of the Borrowing
Base including, without limitation, correct and complete copies of any invoices,
underlying agreements, instruments or other documents and the identity of all
obligors.
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D. Administrative Agent may, at any time, reevaluate the value of any
item included in the Borrowing Base in accordance with the definition of such
item as set forth in subsection 1.1. Administrative Agent may determine, as a
result of any such reevaluation and after consultation with Company, to reduce
the amount which such item contributes to the Borrowing Base or exclude such
item from the Borrowing Base. If Administrative Agent determines that the
Borrowing Base shall be reduced pursuant to this subsection 6.9, Administrative
Agent shall give written notice to Company and Lenders which states the amount
of such reduction and the nature of the action taken by Administrative Agent,
which reduction shall be effective upon receipt of such notice by Company.
E. Company shall promptly notify Administrative Agent in writing of any
information which Company receives or otherwise gains knowledge of relating to
the eligibility of any item or items included in the Borrowing Base which would
cause the Borrowing Base to be decreased by $150,000 or more in the aggregate.
6.10 LOCKBOX SYSTEM.
Within 120 days following the Closing Date, Company shall
transfer its lockbox account system with respect to Accounts Receivable of
Company and its Subsidiaries maintained with its current lockbox bank to
Administrative Agent and thereafter maintain such lockbox account system with
Administrative Agent.
SECTION 7.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the
Revolving Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
7.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become or remain directly or indirectly liable, contingently or otherwise, with
respect to any Indebtedness (including Acquired Debt) and Company shall not
issue any Disqualified Stock and shall not permit any of its Subsidiaries to
issue any shares of preferred stock except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries, as applicable, may remain
liable with respect to existing Indebtedness described in Schedule 7.1
annexed hereto;
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(iii) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Secured Notes in an aggregate
principal amount not to exceed $280,000,000 and Subsidiary Guarantors
may become and remain liable with respect to guarantees thereof;
(iv) Company or any of its Subsidiaries may become and remain
liable for Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used
in the business of the Company or such Subsidiary, in an aggregate
principal amount not to exceed $25,000,000 at any time outstanding;
(v) Company may become and remain liable with respect to
Indebtedness to any Subsidiary Guarantor, and any Subsidiary Guarantor
may become and remain liable with respect to Indebtedness to Company or
any other Subsidiary Guarantor provided that (a) all such intercompany
Indebtedness owed by Company to any of such Subsidiaries shall be
expressly subordinated in right of payment to the payment in full of the
Obligations and (b) (1) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than Company or a Subsidiary Guarantor and (2) any sale or other
transfer of any such Indebtedness to a Person that is not either Company
or a Subsidiary Guarantor shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by Company or such Subsidiary
Guarantor, as the case may be;
(vi) Company and its Subsidiaries may become and remain liable
with respect to Acquired Debt in an aggregate principal amount at any
time outstanding not to exceed $5,000,000;
(vii) Company and its Subsidiaries may become and remain liable
with respect to Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by this Agreement to exist or be incurred;
(viii) Company and its Subsidiaries may become and remain liable
for Indebtedness incurred in respect of worker's compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company in the ordinary course of
business;
(ix) Subsidiaries of Company may become and remain liable with
respect to Indebtedness in respect of the Subsidiary Guaranty;
(x) Company and Subsidiary Guarantors may become and remain
liable with respect to obligations under Hedge Agreements;
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(xi) Company and Subsidiaries may become and remain liable with
respect to Indebtedness providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the disposition of any business, assets or Capital
Stock of the Company or any Subsidiary, or other guarantees of
Indebtedness incurred by any person acquiring all or any portion of such
business, assets or Capital Stock of the Company or any Subsidiary for
the purpose of financing such acquisition, provided that the maximum
aggregate liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such disposition;
(xii) the guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Subsidiary Guarantor that
was permitted to be incurred by this subsection 7.1;
(xiii) Company and its Subsidiaries may incur and remain liable
for Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daily overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(xiv) Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and the Subsidiary Guarantors may
incur Indebtedness or issue shares of preferred stock if Company's
Leverage Ratio as of the last day of the most recently ended Fiscal
Quarter, on a pro forma basis after giving effect to the incurrence of
such additional Indebtedness or the issuance of such Disqualified Stock
or preferred stock, is in compliance with subsection 7.4C; and
(xv) Company or any Subsidiary Guarantor may become and remain
liable with respect to other Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xv) not to exceed
25,000,000.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except Permitted Encumbrances. Without limiting the
generality of the foregoing, Company shall not, and shall not permit any of its
Subsidiaries
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to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any Accounts Receivable or Inventory other than Liens granted
in favor of Administrative Agent, on behalf of Lenders and Liens described in
clause (vi) of the definition of Permitted Encumbrances.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement (other than the Senior
Secured Note Indenture, or any other agreement prohibiting only the creation of
Liens securing Secured Indebtedness) prohibiting the creation or assumption of
any Lien upon any of its properties or assets, whether now owned or hereafter
acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Company shall not, and shall 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 Subsidiary
to (i) (a) pay dividends or make any other distributions to Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to Company or any of its Subsidiaries, or (ii) make loans or
advances to Company or any of its Subsidiaries or (iii) transfer any of its
property or assets to Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Indebtedness
existing on the date of this Agreement pursuant to subsection 7.1(ii), (b) the
Senior Secured Note Indenture and collateral documents relating thereto as in
effect as of the date of this Agreement and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Senior Secured Note Indenture
and collateral documents relating thereto as in effect on the date of this
Agreement, (c) applicable law, rule, regulation or order, (d) any agreement or
instrument governing Indebtedness or Capital Stock of a Person acquired by
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such agreement or instrument was entered into in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person and its Subsidiaries, or the property or assets of
the Person and its
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Subsidiaries, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Agreement to be incurred, (e) by
reason of customary non-assignment provisions in leases, licenses, encumbrances,
contracts or similar agreements entered into or acquired in the ordinary course
of business and consistent with past practices, (f) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (g) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced or (h) contracts for the sale of assets containing
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary.
7.3 RESTRICTED PAYMENTS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of Company's or any of its Subsidiaries'
Equity Interests (including, without limitation, any such dividend, distribution
or other payment in connection with any merger or consolidation involving
Company or any Subsidiary) or to the direct or indirect holders of Company's or
any of its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of Company or dividends or distributions payable to Company or any Wholly
Owned Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, any such purchase, redemption,
acquisition or retirement for value in connection with any merger or
consolidation involving Company) any Equity Interests of Company (other than any
such Equity Interests owned by Company or any Wholly Owned Subsidiary of
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Revolving Loans, except a payment of interest or a payment
of principal at stated maturity for such payment; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "RESTRICTED PAYMENTS", unless, at
the time of and immediately after giving effect to such Restricted Payment:
(a) no Potential Event of Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof; and
(b) Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio (as defined in the Senior Secured Note Indenture) test
set forth in the first paragraph of Section 4.09 of the Senior Secured
Note Indenture; and
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(c) such Restricted Payment, together with the aggregate amount
of all other Restricted Payments made by Company and its Subsidiaries
after the Closing Date (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv) and (viii) of the next succeeding paragraph),
is less than the sum (without duplication) of (i) 50% of the
Consolidated Net Income of Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the Closing Date to the end of Company's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate Qualified Proceeds received by
Company from contributions to capital or the issue or sale since the
Closing Date of Equity Interests of Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to
a Subsidiary of Company and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made after
the Closing Date is sold for Qualified Proceeds or otherwise liquidated
or repaid the lesser of (1) the Qualified Proceeds with respect to such
Restricted Investment (less the cost of disposition, if any) and (2) the
initial amount of such Restricted Investment, plus (iv) $5,000,000.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Agreement; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or any Subsidiary Guarantor in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Subsidiary of Company) of,
other Equity Interests of Company (other than any Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase, retirement or other acquisition of subordinated
Indebtedness in exchange for, or with the net cash proceeds from, an incurrence
of Permitted Refinancing Indebtedness; (iv) the payment of any dividend (or the
making of any similar distribution or redemption) by a Subsidiary of Company to
the holders of its common Equity Interests on a pro rata basis; (v) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Company or any Subsidiary of Company held by any member of
Company's (or any of its Subsidiaries') management, employees or consultants
pursuant to any management, employee or consultant equity subscription agreement
or stock option agreement in effect as of the Closing Date; provided that (a)
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed the sum of (1) $5,0000,000 and (2) the
aggregate cash proceeds received by Company from any reissuance of Equity
Interests (other than Disqualified Stock) by Company to members of management of
Company and its Subsidiaries (provided that the cash proceeds referred to in
this clause (2) shall be excluded from clause (c)(ii) of the preceding
paragraph) and (b) no Potential Event of Default or Event of Default shall have
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occurred and be continuing immediately after such transaction; (vi) cash
payments in lieu of fractional shares issuable as dividends on preferred
securities of Company or any of its Subsidiaries; provided that such cash
payments shall not exceed $20,000 in the aggregate in any twelve-month period
and no Potential Event of Default or Event of Default shall have occurred and be
continuing immediately after such transaction; (vii) the declaration and payment
of dividends to holders of any class or series of Disqualified Stock of Company
or a Subsidiary Guarantor issued after the Closing Date in accordance with
subsection 7.13; provided, that no Potential Event of Default or Event of
Default shall have occurred and be continuing immediately after making such
declaration or payment; and (viii) from and after January 1, 1999 so long as no
Potential Event of Default or Event of Default has occurred and is continuing,
payments by the Company not exceeding $35,000,000 in the aggregate since the
Closing Date in respect of the redemption of shares of Company Preferred Stock
outstanding on the Closing Date (or shares of Company Preferred Stock issued as
dividends thereon) if both before and after giving effect to any such payment,
the Fixed Charge Coverage Ratio (as defined in the Senior Secured Note
Indenture) for the Company's most recently ended four full Fiscal Quarters for
which internal financial statements are available immediately preceding the date
of such payment would be at least 2.5 to 1.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Company or such Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value of
any non-cash Restricted Payment shall be determined by the Board of Directors of
Company whose resolution with respect thereto shall be delivered to the
Administrative Agent, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $10,000,000. Not later than
the date of making any Restricted Payment, Company shall deliver to the
Administrative Agent an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this subsection 7.4 were computed, together with a copy of any
fairness opinion or appraisal required by this subsection 7.4.
7.4 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio
of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense as of
the last day of any Fiscal Quarter ending during any of the periods set forth
below for the four Fiscal Quarter period then ended to be less than the
correlative ratio indicated:
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<TABLE>
<CAPTION>
MINIMUM
INTEREST COVERAGE
PERIOD RATIO
==================== ================
<S> <C>
March 31, 1998 1.5:1.0
through December 31,
1999
January 1, 2000 and 2.5:1.0
thereafter
</TABLE>
B. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed Charges as
of the last day of any Fiscal Quarter for the four-Fiscal Quarter period then
ended to be less than 1:1.
C. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of (i)
Consolidated Total Debt less Cash and Cash Equivalents to (ii) Consolidated
Adjusted EBITDA as of the last day of any Fiscal Quarter ending during any of
the periods set forth below for the four Fiscal Quarter period then ended (the
"LEVERAGE RATIO") to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
MAXIMUM
PERIOD LEVERAGE RATIO
==================== ==============
<S> <C>
March 31, 1998 5.0:1.0
through December 31,
1999
January 1, 2000 and 3.5:1.0
thereafter
</TABLE>
D. CERTAIN CALCULATIONS. With respect to calculations of Consolidated
Adjusted EBITDA, Consolidated Interest Expense and Consolidated Fixed Charges
for any four-Fiscal Quarter period including the Closing Date, such calculations
shall be made on a pro forma basis assuming, in each case, that the Closing
Date, the Merger, the issuance and sale of the Senior Secured Notes, the Company
Common Stock and the Company Preferred Stock occurred on the first day of the
applicable four-Fiscal Quarter period.
7.5 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Company may not consolidate or merge with or into (whether or not
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or
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substantially all of its properties or assets in one or more related
transactions, to another Person unless (i) Company is the surviving corporation;
and (ii) immediately after giving effect to such transaction no Event of Default
or Potential Event of Default shall exist under this Agreement and Company shall
have delivered a Compliance Certificate to Administrative Agent demonstrating
pro forma compliance with this Agreement after giving effect to such
transaction. Company shall not and shall not permit any of its Subsidiaries to
make Asset Sales or Collateral Asset Sales (as defined in the Senior Secured
Note Indenture) except as permitted by and in accordance with the Senior Secured
Note Indenture and not expressly prohibited by this Agreement.
7.6 SALES AND LEASE-BACKS.
Company will not, and will not permit any of its Subsidiaries to, enter
into any sale and leaseback transaction with respect to any property or asset of
Company or any of its Subsidiaries; provided that Company may enter into such a
sale and leaseback transaction if (i) Company could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to subsection 7.1 and (b) incurred a Lien to
secure such Indebtedness pursuant to subsection 7.2, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors of Company
and set forth in an Officers' Certificate delivered to the Administrative Agent)
of the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is excluded
from the definition of Asset Sale pursuant to clause (v) thereof, or is
permitted by, and Company applies the proceeds of such transaction in compliance
with, the Senior Secured Note Indenture.
7.7 SALE OF RECEIVABLES.
Company shall not, and shall not permit any Subsidiary to directly or
indirectly, sell any of its Accounts Receivable, other than Accounts Receivable
(i) excluded from the definition Eligible Accounts Receivable pursuant to
clauses (iii), (vi), (vii) or (xii) and (ii) with respect to which Company, in
its reasonable judgment, has determined that a sale of such Accounts Receivable
would be in the best economic interests of Company.
7.8 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company will not, and will not permit any of its Subsidiaries to, make
any payment to or Investment in, or sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or assets from,
or enter into or make or amend any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to Company or the relevant Subsidiary than
those that would have been obtained in a comparable transaction by Company or
such Subsidiary with an unrelated Person and (ii) Company delivers to the
Administrative Agent (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess
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of $1,000,000, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of Company and (b) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10,000,000, an opinion as to the
fairness to the Lenders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (1) payments of fees and expenses (including any such
payments to TPG) in connection with the Merger, (2) contracts, agreements,
understandings or other arrangements existing on the Closing Date, (3)
transactions with suppliers or other purchasers or sales of goods or services,
in each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in accordance with the terms
of this Agreement which are fair to Company, in the good faith determination of
the Board of Directors of Company or the senior management of Company, and are
on terms at least as favorable as might reasonably have been obtained at such
time from an unaffiliated party (4) any employment agreements, stock option or
other compensation agreements or plans (and the payment of amounts or the
issuance of securities thereunder) and other reasonable fees, compensation,
benefits and indemnities paid or entered into by Company or any of its
Subsidiaries with the officers, directors or employees of Company or its
Subsidiaries in the ordinary course of business, (5) transactions between or
among Company and/or its Subsidiaries and (6) Restricted Payments (other than
Restricted Investments) that are permitted by subsection 7.3, shall not be
deemed Affiliate Transactions.
7.9 DISPOSAL OF SUBSIDIARY STOCK.
Company (i) shall not, and shall not permit any Wholly Owned Subsidiary
of Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of any Wholly Owned Subsidiary of Company to any Person (other than to
Company or to a wholly-owned Subsidiary of Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Subsidiary and (b) the net cash proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
terms of the Senior Secured Note Indenture and (ii) will not permit any Wholly
Owned Subsidiary of Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to Company or to a Wholly Owned Subsidiary of
Company.
7.10 AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS.
Neither Company nor any of its Subsidiaries will agree to any amendment
to, or request any waiver of (other than a waiver for which no fee is paid and
no other concessions or considerations are granted by Company), or waive any of
their respective rights under, any of the Related Agreements (other than any
amendment or waiver described in the next succeeding sentence) without in each
case obtaining the prior written consent of Administrative Agent and Requisite
Lenders to such amendment, request or waiver (such consent not to be
unreasonably withheld) and the giving of prior written notice to Arranging
Agent. Notwithstanding the
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foregoing, Company and its Subsidiaries may agree to amend or waive any
provisions of the Related Agreements (i) to cure any ambiguity, to correct or
supplement any provision therein which may be defective or inconsistent with any
other provision therein, or (ii) to comply with the Trust Indenture Act of 1939,
as amended, or (iii) to make modifications of a technical or clarifying nature
or which are no less favorable to the Lenders, in the reasonable opinion of
Administrative Agent and Requisite Lenders, than the provisions of the Related
Agreements as in effect on the Closing Date (for the purposes of this subsection
7.14, any amendment, modification or change which would extend the maturity or
reduce the amount of any payment of principal on the Senior Secured Notes or
which would reduce the rate or extend the date for payment of interest thereon,
provided that no fee is payable in connection therewith, shall be deemed to be
an amendment, modification or change that is no less favorable to the Lenders).
7.11 FISCAL YEAR
Company shall not change its Fiscal Year-end from December 31 without
the consent of Requisite Lenders, such consent not to be unreasonably withheld.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF DEFAULT") shall
occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any Revolving
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; failure by Company
to pay when due any amount payable to Issuing Lender in reimbursement of any
drawing under a Letter of Credit (including reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B); or failure by Company to pay any
interest on any Revolving Loan or any fee or any other amount due under this
Agreement within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due any
principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) in an individual principal amount of $5,000,000 or more or with an
aggregate principal amount of $10,000,000 or more, in each case beyond the end
of any grace period provided therefor; or (ii) breach or default by Company or
any of its Subsidiaries with respect to any other material term of (a) one or
more items of Indebtedness in the individual or aggregate principal amounts
referred to in clause (i) above or (b) any loan agreement, mortgage, indenture
or other agreement relating to such item(s) of Indebtedness, if the effect of
such breach or default is to cause, or to permit the holder or holders of that
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Indebtedness (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness to become or be declared due and payable prior to its stated
maturity (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply with any term or condition
contained in subsections 2.5, 6.2, 7.4, 7.5 or 7.7 of this Agreement; provided,
however, that the failure of Company to perform or comply with subsection 7.1 or
the financial covenant ratios set forth in subsection 7.4 during the period
commencing on the Closing Date and ending on the first anniversary of the
Closing Date shall not constitute an Event of Default as long as there are no
Revolving Loans or Letters of Credit outstanding; provided, further, that a
failure to comply with subsection 7.1 or the financial covenants set forth in
subsection 7.4 shall at all times constitute an Event of Default for purposes of
any Notice of Borrowing, Notice of Issuance of Letter of Credit or Notice of
Conversion/Continuation; or
8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto shall have been false in any material respect on the
date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 8, and
such default shall not have been remedied or waived within 30 days after the
earlier of (i) an officer of Company or such Loan Party becoming aware of such
default or (ii) receipt by Company and such Loan Party of written notice from
Administrative Agent or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Significant Subsidiaries in
an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its Significant Subsidiaries under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Company or any of its
Significant Subsidiaries, or over all or a substantial part of its property,
shall have been
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entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of Company or any of its Significant
Subsidiaries for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of Company or any of its Significant
Subsidiaries, and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its Significant Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Significant
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
Company or any of its Significant Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Company or any of its Significant
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5,000,000 or (ii)
in the aggregate at any time an amount in excess of $10,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days; or
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of
its Significant Subsidiaries decreeing the dissolution or split up of Company or
such Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 60 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events with respect to Employee
Benefit Plans maintained by or contributed to by Company and its Subsidiaries
which results in or would reasonably be expected to result in liability of
Company and any of its Subsidiaries in any individual case in excess of
$5,000,000 or in the aggregate in excess of $10,000,000 during the term of this
Agreement; or there shall exist an amount of unfunded benefit liabilities (as
defined
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in Section 4001(a)(18) of ERISA), individually or in the aggregate for all
Pension Plans of Company and its Subsidiaries (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
liabilities), which exceeds $5,000,000; or there shall occur one or more ERISA
Events with respect to Company and its Subsidiaries, together with its ERISA
Affiliates, which result in or would reasonably be expected to result in
liability of Company, any of its Subsidiaries or any ERISA Affiliate which would
reasonably be expected to have a Material Adverse Effect; or there shall exist
an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans of Company, its
Subsidiaries and ERISA Affiliates (excluding for purposes of such computation
any Pension Plans with respect to which assets exceed benefit liabilities),
which if required to be fully paid (taking into account any permitted
amortization over a period not exceeding ten years), would reasonably be
expected to have Material Adverse Effect; or
8.11 CHANGE IN CONTROL.
There shall occur any Change of Control; or
8.12 INVALIDITY OF SUBSIDIARY GUARANTY; FAILURE OF SECURITY; REPUDIATION OF
OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Subsidiary
Guaranty for any reason, other than the satisfaction in full of all Obligations
(other than inchoate obligations with respect to claims, losses or liabilities
which have not yet arisen), shall cease to be in full force and effect (other
than in accordance with its terms) or shall be declared to be null and void,
(ii) any Collateral Document shall cease to be in full force and effect (other
than by reason of a release of Collateral thereunder in accordance with the
terms hereof or thereof, the satisfaction in full of the Obligations (other than
inchoate obligations with respect to claims, losses or liabilities which have
not yet arisen) or any other termination of such Collateral Document in
accordance with the terms hereof or thereof) or shall be declared null and void,
or Administrative Agent shall not have or shall cease to have a valid and
perfected First Priority Lien in any Collateral (other than Liens on Collateral
located outside the United States unless such Lien has been perfected in
accordance with the laws of the applicable foreign jurisdiction and Liens
described in clause (vi) of the definition of Permitted Encumbrances) purported
to be covered thereby, in each case for any reason other than the failure of
Administrative Agent or any Lender to take any action within its control, or
(iii) any Loan Party shall contest the validity or enforceability of any Loan
Document in writing or deny in writing that it has any further liability,
including with respect to future advances by Lenders, under any Loan Document to
which it is a party;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Revolving Loans, (b) an amount equal to the maximum amount that may at any time
be drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become
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immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Company,
and the obligation of each Lender to make any Revolving Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon
the occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written consent
of Requisite Lenders, by written notice to Company, declare all or any portion
of the amounts described in clauses (a) through (c) above to be, and the same
shall forthwith become, immediately due and payable, and the obligation of each
Lender to make any Revolving Loan, the obligation of Administrative Agent to
issue any Letter of Credit and the right of Issuing Lender to issue Letter of
Credits hereunder shall thereupon terminate; provided that the foregoing shall
not affect in any way the obligations of Lenders under subsection 3.3C(i).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to the
terms of the Collateral Account Agreement and shall be applied as therein
provided.
Notwithstanding anything contained in the second preceding paragraph, if
at any time within 60 days after an acceleration of the Revolving Loans pursuant
to clause (ii) of such paragraph Company shall pay all arrears of interest and
all payments on account of principal which shall have become due otherwise than
as a result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than
non-payment of the principal of and accrued interest on the Revolving Loans, in
each case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by
written notice to Company, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders and
are not intended, directly or indirectly, to benefit Company, and such
provisions shall not at any time be construed so as to grant Company the right
to require Lenders to rescind or annul any acceleration hereunder or to preclude
Administrative Agent or Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 APPOINTMENT.
A. APPOINTMENT OF AGENTS. GSCP is hereby appointed Arranger and
Syndication Agent hereunder, and each Lender hereby authorizes Arranger and
Syndication Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents.
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BankBoston is hereby appointed Administrative Agent hereunder and under the
other Loan Documents and each Lender hereby authorizes Administrative Agent to
act as its agent in accordance with the terms of this Agreement and the other
Loan Documents. Each Agent hereby agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 9 are solely for the benefit of Agents and Lenders
and Company shall have no rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this Agreement,
each Agent shall act solely as an agent of Lenders and does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for Company or any of its Subsidiaries. Each of Arranger and
Syndication Agent, without consent of or notice to any party hereto, may assign
any and all of its rights or obligations hereunder to any of its Affiliates. As
of the Closing Date, all obligations of Arranger and Syndication Agent hereunder
shall terminate.
B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case Administrative Agent deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral co-agent (any such additional individual or
institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL
AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS").
In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Agent or such Supplemental Collateral Agent, and (ii) the provisions of
this Section 9 and of subsections 10.2 and 10.3 that refer to Administrative
Agent shall inure to the benefit of such Supplemental Collateral Agent and all
references therein to Administrative Agent shall be deemed to be references to
Administrative Agent and/or such Supplemental Collateral Agent, as the context
may require.
Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and
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certainly vesting in and confirming to him or it such rights, powers, privileges
and duties, Company shall, or shall cause such Loan Party to, execute,
acknowledge and deliver any and all such instruments promptly upon request by
Administrative Agent. In case any Supplemental Collateral Agent, or a successor
thereto, shall die, become incapable of acting, resign or be removed, all the
rights, powers, privileges and duties of such Supplemental Collateral Agent, to
the extent permitted by law, shall vest in and be exercised by Administrative
Agent until the appointment of a new Supplemental Collateral Agent.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, 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 of the
other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by any of Agent to Lenders or by or on behalf of
Company to any Agent or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall any Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Revolving Loans or as to the existence or possible existence of
any Event of Default or Potential Event of Default. Anything contained in this
Agreement to the contrary notwithstanding, Administrative Agent shall not have
any liability arising from confirmations of the amount of outstanding Revolving
Loans or the Letter of Credit Usage or the component amounts thereof.
C. EXCULPATORY PROVISIONS. None of Agents nor any of their respective
officers, partners, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by any Agent under or in connection with any of
the Loan Documents except to the extent caused by such Agent's gross negligence
or willful misconduct. Each Agent shall be entitled to refrain from any act or
the taking of any action (including the failure to take an action) in
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connection with this Agreement or any of the other Loan Documents or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until such Agent shall have received instructions in
respect thereof from Requisite Lenders (or such other Lenders as may be required
to give such instructions under subsection 10.6) and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case may be),
such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing, (i)
each Agent shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Company and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against any Agent as a result
of such Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Revolving Loans and the Letters of
Credit, each Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder, and the term "Lender" or "Lenders" or any
similar term shall, unless the context clearly otherwise indicates, include each
Agent in its individual capacity. Any Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Revolving Loans and the
issuance of Letters of Credit hereunder and that it has made and shall continue
to make its own appraisal of the creditworthiness of Company and its
Subsidiaries. No Agent shall have any duty or responsibility, either initially
or on a continuing basis, to make any such investigation or any such appraisal
on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Revolving Loans or at any time or times thereafter, and no Agent
shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to Lenders.
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9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in exercising its powers, rights and remedies or performing its duties
hereunder or under the other Loan Documents or otherwise in its capacity as such
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished; provided
that in no event shall this sentence require any Lender to indemnify any Agent
against any liability, obligation, loss, damage, penalty, action, judgment,
suit, cost, expense or disbursement in excess of such Lender's Pro Rata Share
thereof; and provided, further, that this sentence shall not be deemed to
require any Lender to indemnify any Agent against any liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement
described in the proviso in the immediately preceding sentence.
9.5 SUCCESSOR ADMINISTRATIVE AGENT.
A. SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at
any time by giving 30 days' prior written notice thereof to Lenders and Company,
and Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Company and
Administrative Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to Company, to appoint a successor Administrative
Agent who shall, if no Event of Default shall have occurred and be continuing at
the time of such notice, be reasonably acceptable to Company. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent and the retiring or removed
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring or removed Administrative Agent's resignation
or removal hereunder as Administrative Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
9.6 COLLATERAL DOCUMENTS AND GUARANTIES.
Each Lender hereby further authorizes Administrative Agent, on behalf of
and for the benefit of Lenders, to enter into each Collateral Document as
secured party and to be the agent
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for and representative of Lenders under the Subsidiary Guaranty, and each Lender
agrees to be bound by the terms of each Collateral Document and the Subsidiary
Guaranty; provided that Administrative Agent shall not (i) enter into or consent
to any material amendment, modification, termination or waiver of any provision
contained in any Collateral Document or the Subsidiary Guaranty or (ii) release
any Collateral (except as otherwise expressly permitted or required pursuant to
the terms of this Agreement or the applicable Collateral Document), in each case
without the prior consent of Requisite Lenders (or, if required pursuant to
subsection 10.6, all Lenders); provided further, however, that, without further
written consent or authorization from Lenders, Administrative Agent may execute
any documents or instruments necessary to (a) release any Lien encumbering any
item of Collateral that is the subject of a sale or other disposition of assets
permitted by this Agreement or to which Requisite Lenders have otherwise
consented or (b) release any Subsidiary Guarantor from the Subsidiary Guaranty
if all of the capital stock of such Subsidiary Guarantor is sold to any Person
(other than an Affiliate of Company) pursuant to a sale or other disposition
permitted hereunder or to which Requisite Lenders have otherwise consented. Upon
payment in full of all of the Obligations, all outstanding Letters of Credit
being terminated or returned for cancellation and termination of the
Commitments, Administrative Agent shall release the Liens on such Collateral
granted pursuant to the Collateral Documents. Upon any release of Collateral
pursuant to the foregoing, Administrative Agent shall, at Borrowers' expense,
execute and deliver such documents (without recourse or representation or
warranty) as reasonably requested to evidence such release. Anything contained
in any of the Loan Documents to the contrary notwithstanding, Company,
Administrative Agent and each Lender hereby agree that (1) no Lender shall have
any right individually to realize upon any of the Collateral under any
Collateral Document or to enforce the Subsidiary Guaranty, it being understood
and agreed that all powers, rights and remedies under the Collateral Documents
and the Subsidiary Guaranty may be exercised solely by Administrative Agent for
the benefit of Lenders in accordance with the terms thereof, and (2) in the
event of a foreclosure by Administrative Agent on any of the Collateral pursuant
to a public or private sale, Administrative Agent or any Lender may be the
purchaser of any or all of such Collateral at any such sale and Administrative
Agent, as agent for and representative of Lenders (but not any Lender or Lenders
in its or their respective individual capacities unless Requisite Lenders shall
otherwise agree in writing) shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Obligations
as a credit on account of the purchase price for any collateral payable by
Administrative Agent at such sale.
SECTION 10.
MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN REVOLVING LOANS AND LETTERS OF CREDIT.
A. GENERAL. Subject to subsection 10.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Revolving Loan or Revolving Loans made by it
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or its Letters of Credit or participations therein or any other interest herein
or in any other Obligations owed to it; provided that no such sale, assignment,
transfer or participation shall, without the consent of Company, require Company
to file a registration statement with the Securities and Exchange Commission or
apply to qualify such sale, assignment, transfer or participation under the
securities laws of any state; provided, further that no such sale, assignment or
transfer described in clause (i) above shall be effective unless and until an
Assignment Agreement effecting such sale, assignment or transfer shall have been
accepted by Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii); provided, further that no such sale, assignment, transfer
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation. Except
as otherwise provided in this subsection 10.1, no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment or transfer of, or any granting of participations
in, all or any part of its Commitments or the Revolving Loans, the Letters of
Credit or participations therein, or the other Obligations owed to such Lender.
The expenses of the Lenders in connection with any sale, assignment or transfer
of, or any granting of participations in, any Commitment or other Obligation
pursuant to this subsection 10.1 shall be borne among the parties thereto and no
Loan Party shall be liable for such expense.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Revolving
Loan, Letter of Credit or participation therein, or other Obligation may
(a) be assigned in any amount to another Lender, or to an Affiliate of
the assigning Lender or another Lender, with the giving of notice to
Company and Administrative Agent or (b) be assigned in an aggregate
amount of not less than $5,000,000 (or such lesser amount as shall
constitute the aggregate amount of the Commitments, Revolving Loans,
Letters of Credit and participations therein, and other Obligations of
the assigning Lender and its Affiliates) to any other Eligible Assignee
with, except in the case of assignment by GSCP, the consent of
Administrative Agent (which consent of Administrative Agent shall not be
unreasonably withheld or delayed). To the extent of any such assignment
in accordance with either clause (a) or (b) above, the assigning Lender
shall be relieved of its obligations with respect to its Commitments,
Revolving Loans, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement,
together with a processing and recordation fee of $500 in the case an
assignment from one Lender to another Lender or an Affiliate of a Lender
and of $2000 in the case of an assignment to an Eligible Assignee other
than a Lender or an Affiliate of a Lender and such forms, certificates
or other evidence, if any, with respect to United States federal income
tax withholding matters as the assignee under such Assignment Agreement
may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance and
recordation, from and after the effective date specified
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in such Assignment Agreement, (1) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment Agreement, shall
have the rights and obligations of a Lender hereunder and (2) the
assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which
survive the termination of this Agreement under subsection 10.9B) and be
released from its obligations under this Agreement (and, in the case of
an Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto; provided that, anything
contained in any of the Loan Documents to the contrary notwithstanding,
if such Lender is Issuing Lender with respect to any outstanding Letters
of Credit such Lender shall continue to have all rights and obligations
of Issuing Lender with respect to such Letters of Credit until the
cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments
hereunder shall be modified to reflect the Commitment of such assignee
and any remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of any Revolving Notes hereunder,
the assigning Lender shall, upon the effectiveness of such assignment or
as promptly thereafter as practicable, surrender its applicable
Revolving Notes to Administrative Agent for cancellation, and thereupon,
upon the request of the assignee and/or the assigning Lender, new
Revolving Notes shall be issued to the assignee and/or to the assigning
Lender, substantially in the form of Exhibit IV annexed hereto, as the
case may be, with appropriate insertions, to reflect the new Commitments
of the assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
Upon its receipt of an Assignment Agreement executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee,
together with the processing and recordation fee referred to in
subsection 10.1B(i) and any forms, certificates or other evidence with
respect to United States federal income tax withholding matters that
such assignee may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if
Administrative Agent has consented to the assignment evidenced thereby
to the extent such consent is required pursuant to subsection 10.1B(i)),
(a) accept such Assignment Agreement by executing a counterpart thereof
as provided therein (which acceptance shall evidence any required
consent of Administrative Agent to such assignment), (b) record the
information contained therein in the Register, and (c) give prompt
notice thereof to Company. Administrative Agent shall maintain a copy of
each Assignment Agreement delivered to and accepted by it as provided in
this subsection 10.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Revolving Loan allocated to such participation, (ii) a reduction of the
principal amount of or the rate of interest payable on any Revolving Loan
allocated to such
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participation, or (iii) release of all or substantially all of the Collateral
except as permitted hereunder and under the Collateral Documents, and all
amounts payable by Company hereunder (including amounts payable to such Lender
pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender
had not sold such participation. Company and each Lender hereby acknowledge and
agree that, solely for purposes of subsections 10.4 and 10.5, (a) any
participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Revolving
Loans, the other Obligations owed to such Lender, and its Revolving Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank; provided that (i) no Lender shall, as
between Company and such Lender, be relieved of any of its obligations hereunder
as a result of any such assignment and pledge and (ii) in no event shall such
Federal Reserve Bank be considered to be a "Lender" or be entitled to require
the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (i) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Revolving Loans; and (iii) that
it will make its Revolving Loans for its own account in the ordinary course of
its business and without a view to distribution of such Revolving Loans within
the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
subsection 10.1, the disposition of such Revolving Loans or any interests
therein shall at all times remain within its exclusive control). Each Lender
that becomes a party hereto pursuant to an Assignment Agreement shall be deemed
to agree that the representations and warranties of such Lender contained in
Section 2(c) of such Assignment Agreement are incorporated herein by this
reference.
10.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and any consents,
amendments, waivers or other modifications thereto; (ii) all the actual and
reasonable costs of furnishing all opinions by counsel for Company (including
any opinions requested by Lenders as to any legal matters arising hereunder) and
of Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including with respect to
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confirming compliance with environmental, insurance and solvency requirements;
(iii) the reasonable fees, expenses and disbursements of counsel to Arranger and
counsel to Administrative Agent (in each case including reasonable allocated
costs of internal counsel) in connection with the negotiation, preparation,
execution and administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and any other documents or matters
requested by Company; (iv) all the actual and reasonable costs and expenses of
creating and perfecting Liens in favor of Administrative Agent on behalf of
Lenders pursuant to any Collateral Document, including filing and recording
fees, expenses and taxes, stamp or documentary taxes, search fees, title
insurance premiums, and reasonable fees, expenses and disbursements of counsel
to Arranger and counsel to Administrative Agent and of counsel providing any
opinions that Arranger, Administrative Agent or Requisite Lenders may request in
respect of the Collateral Documents or the Liens created pursuant thereto; (v)
all the actual and reasonable costs and expenses (including the reasonable fees,
expenses and disbursements of any auditors, accountants or appraisers and any
environmental or other consultants, advisors and agents employed or retained by
Administrative Agent or Arranger and its counsel) of obtaining and reviewing any
environmental audits or reports provided for under subsection 4.1I and any
audits or reports provided for under subsection 6.5B with respect to Inventory
and Accounts Receivable of Company and its Subsidiaries; (vi) all the actual and
reasonable costs and expenses (including the reasonable fees, expenses and
disbursements of any consultants, advisors and agents employed or retained by
Administrative Agent and its counsel) in connection with the custody or
preservation of any of the Collateral; (vii) all other actual and reasonable
costs and expenses incurred by Syndication Agent, Arranger or Administrative
Agent in connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and the transactions contemplated
thereby; and (viii) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including reasonable allocated
costs of internal counsel) and costs of settlement, incurred by Arranger,
Administrative Agent and Lenders in enforcing any Obligations of or in
collecting any payments due from any Loan Party hereunder or under the other
Loan Documents by reason of such Event of Default (including in connection with
the sale of, collection from, or other realization upon any of the Collateral or
the enforcement of the Subsidiary Guaranty) or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings. Company shall not be required to pay any expenses
pursuant to this subsection 10.2 which have been expressly identified in any of
the Loan Documents as expenses to be borne by Lenders.
10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Agents and Lenders, and the officers, partners,
directors, employees, agents and affiliates of any of Agents and Lenders
(collectively called the "INDEMNITEES"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that Company shall
not have any obligation to any Indemnitee
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hereunder with respect to any Indemnified Liabilities to the extent such
Indemnified Liabilities arise from the gross negligence or willful misconduct of
that Indemnitee.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and
all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the Related
Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Revolving Loans hereunder or the use or intended
use of the proceeds thereof or the issuance of Letters of Credit hereunder or
the use or intended use of any thereof, or any enforcement of any of the Loan
Documents (including any sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Subsidiary Guaranty)), (ii) the
statements contained in the commitment letter delivered by any Lender to Company
with respect thereto, or (iii) any Environmental Claim or any Hazardous
Materials Activity relating to or arising from, directly or indirectly, any past
or present activity, operation, land ownership, or practice of Company or any of
its Subsidiaries; provided, however, that Indemnified Liabilities shall not
include any expenses expressly identified in any of the Loan Documents as
expenses to be borne by Lenders.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuance of any Event of Default each Lender is hereby authorized by
Company at any time or from time to time, without notice to Company or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that
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Lender to or for the credit or the account of Company against and on account of
the obligations and liabilities of Company then due and payable to that Lender
under this Agreement, the Letters of Credit and participations therein and the
other Loan Documents, including all claims of any nature or description arising
out of or connected with this Agreement, the Letters of Credit and
participations therein or any other Loan Document, irrespective of whether or
not that Lender shall have made any demand hereunder.
10.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall, whether
by voluntary payment (other than a voluntary prepayment of Revolving Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
10.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any provision of
the Loan Documents, or consent to any departure by Company therefrom, shall in
any event be effective without the written concurrence of Company and Requisite
Lenders; provided that no such amendment, modification, termination, waiver or
consent shall, without the consent of each Lender (with Obligations directly
affected in the case of the following clause (i)): (i) extend the scheduled
final maturity of any Revolving Loan or Revolving Note, or extend the stated
expiration date of any Letter of Credit beyond the Revolving Loan Commitment
Termination
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Date, or reduce the rate of interest on any Revolving Loan (other than any
waiver of any increase in the interest rate applicable to any Revolving Loan
pursuant to subsection 2.2E) or any commitment fees or letter of credit fees
payable hereunder, or extend the time for payment of any such interest or fees,
or reduce the principal amount of any Revolving Loan or any reimbursement
obligation in respect of any Letter of Credit, (ii) amend, modify, terminate or
waive any provision of this subsection 10.6, (iii) reduce the percentage
specified in the definition of "Requisite Lenders" (it being understood that,
with the consent of Requisite Lenders, additional extensions of credit pursuant
to this Agreement may be included in the determination of "Requisite Lenders" on
substantially the same basis as the Revolving Loan Commitments and the Revolving
Loans are included on the Closing Date), (iv) consent to the assignment or
transfer by Company of any of its rights and obligations under this Agreement,
(v) release all or substantially all of the Collateral or all or substantially
all of the Subsidiary Guarantors from the Subsidiary Guaranty except as
expressly provided in the Loan Documents or (vi) increases the percentage
advance rates set forth in the definition of "Borrowing Base"; provided, further
that no such amendment, modification, termination or waiver shall (a) increase
the Commitments of any Lender over the amount thereof then in effect without the
consent of such Lender (it being understood that no amendment, modification or
waiver of any condition precedent, covenant, Potential Event of Default or Event
of Default shall constitute an increase in the Commitment of any Lender, and
that no increase in the available portion of any Commitment of any Lender shall
constitute an increase in such Commitment of such Lender); (b) amend, modify,
terminate or waive any obligation of Lenders relating to the purchase of
participations in Letters of Credit as provided in subsection 3.1C without the
written concurrence of Administrative Agent and of each Issuing Lender which has
a Letter of Credit then outstanding or which has not been reimbursed for a
drawing under a Letter of Credit issued it; or (c) amend, modify, terminate or
waive any provision of Section 9 as the same applies to any Agent, or any other
provision of this Agreement as the same applies to the rights or obligations of
any Agent, in each case without the consent of such Agent. Administrative Agent
may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that Lender.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Company
in any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.6 shall be binding
upon each Lender at the time outstanding, each future Lender and on Company.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of subsection 10.6A, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
owed to such Lender through such date of termination, (ii) another financial
institution satisfactory to Administrative Agent (or if Administrative Agent is
also the Lender to be terminated, the successor Administrative Agent)
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shall agree, as of such date, to become a Lender for all purposes under this
Agreement (whether by assignment or amendment) and to assume all obligations of
the Lender to be terminated as of such date, and (iii) all documents and
supporting materials necessary, in the judgment of Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent), to evidence the substitution of such Lender shall have
been received and approved by Administrative Agent as of such date.
10.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, or upon receipt of telefacsimile or telex or
United States mail with postage prepaid. For the purposes hereof, the address of
each party hereto shall be as set forth under such party's name on the signature
pages hereof or (i) as to Company and Administrative Agent, such other address
as shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the
Revolving Loans and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4, 10.5 and 10.19 shall survive the payment of the Revolving Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such
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power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Revolving Notes shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 HEADINGS.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
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10.15 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.8; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING
IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT; (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE
COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS
SUBSECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS
LAW SECTION 5-1402 OR OTHERWISE.
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10.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER AND BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE REVOLVING LOANS MADE HEREUNDER. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
10.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with prudent lending or investing practices, it being understood and
agreed by Company that in any event a Lender may make disclosures to Affiliates
of such Lender or disclosures reasonably required by any bona fide assignee,
transferee or participant who agrees to keep such information confidential in
connection with the contemplated assignment or transfer by such Lender of any
Revolving Loans or any participations therein or disclosures required or
requested by any governmental agency or representative thereof or by the
National Association of Insurance Commissioners or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall any Lender be
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
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10.20 MAXIMUM AMOUNT.
A. It is the intention of Company and Lenders to conform strictly to the
usury and similar laws relating to interest from time to time in force, and all
agreements between Company, Administrative Agent and Lenders, whether now
existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid in
the aggregate to Lenders or to Administrative Agent on behalf of Lenders as
interest hereunder or under the other Loan Documents or in any other security
agreement given to secure the Obligations, or in any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby or thereby, exceed
the maximum amount permissible under applicable usury or such other laws (the
"MAXIMUM AMOUNT"). If under any circumstances whatsoever fulfillment of any
provision hereof, or of any of the other Loan Documents, at the time performance
of such provision shall be due, shall involve exceeding the Maximum Amount,
then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum
Amount. For the purposes of calculating the actual amount of interest paid
and/or payable hereunder in respect of laws pertaining to usury or such other
laws, all sums paid or agreed to be paid to Lenders for the use, forbearance or
detention of the indebtedness of Company evidenced hereby, outstanding from time
to time shall, to the extent permitted by applicable law, be amortized, pro
rated, allocated and spread from the date of disbursement of the proceeds of the
Revolving Loans until payment in full of all of such indebtedness, so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term hereof. The terms and provisions of this subsection shall control and
supersede every other provision of all agreements between Company,
Administrative Agent and Lenders.
B. If under any circumstances Lenders shall receive an amount which
would exceed the Maximum Amount, such amount shall be deemed a payment in
reduction of the principal amount of the Revolving Loans and shall be treated as
a voluntary prepayment under subsection 2.4A(i), and shall be so applied in
accordance with subsection 2.4A(iv) hereof, or if such amount exceeds the unpaid
balance of the Revolving Loans and any other indebtedness of Company in favor of
Lenders, the excess shall be deemed to have been a payment made by mistake and
shall be refunded to Company.
10.21 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
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[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
ZILOG, INC. a Delaware corporation
By: /s/ RICHARD R. PICKARD
--------------------------------------
Name: Richard R. Pickard
Title: Secretary
Notice Address:
210 East Hacienda Aveune
--------------------------------------
Campbell, CA 90058
--------------------------------------
--------------------------------------
--------------------------------------
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AGENTS AND LENDERS:
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, as Arranger and as
Syndication Agent
By: /s/ GOLDMAN SACHS CREDIT PARTNERS L.P.
----------------------------------------
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention:
Telecopy:
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BANKBOSTON, N.A.,
individually and as Administrative Agent
By: /s/ MAIA D. HEYMANN
---------------------------------------
Name: Maia D. Heymann
Title: Vice President
Notice Address:
435 Tasso Street, Suite 250
---------------------------------------
Palo Alto, CA 94301
---------------------------------------
---------------------------------------
---------------------------------------
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EXHIBIT 10.11
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of February 27, 1998 by each
of the undersigned direct and indirect Subsidiaries of ZILOG, INC. (the
"COMPANY") (each of such Subsidiaries being a "GUARANTOR" and collectively,
"GUARANTORS"; provided, that after the Closing Date, Guarantors shall be deemed
to include any Additional Guarantors (as hereinafter defined)) in favor of and
for the benefit of BANKBOSTON, N.A., as administrative agent for and
representative of (in such capacity herein called "GUARANTIED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below, and, subject to subsection 3.14, for the benefit of the other
Beneficiaries (as hereinafter defined).
RECITALS
A. Zilog, Inc., a Delaware corporation ("COMPANY"), has entered
into that certain Credit Agreement, dated as of February 27, 1998, with
Guarantied Party, Lenders and Goldman Sachs Credit Partners L.P., as Arranger
and Syndication Agent (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"; capitalized terms defined therein and not otherwise defined herein
being used herein as therein defined).
B. A portion of the proceeds of the Loans may be advanced to
Guarantors and thus the Guarantied Obligations (as hereinafter defined) are
being incurred for and will inure to the benefit of Guarantors (which benefits
are hereby acknowledged).
C. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Company's obligations thereunder be guarantied
by Guarantors.
D. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder,
Guarantors hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms
shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Guarantied Party and Lenders.
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"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Subsidiary Guaranty dated as of February 27,
1998 as it may be amended, supplemented or otherwise modified from time to
time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment
in full of the Guarantied Obligations, including all principal, interest,
costs, fees and expenses (including reasonable legal fees and expenses) of
Beneficiaries as required under the Loan Documents.
1.2 INTERPRETATION.
(a) References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Guaranty unless otherwise
specifically provided.
(b) In the event of any conflict or inconsistency between the
terms, conditions and provisions of this Guaranty and the terms,
conditions and provisions of the Credit Agreement, the terms, conditions
and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the provisions of
subsection 2.2(a), Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty the due and punctual payment in full of all Guarantied
Obligations when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)). The term
"GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and
includes:
(a) any and all Obligations of Company, in each case now or
hereafter made, incurred or created, whether absolute or contingent,
liquidated or unliquidated, whether due or not due, and however arising
under or in connection with the Credit Agreement and the other Loan
Documents, including those arising under successive borrowing transactions
under the Credit Agreement which shall either continue the Obligations of
Company or from time to time renew them after they have been satisfied and
including interest which, but for the filing of a petition in bankruptcy
with respect to Company, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Company for such interest in the
related bankruptcy proceeding; and
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(b) those expenses set forth in subsection 2.8 hereof
2.2 LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS.
(a) Anything contained in this Guaranty to the contrary
notwithstanding, if any Fraudulent Transfer Law (as hereinafter defined) is
determined by a court of competent jurisdiction to be applicable to the
obligations of any Guarantor under this Guaranty, such obligations of such
Guarantor hereunder shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving effect
to all other liabilities of such Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Guarantor (1) in respect of intercompany indebtedness to
Company or other affiliates of Company to the extent that such indebtedness
would be discharged in an amount equal to the amount paid by such Guarantor
hereunder and (2) under any guaranty of Subordinated Indebtedness which guaranty
contains a limitation as to maximum amount similar to that set forth in this
subsection 2.2(a), pursuant to which the liability of such Guarantor hereunder
is included in the liabilities taken into account in determining such maximum
amount) and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, reimbursement, indemnification or contribution of such Guarantor
pursuant to applicable law or pursuant to the terms of any agreement (including
any such right of contribution under subsection 2.2(b)).
(b) Guarantors under this Guaranty together desire to allocate
among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by any Guarantor under
this Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair Share (as defined
below) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Contributing Guarantors in the amount of
such other Contributing Guarantor's Fair Share Shortfall (as defined below) as
of such date, with the result that all such contributions will cause each
Contributing Guarantor's Aggregate Payments (as defined below) to equal its Fair
Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(1) the Adjusted Maximum Amount (as defined below) with respect to such
Contributing Guarantor to (2) the aggregate of the Adjusted Maximum Amounts with
respect to all Contributing Guarantors multiplied by (ii) the aggregate amount
paid or distributed on or before such date by all Funding Guarantors under this
Guaranty in respect of the obligations guarantied. "FAIR SHARE SHORTFALL" means,
with respect to a Contributing Guarantor as of any date of determination, the
excess, if any, of the Fair Share of such Contributing Guarantor over
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the Aggregate Payments of such Contributing Guarantor. "ADJUSTED MAXIMUM AMOUNT"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty, determined as of such date, in the case of any Guarantor,
in accordance with subsection 2.2(a); provided that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Contributing
Guarantor for purposes of this subsection 2.2(b), any assets or liabilities of
such Contributing Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder shall not be considered as assets or liabilities of such Contributing
Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty (including in respect of this subsection
2.2(b) minus (ii) the aggregate amount of all payments received on or before
such date by such Contributing Guarantor from the other Contributing Guarantors
as contributions under this subsection 2.2(b). The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this subsection 2.2(b) shall not be construed in any way to limit the liability
of any Contributing Guarantor hereunder.
2.3 PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS.
Subject to the provisions of subsection 2.2(a), Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Company to pay any of the
Guarantied Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)),
Guarantors will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guarantied Obligations then due as aforesaid,
accrued and unpaid interest on such Guarantied Obligations (including interest
which, but for the filing of a petition in bankruptcy with respect to Company,
would have accrued on such Guarantied Obligations, whether or not a claim is
allowed against Company for such interest in the related bankruptcy proceeding)
and all other Guarantied Obligations then owed to Beneficiaries as aforesaid.
All payments shall be applied promptly from time to time by Guarantied Party as
provided in subsection 2.4C of the Credit Agreement.
2.4 LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a
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guarantor or surety other than payment in full of the Guarantied Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence
of an Event of Default notwithstanding the existence of any dispute
between Company and any Beneficiary with respect to the existence of such
Event of Default.
(c) The obligations of each Guarantor hereunder are independent of
the obligations of Company under the Loan Documents and the obligations of
any other guarantor (including any other Guarantor) of the obligations of
Company under the Loan Documents, and a separate action or actions may be
brought and prosecuted against such Guarantor whether or not any action is
brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge
any Guarantor's liability for any portion of the Guarantied Obligations
which has not been paid. Without limiting the generality of the foregoing,
if Guarantied Party is awarded a judgment in any suit brought to enforce
any Guarantor's covenant to pay a portion of the Guarantied Obligations,
such judgment shall not be deemed to release such Guarantor from its
covenant to pay the portion of the Guarantied Obligations that is not the
subject of such suit, and such judgment shall not, except to the extent
satisfied by such Guarantor, limit, affect, modify or abridge any other
Guarantor's liability hereunder in respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate in
accordance with the Credit Agreement and any applicable security
agreement, without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of any Guarantor's
liability hereunder, from time to time may (i) renew, extend, accelerate,
increase the rate of interest on, or otherwise change the time, place,
manner or terms of payment of the Guarantied Obligations, (ii) settle,
compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the
payment of the same to the payment of any other obligations; (iii) request
and accept other guaranties of the Guarantied Obligations and take and
hold security for the payment of this Guaranty or the Guarantied
Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle,
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rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any
other guaranties of the Guarantied Obligations, or any other obligation of
any Person (including any other Guarantor) with respect to the Guarantied
Obligations; (v) enforce and apply any security now or hereafter held by
or for the benefit of such Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that such Beneficiary may have against
any such security, including foreclosure on any such security pursuant to
one or more judicial or nonjudicial sales, whether or not every aspect of
any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation
or other right or remedy of any Guarantor against Company or any security
for the Guarantied Obligations; and (vi) exercise any other rights
available to it under the Loan Documents.
(f) This Guaranty and the obligations of Guarantors hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other
than payment in full of the Guarantied Obligations), including the
occurrence of any of the following, whether or not any Guarantor shall
have had notice or knowledge of any of them: (i) any failure or omission
to assert or enforce or agreement or election not to assert or enforce, or
the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Loan Documents, at law,
in equity or otherwise) with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Guarantied Obligations; (ii) any
rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions (including provisions
relating to events of default) of the Credit Agreement, any of the other
Loan Documents or any agreement or instrument executed pursuant thereto,
or of any other guaranty or security for the Guarantied Obligations; (iii)
the Guarantied Obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect; (iv)
the application of payments received from any source (other than payments
received pursuant to the other Loan Documents or from the proceeds of any
security for the Guarantied Obligations, except to the extent such
security also serves as collateral for indebtedness other than the
Guarantied Obligations) to the payment of indebtedness other than the
Guarantied Obligations, even though any Beneficiary might have elected to
apply such payment to any part or all of the Guarantied Obligations; (v)
any Beneficiary's consent to the change, reorganization or termination of
the corporate structure or existence of Company or any of its Subsidiaries
and to any corresponding restructuring of the Guarantied Obligations; (vi)
any failure to perfect or continue perfection of a security interest in
any collateral which secures any of the Guarantied Obligations; (vii) any
defenses, set-offs or counterclaims which
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Company may allege or assert against any Beneficiary in respect of the
Guarantied Obligations, including failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) 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 any Guarantor as an obligor in respect of the
Guarantied Obligations.
2.5 WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit
of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of
payment or performance by such Guarantor, to (i) proceed against Company,
any other guarantor (including any other Guarantor) of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any
security held from Company, any such other guarantor or any other Person,
(iii) proceed against or have resort to any balance of any deposit account
or credit on the books of any Beneficiary in favor of Company or any other
Person, or (iv) pursue any other remedy in the power of any Beneficiary
whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including any
defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations;
(c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions
in the administration of the Guarantied Obligations, except behavior which
amounts to gross negligence or willful misconduct;
(e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of such Guarantor's
obligations hereunder, (ii) the benefit of any statute of limitations
affecting such Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property
subject thereto;
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(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit Agreement
or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Guarantied Obligations or any agreement
related thereto, notices of any extension of credit to Company and notices
of any of the matters referred to in subsection 2.4 and any right to
consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded
by law which limit the liability of or exonerate guarantors or sureties,
or which may conflict with the terms of this Guaranty.
2.6 GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
Guarantied Obligations have been paid in full, the Commitments terminated and
all Letters of Credit shall have expired or been cancelled, each Guarantor
hereby waives any claim, right or remedy, direct or indirect, that such
Guarantor now has or may hereafter have against Company or any of its assets in
connection with this Guaranty or the performance by such Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including (a) any right of subrogation, reimbursement or indemnification that
such Guarantor now has or may hereafter have against Company, (b) any right to
enforce, or to participate in, any claim, right or remedy that any Beneficiary
now has or may hereafter have against Company, and (c) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by any
Beneficiary. In addition, until the Guarantied Obligations shall have been
indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled, each Guarantor shall
withhold exercise of any right of contribution such Guarantor may have against
any other guarantor (including any other Guarantor) of the Guarantied
Obligations (including any such right of contribution under subsection 2.2(b)).
Each Guarantor further agrees that, to the extent the waiver or agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
Company or against any collateral or security, and any rights of contribution
such Guarantor may have against any such other guarantor, shall be junior and
subordinate to any rights any Beneficiary may have against Company, to all
right, title and interest any Beneficiary may have in any such collateral or
security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guarantied Obligations shall not have been paid in full, such amount
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the
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Guarantied Obligations, whether matured or unmatured, in accordance with the
terms hereof.
2.7 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company or
any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR")
is hereby subordinated in right of payment to the Guarantied Obligations, and
any such indebtedness collected or received by the Obligee Guarantor after an
Event of Default has occurred and is continuing shall be held in trust for
Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over to
Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations but without affecting, impairing or limiting
in any manner the liability of the Obligee Guarantor under any other provision
of this Guaranty.
2.8 EXPENSES. Guarantors jointly and severally agree to pay, or cause to
be paid, on demand, and to save Beneficiaries harmless against liability for,
any and all costs and expenses (including fees and disbursements of counsel and
allocated costs of internal counsel) incurred or expended by any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty.
2.9 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
shall remain in effect until all of the Guarantied Obligations shall have been
paid in full and the Commitments shall have terminated and all Letters of Credit
shall have expired or been cancelled. Each Guarantor hereby irrevocably waives
any right to revoke this Guaranty as to future transactions giving rise to any
Guarantied Obligations.
2.10 AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any
Beneficiary to inquire into the capacity or powers of any Guarantor or Company
or the officers, directors or any agents acting or purporting to act on behalf
of any of them.
2.11 FINANCIAL CONDITION OF COMPANY. Any Loans may be granted to Company
or continued from time to time may be entered into from time to time, in each
case without notice to or authorization from any Guarantor regardless of the
financial or other condition of Company at the time of any such grant or
continuation. No Beneficiary shall have any obligation to disclose or discuss
with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of Company. Each Guarantor has adequate means to obtain
information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Loan
Documents, and each Guarantor assumes the responsibility for being and keeping
informed of the financial condition of Company and of all circumstances bearing
upon the risk of nonpayment of the Guarantied Obligations. Each Guarantor hereby
waives and relinquishes any duty on the part of any Beneficiary to disclose any
matter, fact or thing relating to the business, operations or conditions of
Company now known or hereafter known by any Beneficiary.
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<PAGE> 10
2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents or any
agreement between any Guarantor and any Beneficiary or Beneficiaries or between
Company and any Beneficiary or Beneficiaries. Any forbearance or failure to
exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
So long as any Guarantied Obligations remain outstanding, no Guarantor shall,
without the prior written consent of Guarantied Party acting pursuant to the
instructions of Requisite Lenders, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against Company. The obligations of Guarantors under this Guaranty shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of Company or by any
defense which Company may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on
any portion of the Guarantied Obligations which accrues after the
commencement of any proceeding referred to in clause (a) above (or, if
interest on any portion of the Guarantied Obligations ceases to accrue by
operation of law by reason of the commencement of said proceeding, such
interest as would have accrued on such portion of the Guarantied
Obligations if said proceedings had not been commenced) shall be included
in the Guarantied Obligations because it is the intention of Guarantors
and Beneficiaries that the Guarantied Obligations which are guarantied by
Guarantors pursuant to this Guaranty should be determined without regard
to any rule of law or order which may relieve Company of any portion of
such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date
on which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by Company, the obligations of Guarantors hereunder
shall continue and remain in full force and effect or be reinstated, as
the case may be, in the event that all or any part of such payment(s) are
rescinded or recovered directly or indirectly from any Beneficiary as a
preference, fraudulent transfer or otherwise, and any such payments which
are so rescinded or recovered shall constitute Guarantied Obligations for
all purposes under this Guaranty.
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2.14 NOTICE OF EVENTS. As promptly as practicable after any Guarantor
obtains knowledge thereof, such Guarantor shall give Guarantied Party written
notice of any condition or event which has resulted in (a) a material adverse
change in the financial condition of any Guarantor or Company or (b) a breach of
or noncompliance with any term, condition or covenant contained herein or in the
Credit Agreement, any other Loan Document or any other document delivered
pursuant hereto or thereto.
2.15 SET OFF. In addition to any other rights any Beneficiary may have
under law or in equity, upon the occurrence and during the continuance of an
Event of Default, if any amount shall at any time be due and owing by any
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness of such
Beneficiary owing to such Guarantor and any other property of such Guarantor
held by any Beneficiary to or for the credit or the account of such Guarantor
against and on account of the Guarantied Obligations and liabilities of such
Guarantor to any Beneficiary under this Guaranty.
SECTION 3. MISCELLANEOUS
3.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Loan Documents and any increase in the Commitments under the
Credit Agreement.
3.2 NOTICES. Any communications between Guarantied Party and any
Guarantor and any notices or requests provided herein to be given may be given
by mailing the same, postage prepaid, or by telex, facsimile transmission or
cable to each such party at its address set forth in the Credit Agreement, on
the signature pages hereof or to such other addresses as each such party may in
writing hereafter indicate. Any notice, request or demand to or upon Guarantied
Party or any Guarantor shall not be effective until received.
3.3 SEVERABILITY. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
3.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, each Guarantor against whom enforcement of such amendment or
modification is sought. Any such
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waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
3.5 HEADINGS. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 APPLICABLE LAW; RULES OF CONSTRUCTION. THIS GUARANTY AND THE RIGHTS
AND OBLIGATIONS OF GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
3.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
shall be binding upon each Guarantor and its respective successors and assigns.
This Guaranty shall inure to the benefit of Beneficiaries and their respective
successors and assigns. No Guarantor shall assign this Guaranty or any of the
rights or obligations of such Guarantor hereunder without the prior written
consent of all Lenders. Any Beneficiary may, without notice or consent, assign
its interest in this Guaranty in whole or in part. The terms and provisions of
this Guaranty shall inure to the benefit of any transferee or assignee of any
Loan, and in the event of such transfer or assignment the rights and privileges
herein conferred upon such Beneficiary shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof.
3.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS HEREUNDER OR THEREUNDER,
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT,
EACH GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III)
AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH
GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 3.2; (IV) AGREES
THAT SERVICE AS PROVIDED IN CLAUSE
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(III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
3.9 WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF
THE BENEFITS HEREOF, EACH BENEFICIARY HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY OR ANY OTHER LOAN DOCUMENT. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each Guarantor and, by its acceptance of the benefits hereof,
each Beneficiary, each (i) acknowledges that this waiver is a material
inducement for such Guarantor and Beneficiaries to enter into a business
relationship, that such Guarantor and Beneficiaries have already relied on this
waiver in entering into this Guaranty or accepting the benefits thereof, as the
case may be, and that each will continue to rely on this waiver in their related
future dealings and (ii) further warrants and represents that each has reviewed
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 3.9 AND EXECUTED BY GUARANTIED PARTY AND EACH GUARANTOR), AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT. In the event of
litigation, this Guaranty may be filed as a written consent to a trial by the
court.
3.10 NO OTHER WRITING. This writing is intended by Guarantors and
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or trade
usage, and no parole evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
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3.11 FURTHER ASSURANCES. At any time or from time to time, upon the
request of Guarantied Party, Guarantors shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.12 ADDITIONAL GUARANTORS. The initial Guarantor hereunder shall be the
Subsidiary of Company that is a signatory hereto on the date hereof From time to
time subsequent to the date hereof, additional Subsidiaries of Company may
become parties hereto, as additional Guarantors (each an "ADDITIONAL
GUARANTOR"), by executing a counterpart of this Guaranty. Upon delivery of any
such counterpart to Guarantied Party, notice of which is hereby waived by
Guarantors, each such Additional Guarantor shall be a Guarantor and shall be as
fully a party hereto as if such Additional Guarantor were an original signatory
hereof. Each Guarantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Guarantor hereunder, nor by any election of Guarantied Party not to cause any
Subsidiary of Company to become an Additional Guarantor hereunder. This Guaranty
shall be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
3.13 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become effective
as to each Guarantor upon the execution of a counterpart hereof by such
Guarantor (whether or not a counterpart hereof shall have been executed by any
other Guarantor) and receipt by Guarantied Party of written or telephonic
notification of such execution and authorization of delivery thereof
3.14 GUARANTIED PARTY AS ADMINISTRATIVE AGENT.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders. Guarantied Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5A of the Credit Agreement
shall also constitute notice of resignation as Guarantied Party under this
Guaranty; removal of Administrative Agent pursuant to subsection 9.5A of the
Credit Agreement shall also constitute removal as Guarantied Party under this
Guaranty; and appointment of a successor Administrative Agent pursuant to
subsection 9.5A of the Credit Agreement shall
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<PAGE> 15
also constitute appointment of a successor Guarantied Party under this Guaranty.
Upon the acceptance of any appointment as Administrative Agent under subsection
9.5A of the Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Guarantied
Party under this Guaranty, and the retiring or removed Guarantied Party under
this Guaranty shall promptly (i) transfer to such successor Guarantied Party all
sums held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Guarantied Party under this Guaranty, and (ii) take such other actions as may be
necessary or appropriate in connection with the assignment to such successor
Guarantied Party of the rights created hereunder, whereupon such retiring or
removed Guarantied Party shall be discharged from its duties and obligations
under this Guaranty. After any retiring or removed Guarantied Party's
resignation or removal hereunder as Guarantied Party, the provisions of this
Guaranty shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Guaranty while it was Guarantied Party hereunder.
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<PAGE> 16
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
ZILOG EUROPE
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
-----------------------------------
Title: Secretary
----------------------------------
Notice Address: 210 East Hacienda Avenue
-------------------------
Campbell, CA 95008
-------------------------
-------------------------
ZILOG TOA COMPANY
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
-----------------------------------
Title: Secretary
----------------------------------
Notice Address: 210 East Hacienda Avenue
-------------------------
Campbell, CA 95008
-------------------------
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<PAGE> 1
EXHIBIT 10.12
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "AGREEMENT") is dated as
of February 27, 1998 and entered into by and between ZILOG, INC., a Delaware
corporation ("PLEDGOR"), and BANKBOSTON, N.A., as administrative agent for and
representative of (in such capacity herein called "SECURED PARTY") the financial
institutions ("LENDERS") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Secured Party, Lenders and Goldman Sachs Credit Partners L.P.,
as Arranger and Syndication Agent, have entered into a Credit Agreement, dated
as of February 27, 1998 (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined), with Pledgor pursuant to which Lenders have
made certain commitments, subject to the terms and conditions set forth in the
Credit Agreement, to extend certain credit facilities to Pledgor.
B. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and issue Letters of Credit under the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms used in this
Agreement shall have the following meanings:
"COLLATERAL" means (i) the Collateral Account, (ii) all amounts on
deposit from time to time in the Collateral Account, (iii) all interest, cash,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Collateral, and (iv) to the extent not covered by clauses (i) through
(iii) above, all proceeds of any or all of the foregoing Collateral.
"COLLATERAL ACCOUNT" means the restricted deposit account
established and maintained by Secured Party pursuant to Section 2(a).
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"SECURED OBLIGATIONS" means all obligations and liabilities of
every nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and all
extensions or renewals thereof, whether for principal, interest (including
interest that, but for the filing of a petition in bankruptcy with respect to
Pledgor, would accrue on such obligations), reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnities or otherwise, whether voluntary
or involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender as a preference, fraudulent transfer
or otherwise, and all obligations of every nature of Pledgor now or hereafter
existing under this Agreement.
SECTION 2. ESTABLISHMENT AND OPERATION OF COLLATERAL ACCOUNT.
(a) Secured Party is hereby authorized to establish and maintain
at its office at 100 Federal Street, Boston, Massachusetts, as a blocked account
in the name of Secured Party and under the sole dominion and control of Secured
Party, a restricted deposit account (Account #533-04379), designated as "Zilog,
Inc., Collateral Account in favor of BankBoston, N.A.".
(b) The Collateral Account shall be operated in accordance with
the terms of this Agreement.
(c) All amounts at any time held in the Collateral Account shall
be beneficially owned by Pledgor but shall be held in the name of Secured Party
hereunder, for the benefit of Lenders, as collateral security for the Secured
Obligations upon the terms and conditions set forth herein. Pledgor shall have
no right to withdraw, transfer or, except as expressly set forth herein,
otherwise receive any funds deposited into the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
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SECTION 3. DEPOSITS OF CASH COLLATERAL.
(a) All deposits of funds in the Collateral Account shall be made
by wire transfer (or, if applicable, by intra-bank transfer from another account
of Pledgor) of immediately available funds in accordance with written wire
transfer instructions provided to Pledgor by Secured Party. Pledgor shall,
promptly after initiating a transfer of funds to the Collateral Account, give
notice to Secured Party by telefacsimile of the date, amount and method of
delivery of such deposit.
(b) If an Event of Default has occurred and is continuing and, in
accordance with Section 8 of the Credit Agreement, Pledgor is required to pay to
Secured Party an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding under the Credit Agreement,
Pledgor shall deliver funds in such an amount for deposit in the Collateral
Account in accordance with Section 3(a). Upon any drawing under any outstanding
Letter of Credit in respect of which Pledgor has deposited in the Collateral
Account any amounts described above, Secured Party shall apply such amounts to
reimburse the Issuing Lender for the amount of such drawing. In the event the
amount on deposit in the Collateral Account exceeds the maximum amount available
to be drawn under all Letters of Credit, Secured Party shall apply the excess in
accordance with subsection 2.4C of the Credit Agreement.
(c) In accordance with subsection 2.4A(iv)(b) of the Credit
Agreement, Secured Party shall from time to time deposit into the Collateral
Account any Deferred Prepayment Amount (as defined in such subsection) received
from Pledgor. Secured Party shall apply any such Deferred Prepayment Amounts to
prepay the applicable Eurodollar Rate Loans at the end of the Interest Periods
applicable thereto in accordance with subsection 2.4A(iv)(b) of the Credit
Agreement.
SECTION 4. PLEDGE OF SECURITY FOR SECURED OBLIGATIONS. Pledgor
hereby pledges and assigns to Secured Party, and hereby grants to Secured Party
a security interest in, all of Pledgor's right, title and interest in and to the
Collateral as collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all Secured Obligations.
SECTION 5. NO INVESTMENT OF AMOUNTS IN THE COLLATERAL ACCOUNT;
INTEREST ON AMOUNTS IN THE COLLATERAL ACCOUNT.
(a) Cash held by Secured Party in the Collateral Account shall not
be invested by Secured Party but instead shall be maintained as a cash deposit
in the Collateral Account pending application thereof as elsewhere provided in
this Agreement.
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<PAGE> 4
(b) To the extent permitted under Regulation Q of the Board of
Governors of the Federal Reserve System, any cash held in the Collateral Account
shall bear interest at the standard rate paid by Secured Party to its customers
for deposits of like amounts and terms.
(c) Subject to Secured Party's rights under Section 12, any
interest earned on deposits of cash in the Collateral Account in accordance with
Section 5(b) shall be deposited directly in, and held in the Collateral Account.
SECTION 6. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants as follows:
(a) Ownership of Collateral. Pledgor is (or at the time of
transfer thereof to Secured Party will be) the legal and beneficial owner of the
Collateral from time to time transferred by Pledgor to Secured Party, free and
clear of any Lien except for the security interest created by this Agreement.
(b) Perfection. The pledge and assignment of the Collateral
pursuant to this Agreement creates a valid and perfected First Priority security
interest in the Collateral in the Collateral Account from time to time, securing
the payment of the Secured Obligations.
(c) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Collateral is accurate and complete in all respects.
SECTION 7. FURTHER ASSURANCES. Pledgor agrees that from time to
time, at the expense of Pledgor, Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Secured Party may reasonably request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Pledgor will: (a) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby and (b) at Secured Party's request, appear in and defend any
action or proceeding that may affect Pledgor's beneficial title to or Secured
Party's security interest in all or any part of the Collateral.
SECTION 8. TRANSFERS AND OTHER LIENS. Pledgor agrees that it will
not (a) sell, assign (by operation of law or otherwise) or otherwise dispose of
any of the Collateral or (b) create or suffer to exist any Lien upon or with
respect to any of the Collateral, except for the security interest under this
Agreement.
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SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor
hereby irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Secured Party or otherwise, from time to time in Secured Party's discretion to
take any action and to execute any instrument that Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including
to file one or more financing or continuation statements, or amendments thereto,
relative to all or any part of the Collateral without the signature of Pledgor.
SECTION 10. SECURED PARTY MAY PERFORM. If Pledgor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13.
SECTION 11. STANDARD OF CARE. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral, it being understood that Secured Party shall
have no responsibility for (a) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Collateral) to preserve rights against any parties with
respect to any Collateral or (b) taking any necessary steps to collect or
realize upon the Secured Obligations or any guarantee therefor, or any part
thereof, or any of the Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Secured Party accords its own property of like kind.
SECTION 12. REMEDIES. Subject to the provisions of Section 3(b),
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies otherwise available to it, all the rights and remedies
of a secured party on default under the Uniform Commercial Code as in effect in
any relevant jurisdiction (the "CODE") (whether or not the Code applies to the
affected Collateral).
SECTION 13. INDEMNITY AND EXPENSES.
(a) Pledgor agrees to indemnify Secured Party and each Lender from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
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(b) Pledgor shall pay to Secured Party upon demand the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (ii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by Pledgor to perform or observe any of the provisions hereof.
(c) The provisions of this Section 13 shall survive any
termination of this Agreement.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Pledgor. Upon any
such termination Secured Party shall, at Pledgor's expense, execute and deliver
to Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and at
its expense, against receipt and without recourse to Secured Party, of such of
the Collateral as shall not have been otherwise applied pursuant to the terms
hereof.
SECTION 15. SECURED PARTY AS ADMINISTRATIVE AGENT.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5A of the Credit Agreement
shall also constitute notice of resignation as Secured Party under this
Agreement; removal of Administrative Agent pursuant to subsection 9.5A of the
Credit Agreement shall also
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constitute removal as Secured Party under this Agreement; and appointment of a
successor Administrative Agent pursuant to subsection 9.5A of the Credit
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement. Upon the acceptance of any appointment as Administrative Agent
under subsection 9.5A of the Credit Agreement by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Secured Party under this Agreement, and the retiring or removed Secured
Party under this Agreement shall promptly (i) transfer to such successor Secured
Party all sums held by Secured Party hereunder (which shall be deposited in a
new Collateral Account established and maintained by such successor Secured
Party), together with all records and other documents necessary or appropriate
in connection with the performance of the duties of the successor Secured Party
under this Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 16. AMENDMENTS; ETC. No amendment, modification,
termination or waiver of any provision of this Agreement, and no consent to any
departure by Pledgor therefrom, shall in any event be effective unless the same
shall be in writing and signed by Secured Party and, in the case of any such
amendment or modification, by Pledgor. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
SECTION 17. NOTICES. Unless otherwise specifically provided
herein, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, or upon receipt
of telefacsimile or telex or United States mail with postage prepaid. For the
purposes hereof, the address of each party hereto shall be as provided in
subsection 10.8 of the Credit Agreement.
SECTION 18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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SECTION 19. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 20. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 22. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ZILOG, INC.
By: /s/ RICHARD R. PICKARD
----------------------------------
Name: Richard R. Pickard
Title: Secretary
BANKBOSTON, N.A., AS SECURED PARTY
By: /s/ MAIA D. HEYMANN
--------------------------------
Name: Maia D. Heymann
Title: Vice President
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<PAGE> 1
EXHIBIT 10.13
COMPANY SECURITY AGREEMENT
This COMPANY SECURITY AGREEMENT (this "AGREEMENT") is dated as of
February 27, 1998 and entered into by and between ZILOG, INC., a Delaware
corporation ("GRANTOR"), and BANKBOSTON, N.A., as administrative agent for and
representative of (in such capacity herein called "SECURED PARTY") the financial
institutions ("LENDERS") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Secured Party, Lenders and Goldman Sachs Credit Partners L.P.,
as Arranger and Syndication Agent, have entered into a Credit Agreement dated as
of February 27, 1998 (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Grantor pursuant to which Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Grantor.
B. It is a condition precedent to the initial extensions of
credit by Lenders under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantor hereby agrees with Secured
Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured
Party, and hereby grants to Secured Party, for the benefit of Lenders, a
security interest in, all of Grantor's right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(the "COLLATERAL"):
(a) all inventory in all of its forms including (i) all goods held
by Grantor for sale or lease or to be furnished under contracts of service or so
leased or furnished, (ii) all raw materials, work in process, finished goods,
and materials used or consumed in the manufacture, packing, shipping,
advertising, selling, leasing, furnishing or production of such inventory or
otherwise used or consumed in Grantor's business, (iii) all goods in which
Grantor has an interest in mass or a joint or other interest or right of any
kind, and (iv) all goods which are returned to or repossessed by Grantor, and
all accessions thereto and products thereof (all such inventory, accessions and
products being the "INVENTORY") and all negotiable documents of title (including
warehouse receipts, dock
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receipts and bills of lading) issued by any Person covering any Inventory (any
such negotiable document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
(b) all rights to payments for goods sold or leased or for
services rendered no matter how evidenced, including but not limited to
accounts, contract rights, notes, drafts, acceptances, instruments and other
forms of obligations in accounts, whether or not earned by performance and all
rights in, to and under all security agreements, leases and other contracts
securing or otherwise relating to any such accounts, contract rights, notes,
drafts, acceptances, instruments or other forms of obligations in accounts (any
and all such accounts, contract rights, notes, drafts, acceptances, instruments
or other forms of obligations in accounts being the "ACCOUNTS", and any and all
such security agreements, leases and other contracts being the "RELATED
CONTRACTS"); and
(c) all proceeds, products, rents and profits of or from any and
all of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
The Collateral shall include, without limitation, all Inventory, Accounts,
Related Contracts and proceeds thereof relating to any of the copyrights listed
on Schedule 1 (it being understood that the copyrights listed on Schedule 1
shall not constitute Collateral hereunder).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section362(a)), of all obligations and
liabilities of every nature of Grantor now or hereafter existing under or
arising out of or in connection with the Credit Agreement and the other Loan
Documents and all extensions or renewals thereof, whether for principal,
interest (including interest that, but for the filing of a petition in
bankruptcy with respect to Grantor, would accrue on such obligations),
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT") and all obligations of every
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nature of Grantor now or hereafter existing under this Agreement (all such
obligations of Grantor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted under
the Credit Agreement and except for the security interest created by this
Agreement, Grantor owns the Collateral free and clear of any Lien. Except as
disclosed in the Credit Agreement, and except such as may have been filed in
favor of Secured Party relating to this Agreement, no effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office.
(b) Location of Inventory. All of the Inventory is, as of the date
hereof, located at the places specified in Schedule 4(b) annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of
Title are outstanding with respect to any of the Inventory.
(d) Office Locations; Other Names. The chief place of business,
the chief executive office and the office where Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date hereof,
located at 210 East Hacienda Avenue, Campbell, CA. Grantor has not in the past
done, and does not now do, business under any other name (including any
trade-name or fictitious business name).
(e) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of Collateral have
been delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
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(f) Perfection. This Agreement, together with the filing of UCC
financing statements describing the Collateral with the filing offices indicated
on Schedule 4(f) annexed hereto and filings with the United States Copyright
Office, creates a valid and perfected First Priority Lien (other than Liens
described in clause (vi) of the definition of Permitted Encumbrances) in all
Collateral in which a security interest may be perfected by the filing of a
financing statement, securing the payment of the Secured Obligations.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Grantor will:
(i) at the request of Secured Party, deliver and pledge to Secured Party
hereunder all promissory notes and other instruments (including checks) and all
original counterparts of chattel paper constituting Collateral, duly endorsed
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to Secured Party, (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iii) at any reasonable time, upon prior
reasonable request by Secured Party, exhibit the Collateral to and allow
inspection of the Collateral by Secured Party, or persons designated by Secured
Party, and (iv) at Secured Party's request, appear in and defend any action or
proceeding that may affect Grantor's title to or Secured Party's security
interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees that
a carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and may
be filed as a financing statement in any and all jurisdictions.
(c) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
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SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity
or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts and all originals
of all chattel paper that evidence Accounts;
(d) if Secured Party gives value to enable Grantor to acquire
rights in or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Grantor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed against
Grantor or any of the Collateral as a result of the failure to make such
payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO INVENTORY. Grantor
shall keep all Inventory located in the United States at the places therefor
specified on Schedule 4(b) annexed hereto and at such other places in
jurisdictions where all action necessary, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Inventory shall have been taken, except to the extent Inventory
may be in transit between such places or may be shipped to a jurisdiction
outside of the United States in the ordinary course of business.
SECTION 8. INSURANCE. Grantor shall, at its own expense, maintain
insurance with respect to the Inventory in accordance with the terms of the
Credit Agreement.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location
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therefor specified in Section 4 or, upon 30 days' prior written notice to
Secured Party, at such other location in a jurisdiction where all action that
may be necessary or desirable, or that Secured Party may request, in order to
perfect and protect any security interest granted or purported to be granted
hereby, or to enable Secured Party to exercise and enforce its rights and
remedies hereunder, with respect to such Accounts and Related Contracts shall
have been taken. Grantor will hold and preserve such records and chattel paper
and will permit representatives of Secured Party upon prior and reasonable
notice to Grantor during normal business hours to inspect and make abstracts
from such records and chattel paper, and Grantor agrees to render to Secured
Party, at Grantor's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto. Promptly upon the request of
Secured Party, Grantor shall deliver to Secured Party complete and correct
copies of each Related Contract.
(b) Except as otherwise provided in this subsection (c), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, shall take)
such action as Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; provided,
however, that Secured Party shall have the right at any time, upon the
occurrence and during the continuation of an Event of Default and upon written
notice to Grantor of its intention to do so, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Secured Party
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Grantor thereunder directly to Secured Party, to notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Secured Party and, upon such notification and at the expense of
Grantor, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as Grantor might have done. After receipt by Grantor of the notice from
Secured Party referred to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including checks and other instruments) received by
Grantor in respect of the Accounts and the Related Contracts shall be received
in trust for the benefit of Secured Party hereunder, shall be segregated from
other funds of Grantor and shall be forthwith paid over or delivered to Secured
Party in the same form as so received (with any necessary endorsement) to be
held as cash Collateral and applied as provided by Section 15, and (ii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 10. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
or
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(b) except for the security interest created by this Agreement or
pursuant to clause (vi) of the definition of Permitted Encumbrances, create or
suffer to exist any Lien upon or with respect to any of the Collateral to secure
the indebtedness or other obligations of any Person.
SECTION 11. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor
hereby, upon the occurrence and during the continuance of an Event of Default,
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including:
(a) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a)
and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Secured
Party in its sole discretion, any such payments made by Secured Party to
become obligations of Grantor to Secured Party, due and payable
immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantor's expense, at
any time or from time to time, all
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acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein
in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
SECTION 12. SECURED PARTY MAY PERFORM. If Grantor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 16.
SECTION 13. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 14. REMEDIES. If any Event of Default shall have occurred
and be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (a) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (b) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (c) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) place custodians on Grantor's
premises for the purpose of taking any actions described in the preceding clause
(c), and (e) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any of
Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable. Secured Party or any
Lender may be the purchaser of any or all of the Collateral at any such sale and
Secured Party, as agent for and representative of Lenders (but not any Lender or
Lenders in its or their respective individual capacities unless Requisite
Lenders shall otherwise agree in writing), shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Secured Party at such sale.
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Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Grantor, and Grantor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice to
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
SECTION 15. APPLICATION OF PROCEEDS. All proceeds received by
Secured Party in respect of sale, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 2.4C of
the Credit Agreement.
SECTION 16. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Secured Party and each Lender from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's or such Lender's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (ii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by Grantor to perform or observe any of the provisions hereof.
(c) The provisions of this Section 16 shall survive any
termination of this Agreement.
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SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Grantor. Upon any
such termination Secured Party will, at Grantor's expense, execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence such
termination.
SECTION 18. SECURED PARTY AS ADMINISTRATIVE AGENT.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5A of the Credit Agreement
shall also constitute notice of resignation as Secured Party under this
Agreement; removal of Agent pursuant to subsection 9.5A of the Credit Agreement
shall also constitute removal as Secured Party under this Agreement; and
appointment of a successor Administrative Agent pursuant to subsection 9.5A of
the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5A of the Credit Agreement by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Secured Party under this Agreement, and
the retiring or removed Secured Party under this Agreement shall promptly (i)
transfer to such successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Secured Party under this Agreement, and (ii) execute and deliver to
such successor Secured Party such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such
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successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 19. AMENDMENTS; ETC. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 20. NOTICES. Any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, or upon receipt of telefacsimile or telex or United States mail
with postage prepaid. For the purposes hereof, the address of each party hereto
shall be as provided in subsection 10.8 of the Credit Agreement.
SECTION 21. FAILURE OF INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights or remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 22. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 23. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 24. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN
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ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
ZILOG, INC.
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
Title: Secretary
BANKBOSTON, N.A., AS SECURED PARTY
By: /s/ MAIA D. HEYMANN
-------------------------------------
Name: Maia D. Heymann
Title: Vice President
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EXHIBIT 10.14
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (this "AGREEMENT") is dated as
of February 27, 1998 and entered into by and among each of the undersigned
direct and indirect Subsidiaries of Zilog, Inc. ("COMPANY") (each of such
Subsidiaries being a "GRANTOR" and collectively, "GRANTORS"); provided, that
after the Closing Date, the "Grantors" shall include any Additional Grantors (as
hereinafter defined), and BANKBOSTON, N.A., as administrative agent for and
representative of (in such capacity herein called "SECURED PARTY") the financial
institutions ("LENDERS") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Secured Party, Lenders and Goldman Sachs Credit Partners,
L.P., as Arranger and Syndication Agent, have entered into a Credit Agreement
dated as of February 27, 1998 (said Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Zilog, Inc., a Delaware corporation,
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of February 27, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "GUARANTY") in favor of Secured Party for the benefit of Lenders,
pursuant to which Grantors have guarantied the prompt payment and performance
when due of all obligations of Company under the Credit Agreement and the other
Loan Documents.
C. It is a condition precedent to the initial extensions of
credit by Lenders under the Credit Agreement that Grantors shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantors hereby agree with Secured
Party as follows:
SECTION 1. GRANT OF SECURITY. Each Grantor hereby assigns to
Secured Party, and hereby grants to Secured Party, for the benefit of Lenders, a
security interest in, all of such Grantor's right, title and interest in and to
the following, in each case whether now or hereafter existing or in which such
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "COLLATERAL"):
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(a) all inventory in all of its forms owned by such Grantor
including (i) all goods held by such Grantor for sale or lease or to be
furnished under contracts of service or so leased or furnished, (ii) all raw
materials, work in process, finished goods, and materials used or consumed in
the manufacture, packing, shipping, advertising, selling, leasing, furnishing or
production of such inventory or otherwise used or consumed in such Grantor's
business, (iii) all goods in which such Grantor has an interest in mass or a
joint or other interest or right of any kind, and (iv) all goods which are
returned to or repossessed by such Grantor and all accessions thereto and
products thereof (all such inventory, accessions and products being the
"INVENTORY") and all negotiable documents of title (including warehouse
receipts, dock receipts and bills of lading) issued by any Person covering any
Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF
TITLE");
(b) all rights to payments for goods sold or leased or for
services rendered no matter how evidenced, including but not limited to
accounts, contract rights, notes, drafts, acceptances, instruments and other
forms of obligations in accounts, whether or not earned by performance and all
rights in, to and under all security agreements, leases and other contracts
securing or otherwise relating to any such accounts, contract rights, notes,
drafts, acceptances, instruments or other forms of obligations in accounts (any
and all such accounts, contract rights, notes, drafts, acceptances, instruments
or other forms of obligations in accounts being the "ACCOUNTS", and any and all
such security agreements, leases and other contracts being the "RELATED
CONTRACTS"); and
(c) all proceeds, products, rents and profits of or from any and
all of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
The Collateral shall include, without limitation, all Inventory,
Accounts, Related Contracts and proceeds thereof relating to any of the
copyrights listed on Schedule 1 (it being understood that the copyrights listed
on Schedule 1 shall not constitute Collateral hereunder).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and
the Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Grantor now or hereafter existing under or
arising out of or in connection with the Guaranty and all extensions or renewals
thereof, whether for principal, interest (including interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnities or
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otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender as
a preference, fraudulent transfer or otherwise and all obligations of every
nature of Grantors now or hereafter existing under this Agreement (all such
obligations of Grantors being the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to
the contrary notwithstanding, (a) each Grantor shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Secured
Party of any of its rights hereunder shall not release such Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) Secured Party shall not have any obligation or liability
under any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor
represents and warrants as follows:
(a) Ownership of Collateral. Except for the security interest
created by this Agreement, each Grantor owns the Collateral owned by such
Grantor free and clear of any Lien.
(b) Location of Inventory. All of the Inventory of such Grantor
is, as of the date hereof, located at the places specified in Schedule 4(b)
annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of
Title are outstanding with respect to any of the Inventory.
(d) Office Locations. The chief place of business, the chief
executive office and the office where such Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at the
locations set forth in Schedule 4(d) annexed hereto.
(e) Other Names. Such Grantor has not in the past done, and does
not now do, business under any other name (including any trade-name or
fictitious business name) except the names listed on Schedule 4(e) annexed
hereto.
(f) Perfection. This Agreement, together with the filing of UCC
financing statements describing the Collateral with the filing offices indicated
on Schedule 4(f)
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annexed hereto and filings with the United States Copyright Office, creates a
valid and perfected First Priority Lien (other than Liens described in clause
(vi) of the definition of Permitted Encumbrances) in all Collateral in which a
security interest may be perfected by the filing of a financing statement,
securing the payment of the Secured Obligations.
(g) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of Collateral have
been delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
SECTION 5. FURTHER ASSURANCES.
(a) Each Grantor agrees that from time to time, at the expense of
such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will: (i) at the request of Secured Party, deliver and
pledge to Secured Party hereunder all promissory notes and other instruments
(including checks) and all original counterparts of chattel paper constituting
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Secured Party,
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, (iii) at any
reasonable time, upon prior reasonable request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (iv) at Secured Party's request, appear
in and defend any action or proceeding that may affect such Grantor's title to
or Secured Party's security interest in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of any Grantor. Each
Grantor agrees that a carbon, photographic or other reproduction of this
Agreement or of a financing statement signed by a Grantor shall be sufficient as
a financing statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
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SECTION 6. CERTAIN COVENANTS OF GRANTOR. Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any
change in such Grantor's chief place of business, chief executive office or
residence or the office where such Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts;
(d) if Secured Party gives value to enable such Grantor to
acquire rights in or the use of any Collateral, use such value for such
purposes; and
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment entered or filed
against such Grantor or any of the Collateral as a result of the failure to make
such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO INVENTORY. Each
Grantor shall keep all Inventory located in the United States owned by such
Grantor at the places therefor specified on Schedule 4(b) annexed hereto and at
such other places in jurisdictions where all action that may be necessary in
order to perfect and protect any security interest granted or purported to be
granted hereby, or to enable Secured Party to exercise and enforce its rights
and remedies hereunder, with respect to such Inventory shall have been taken,
except to the extent Inventory may be in transit between such places or may be
shipped to a jurisdiction outside of the United States in the ordinary course of
business.
SECTION 8. INSURANCE. Each Grantor shall, at its own expense,
maintain insurance with respect to the Inventory owned by such Grantor in
accordance with the terms of the Credit Agreement.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 4 or, upon 30
days' prior written notice to Secured Party, at
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such other location in a jurisdiction where all action that may be necessary or
desirable, or that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Each
Grantor will hold and preserve such records and chattel paper and will permit
representatives of Secured Party upon prior and reasonable notice to Grantor
during normal business hours to inspect and make abstracts from such records and
chattel paper, and each Grantor agrees to render to Secured Party, at Grantor's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto. Promptly upon the request of Secured Party, each
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract.
(b) Except as otherwise provided in this subsection (c), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor under the Accounts and Related Contracts. In
connection with such collections, each Grantor may take (and, at Secured Party's
direction, shall take) such action as such Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Secured Party shall have the right
at any time, upon the occurrence and during the continuation of an Event of
Default and upon written notice to such Grantor of its intention to do so, to
notify the account debtors or obligors under any Accounts of the assignment of
such Accounts to Secured Party and to direct such account debtors or obligors to
make payment of all amounts due or to become due to such Grantor thereunder
directly to Secured Party, to notify each Person maintaining a lockbox or
similar arrangement to which account debtors or obligors under any Accounts have
been directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to Secured Party and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Accounts and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as such Grantor might have done. After
receipt by such Grantor of the notice from Secured Party referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
checks and other instruments) received by such Grantor in respect of the
Accounts and the Related Contracts shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
and applied as provided by Section 16, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
SECTION 10. TRANSFERS AND OTHER LIENS. No Grantor shall:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
or
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(b) except for the security interest created by this Agreement or
pursuant to clause (vi) of the definition of Permitted Encumbrances, create or
suffer to exist any Lien upon or with respect to any of the Collateral to secure
the indebtedness or other obligations of any Person.
SECTION 11. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each
Grantor hereby, upon the occurrence and during the continuance of an Event of
Default, irrevocably appoints Secured Party as Grantor's attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to obtain and adjust insurance required to be maintained by
such Grantor or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a) and (b)
above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of such Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and such Grantor's expense, at any time or from
time to time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
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SECTION 12. SECURED PARTY MAY PERFORM. If any Grantor fails to
perform any agreement contained herein, Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of Secured Party incurred
in connection therewith shall be payable by such Grantor under Section 16.
SECTION 13. STANDARD OF CARE. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 14. REMEDIES. If any Event of Default shall have occurred
and be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (a) require each Grantor to, and each Grantor hereby agrees that it will at
its expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it available to Secured
Party at a place to be designated by Secured Party that is reasonably convenient
to both parties, (b) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (c) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) place custodians on each
Grantor's premises for the purpose of taking any actions described in the
preceding clause (c), and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Lender may be the purchaser of any or all of the Collateral at any such sale
and Secured Party, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Secured Party at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute
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reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantor shall be liable for
the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
SECTION 15. APPLICATION OF PROCEEDS. All proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied as provided in
subsection 2.4C of the Credit Agreement.
SECTION 16. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify Secured Party and each
Lender from and against any and all claims, losses and liabilities in any way
relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including enforcement of this Agreement),
except to the extent such claims, losses or liabilities result solely from
Secured Party's or such Lender's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
(b) Grantors shall pay to Secured Party upon demand the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (ii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iii) the failure by any Grantor to perform or observe any of the provisions
hereof.
(c) The provisions of this Section 16 shall survive any
termination of this Agreement.
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon each Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect
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thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Grantors. Upon any such termination Secured Party will, at Grantors'
expense, execute and deliver to Grantors such documents as Grantors shall
reasonably request to evidence such termination.
SECTION 18. SECURED PARTY AS ADMINISTRATIVE AGENT.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5A of the Credit Agreement
shall also constitute notice of resignation as Secured Party under this
Agreement; removal of Administrative Agent pursuant to subsection 9.5A of the
Credit Agreement shall also constitute removal as Secured Party under this
Agreement; and appointment of a successor Administrative Agent pursuant to
subsection 9.5A of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under subsection 9.5A of the Credit
Agreement by a successor Administrative Agent, that successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this Agreement shall
promptly (i) transfer to such successor Secured Party all sums held by Secured
Party hereunder (which shall be deposited in a new Collateral Account
established and maintained by such successor Secured Party), together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 19. ADDITIONAL GRANTORS. The initial Grantors hereunder
shall be the Subsidiary of Company that is a signatory hereto on the date
hereof. From time to time subsequent to the date hereof, additional Subsidiaries
of Company may become parties hereto, as additional Grantors (each an
"ADDITIONAL GRANTOR"), by executing a counterpart of this Agreement
substantially in the form of Schedule 19 annexed hereto. Upon delivery
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of any such counterpart to Administrative Agent, notice of which is hereby
waived by Grantors, each such Additional Grantor shall be a Grantor and shall be
as fully a party hereto as if such Additional Grantor were an original signatory
hereof. Each Grantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
SECTION 20. AMENDMENTS; ETC. No amendment, modification,
termination or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by Secured Party and, in the case of any
such amendment or modification, by Grantors. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
SECTION 21. NOTICES. Any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, or upon receipt of telefacsimile or telex or United States mail
with postage prepaid. For the purposes hereof, the address of each party hereto
shall be as set forth under such party's name on the signature pages hereof or,
as to either party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of Secured Party in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 24. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 25. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND
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ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined. The rules of construction set forth in subsection 1.3 of the Credit
Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 26. COUNTERPARTS. This Agreement may be executed in one
or more counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the undersigned Grantors and Secured
Party have caused this Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first written
above.
ZILOG EUROPE
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
-----------------------------------
Title: Secretary
----------------------------------
Notice Address: 210 East Hacienda Avenue
-------------------------
Campbell, CA 95008
-------------------------
-------------------------
ZILOG TOA COMPANY
By: /s/ RICHARD R. PICKARD
-------------------------------------
Name: Richard R. Pickard
-----------------------------------
Title: Secretary
----------------------------------
Notice Address: 210 East Hacienda Avenue
-------------------------
Campbell, CA 95008
-------------------------
-------------------------
BANKBOSTON, N.A., AS SECURED PARTY
By: /s/ MAIA D. HEYMANN
-------------------------------------
Name: Maia D. Heymann
-----------------------------------
Title: Vice President
----------------------------------
Notice Address: 435 Tasso Street,
-------------------------
Suite 250
-------------------------
Palo Alto, CA 94301
-------------------------
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<PAGE> 1
EXHIBIT 10.15
AGREEMENT
This Agreement is made as of January 5, 1998 between TPG PARTNERS II, L.P.
("TPG"), a limited partnership and CURTIS J. CRAWFORD ("CRAWFORD").
R E C I T A L S
A. TPG has entered into agreements under which it has the right to
acquire all or substantially all of the outstanding capital stock of Zilog,
Inc., a corporation (the "COMPANY") and hopes to complete the acquisition of
such stock ("ACQUISITION") no later than March 31, 1998 (the "OUTSIDE DATE").
If the Acquisition is completed, TPG would like Crawford to become the
President and Chief Executive Officer ("CEO") of the Company.
B. Crawford plans to resign as President of the Microelectronics Group
of Lucent Technologies, Inc. ("EMPLOYER"), with such resignation to be
effective as of January 6, 1998 (the "EFFECTIVE DATE"). Crawford is willing to
enter into this Agreement and, if the Acquisitions is completed on or before
the Outside Date, to become CEO of the Company upon the terms herein.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. PAYMENT OF BONUSES.
1.1 ONE MILLION DOLLAR BONUS. TPG will cause the Company to pay to
Crawford the sum of One Million Dollars ($1,000,000.00) concurrently with the
completion of the Acquisition, if the Acquisition is completed by the Outside
Date. Such payment, subject only to such condition, is fully earned by Crawford
on the date hereof and not subject to any other condition, except as provided
in Sections 1.6 and 2.
1.2 EIGHT MILLION DOLLAR BONUS. TPG agrees to cause the Company to
pay an additional Eight Million Dollars ($8,000,000.00) to Crawford, together
with interest from the Effective Date until paid at the rate of eight percent
(8%) per annum, compounded annually (the "$8 MILLION BONUS"), on January 2,
2002 or, at Crawford's election, on the first to occur of the following events:
(i) change in control of the Company (as defined below); (ii) a "PUBLIC
OFFERING," which is the sale of any class of stock in the Company to the public
wherein the Company receives gross proceeds of at least $20 million (other than
a sale exclusively to then existing shareholders of the Company); and (iii) as
provided in Section 4.7 below. The parties agree that the foregoing amounts are
fully earned by Crawford as of the Effective Date and are not subject to any
condition or restriction, except as provided in Sections 1.6 and 2.
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<PAGE> 2
1.3 EFFECT OF DEATH, DISABILITY OR FAILURE OF THE ACQUISITION TO
OCCUR BY THE OUTSIDE DATE. In the event Crawford is prevented from serving as
CEO of the Company on account of his death or permanent disability (as defined
below) prior to the date of the Acquisition, or in the event the Acquisition is
not completed on or before the Outside Date. TPG will pay (or will cause the
Company to pay) Crawford or his estate, as the case may be, (i) within 30 days
after the Outside Date Two Million Dollars ($2,000,000), less any amounts paid
to Crawford pursuant to Section 1.1 above, plus (ii) on September 1, 1999, the
$8 Million Bonus, less any amounts paid to Crawford pursuant to Section 1.2
above.
1.4 EFFECT OF ADVERSE COURT ORDER.
(a) In the event the Acquisition is completed by the Outside Date but
Crawford is prevented from serving as CEO of the Company on account of a court
order, the parties shall cooperate and use their commercially reasonable efforts
to have such court order rescinded or terminated so that Crawford may serve as
CEO as contemplated hereunder. In the event that by December 31, 1998 (or such
earlier date as TPG shall reasonably determine, based on its determination (in
the exercise of its sole discretion) that the chances of causing such court
order to be rescinded or overturned are poor) [the "TERMINATION DATE"], the
parties are unable, despite having used such commercially reasonable efforts,
to have such court order rescinded or terminated so that Crawford may serve as
CEO of the Company, then (A) TPG shall pay, or shall cause the Company to pay
to Crawford: (i) within ten days after the Termination Date the sum of
$2,000,000, less any amount previously paid pursuant to Section 1.1 above; and
(ii) on September 1, 1999, the $8 Million Bonus, less any amount previously
paid pursuant to Section 1.2 above; and (B) neither the Company nor TPG will
have any obligation to cause Crawford, and Crawford will have no obligation, to
be employed by the Company. In the event that the commencement date of the
employment of Crawford by the Company is extended past the Outside Date by
reason of this paragraph, the dates of grant and exercisability of stock
options provided for herein shall be commensurately extended.
(b) Crawford hereby represents and warrants to TPG that, to the best
of his knowledge, after consultation with counsel, the execution, delivery and
performance of this Agreement do not violate any provision of any agreement
which Crawford has with the Employer. TPG acknowledges, however, that Crawford
has an obligation to the Employer not to disclose certain confidential
information, that Crawford intends to honor such obligation and that honoring
such obligation does not violate the foregoing representation and warranty made
by Crawford. TPG further acknowledges that Crawford is making no warranty or
representation to TPG or the Company concerning whether the "inevitable
disclosure" doctrine is applicable to the transactions contemplated herein.
1.5 MAXIMUM AMOUNTS PAYABLE. In no event shall Crawford be entitled to
receive, pursuant to this Section 1, payments in excess of Nine Million Dollars
($9,000,000), if
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<PAGE> 3
he becomes CEO of the Company, and Ten Million Dollars ($10,000,000) if he does
not, in each case plus interest on the $8,000,000 payment described above.
1.6 RETURN OF BONUSES. Notwithstanding Sections 1.1.1.2 and 4.7,
Crawford shall promptly return to TPG or the Company, as appropriate, all
payments made to him pursuant to this Section 1 and any shares of Company stock
issued to him pursuant to Section 4.3(a), and Crawford shall forfeit any
compensation and shares which have not been paid or delivered to him hereunder,
should the Acquisition be completed on or before the Outside Date and any of
the following occur:
(a) Within one year of the date hereof, Crawford both
terminates his employment with the Company pursuant to Section 4.7(e) below and
(without the written consent of the Company) becomes employed by the Employer
(other than an account of the acquisition of an interest in the Company by the
Employer); or
(b) Crawford is prevented from becoming CEO of the Company by
a court order initiated by the Employer and, within one year after the date
hereof, Crawford becomes employed by the Employer, without the written consent
of the Company; or
(c) Crawford refuses to become CEO of the Company on the terms
of this Agreement upon the completion of the Acquisition, assuming that he (i)
is not prevented from doing so by court order or (ii) has not died or become
severely disabled.
In addition, Crawford shall promptly return to the Company or TPG, as
appropriate, any portion of the $8 Million Bonus paid to him (and shall forfeit
any unpaid portion) if, after having been employed by the Company pursuant to
this Agreement, Crawford terminates this Agreement pursuant to Section 4.7(e)
below prior to January 1, 1999.
1.7 OTHER EMPLOYMENT. In the event that the Acquisition is not
consummated by the Outside Date, TPG and Crawford desire to negotiate in good
faith concerning additional potential employment opportunities for Crawford
with TPG or its portfolio companies, appropriately considering and giving
credit for the payments described in this Section 1 against bonus compensation
that might be paid to Crawford in connection with any such opportunity, it
being understood that Crawford shall in no event to be obligated to accept any
such opportunity, nor shall anything in this subsection 1.7 be deemed to be a
condition to the receipt by Crawford of any payment to which he is otherwise
entitled.
2. RESIGNATION FROM EMPLOYER: EFFECTIVENESS OF AGREEMENT. Crawford
plans to tender his resignation to Employer, effective on the Effective Date,
in consideration of this Agreement. The parties acknowledge that by resigning,
Crawford will forfeit considerable potential compensation, including certain
future stock option and restricted stock rights. The obligations of Crawford
herein, as well as his rights to receive the payments and other benefits of
this Agreement, are contingent upon his resignation from the Employer becoming
effective on or before the Effective Date.
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<PAGE> 4
3. EMPLOYMENT BY THE COMPANY; INTERIM ARRANGEMENTS.
3.1 EMPLOYMENT. If TPG completes the Acquisition by the Outside
Date, then:
(a) TPG shall cause Crawford to become CEO, and a member of the
Board of Directors, of the Company effective upon such completion;
(b) TPG shall cause the Company to adopt (and its Board of
Directors to approve) the employment of Crawford on all of the terms set
out in Section 4 below; and
(c) Crawford agrees to become the CEO of the Company and a
member of its Board of Directors, effective upon the completion of the
Acquisition, on all of the terms set out in Section 4 below.
3.2 INTERIM ARRANGEMENTS. From the Effective Date until the later
of (i) the earlier of the completion of the Acquisition by TPG or the Outside
Date or (ii) if Section 1.4 is applicable, the Termination Date:
(a) Crawford agrees to assist TPG at its expense (including
travel, lodging and the like) in completing the Acquisition, including by
assisting in fund raising therefor;
(b) TPG agrees to cause the Company to pay Crawford an amount
equal to $66,667.00 per month, prorated for partial months, payable on the
first and 15th day of each month, or payable in such other fashion as may be
mutually acceptable to the parties; and
(c) TPG agrees to cause the Company to pay or reimburse
Crawford for the cost to Crawford, with respect to such period, of COBRA
benefits and a continuation of his existing life insurance benefits with the
Employer which Crawford elects to obtain.
In the event the Acquisition is not completed by the Outside Date, TPG shall
pay the amounts in clauses (b) and (c) above.
3.3 NON-PAYMENT OF EMPLOYER BONUS. Crawford is entitled to receive
a bonus of $350,000 from the Employer on January 15, 1998. If the Employer does
not pay all of such bonus, TPG will pay Crawford fifty percent (50%) of that
portion which the Employer does not pay, no later than the Outside Date.
4. TERMS OF THE EMPLOYMENT AGREEMENT. The employment agreement between
the Company and Crawford shall have the following terms:
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<PAGE> 5
4.1 POSITION/TITLE/JOB DESCRIPTION. Crawford will be the President
and Chief Executive Officer of the Company and shall report only to the Board
of Directors. He shall have such responsibilities and authority as are
customarily held by chief executive officers of corporations comparable to the
Company. Crawford will devote his full business time to his duties and
responsibilities as an employee, officer and director of the Company, except as
provided in Section 4.8 below.
4.2 TERM. The term shall be five years. Crawford's employment with
the Company shall commence no later than the Outside Date unless extended as
contemplated in Section 1.4 and shall end on the fifth anniversary of the date
of commencement (the "Scheduled Termination Date").
4.3 COMPENSATION. As compensation, Crawford shall receive:
(a) 50,000 shares of the voting common stock of the Company on
each of May 1, 1998, 1999, 2000 and 2001 (a total of 200,000 shares). Such
shares shall become fully deliverable (all 200,000 shares) and vested on
the earliest to occur of (i) a change in the control of the Company (as
defined below), (ii) Crawford ceasing to be employed by the Company for
any reason, or (iii) a Public Offering.
(b) Within 30 days after completion of the Acquisition, the
Company will grant Crawford options, in form reasonably satisfactory to
Crawford, to purchase an additional 1,000,000 shares of the voting common
stock of the Company (subject to restrictions on exercise as provided
below) and which expire ten years after the date of the grant of the
options. The exercise price for 500,000 shares of such stock shall be $5
per share and the exercise price for the other 500,000 shares shall be $10
per share. The options shall become exercisable in accordance with the
following schedule, provided that Crawford is employed by the Company on
the date set forth in the schedule for exercise. Notwithstanding the
foregoing, the options shall become immediately exercisable upon the
occurrence of any of the events described in Sections 4.7(b), (c), (d),
(f) and (g) and Section 4.10, or in the event of a Public Offering.
<TABLE>
<CAPTION>
DATE OF VESTING # SHARES PRICE PER SHARE
<S> <C> <C>
Completion of the Acquisition 125,000 1/2 @ $5
(if by the Outside Date) 1/2 @ $10
December 31, 1998 125,000 1/2 @ $5
1/2 @ $10
End of each calendar quarter of 62,500 1/2 @ $5*
1999, 2000 and 2001 1/2 @ $10*
Total: 1,000,000 *(on pari pasu basis)
</TABLE>
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<PAGE> 6
The number of shares of common stock set out in clauses (a) and (b)
above have been arrived at based on Exhibit "A" hereto, and to the extent the
capital structure of the Company on the date of the Acquisition differs from
the assumptions set out in Exhibit "A" hereto, the number of shares of common
stock and options provided to Crawford under clauses (a) and (b) above shall be
adjusted in an equitable manner to take into account such differences. With
respect to all Company stock held by Crawford from time to time, the Company
will provide to Crawford "piggyback" registration rights and, upon request of
Crawford no later than February 1, 2001 (i) the right to cause the Company to
register such stock on May 1, 2001, or (ii) at the Company's option in lieu of
the obligation to so register, the payment by the Company to Crawford of the
appraised fair market value of Crawford's shares of common stock of the Company
on such date, without any discount for the fact that such stock is illiquid and
represents a minority holding in the Company. The appraisal shall be performed
by a single investment banking firm selected by both parties, acting
reasonably, the cost for which will be borne by the Company. If such shares or
any portion thereof are registered, the Company shall pay all costs of
registration, although Crawford shall be subject to the underwriters' discount.
All Company stock held by Crawford or which he is entitled to purchase shall be
subject to the antidilution provisions set out in Exhibit "B" attached hereto.
(c) Base salary of at least $800,000 per year, payable in
equal monthly installments.
(d) The $8,000,000 Bonus.
(e) An annual bonus of at least $600,000 for 1998, which
shall be deemed earned and paid in January, 1999. The Board of Directors may
elect to award a larger bonus for 1998 in its discretion, based on Crawford's
performance.
The Board of Directors of the Company will establish target bonuses for
Crawford each year during the term of the employment agreement, each of which
shall be a minimum of $600,000. Crawford shall be considered each year for
increases in both his salary and target bonuses, as well as for the grant of
additional stock options, in each case based on Crawford's performance.
4.4 BOARD MEMBERSHIP. Crawford shall at all times during the term
of the employment agreement be a member of the Board of Directors of the
Company and shall serve on each committee concerned with the strategic
direction of the Company.
4.5 LOCATION; RELOCATION.
(a) Crawford will relocate from his New Jersey home to a
home selected by him in Northern California. Crawford shall perform his
obligations to the Company from a base in Northern California, and shall not be
required to relocate again
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<PAGE> 7
during the term of the employment agreement, although he shall travel as the
job requires.
(b) The Company will pay the following relocation expenses
incurred by Crawford in connection with his move to California, all of which
shall be "grossed up" so there will be no after-tax consequences to Crawford
of having received the following relocation benefits:
(i) Crawford's reasonable relocation costs to
California, including moving costs;
(ii) The cost of appropriate temporary quarters for
Crawford and his immediate family, in California, from the date of his
employment with the Company until he moves into a new home in California, but
no later than December 31, 1998;
(iii) Travel to and from California and New Jersey,
and lodging, meals and related expenses for Crawford and his immediate family
until he moves into a permanent home in California, and for a period of two
years from the date hereof, reasonable travel for his immediate family to and
from New Jersey; and
(iv) The Company will cause Crawford's New Jersey
home to be bought for its appraised value (as determined by an independent
appraiser mutually agreed upon by the parties) no later than six (6) months
after the date Crawford puts the home on the market. If Crawford sells his
house in an arms' length transaction with the consent of the Company for less
than such amount before that time, the Company shall pay him the difference
between such appraised value and the proceeds of sale.
4.6 BENEFITS.
Crawford will enjoy the following benefits:
(a) Medical, dental, life and disability insurance and
coverage in amounts and coverage at least equivalent to that which is customary
for chief executive officers in the Company's industry. Should such amounts and
coverage, in any area, be materially less, or cost Crawford materially more,
than the amounts and coverage Crawford currently enjoys with the Employer, the
Company will at Crawford's election provide him with the equivalent coverage
and amounts, and at the same cost to Crawford, as he enjoyed with the Employer,
but only if, in the Company's reasonable judgment, the extra cost of doing so
is not excessive and the providing of such extra benefits does not unduly
disrupt the continuity or effectiveness of similar benefits made available to
other senior executives of the Company. Evidence of insurability shall be
waived, although Crawford will agree to a standard physical examination.
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<PAGE> 8
(b) The Company will acquire a suitable automobile for Crawford
during the term of the employment agreement and will replace it with
a new automobile once every two years. The Company will pay all
reasonable expenses associated with the automobile, including
liability insurance.
(c) The Company will provide customary directors' and officers'
liability insurance for Crawford, the other members of the Board of
Directors and the other executives of the Company, and will provide
an indemnity of Crawford with respect to his activities on behalf of
the Company in the form of Exhibit "C" attached hereto.
(d) The Company will purchase for Crawford from the Employer
Crawford's home computer system and assist Crawford in integrating
the system with the computer systems of the Company.
(e) The Company will adopt (and the Board of Directors will
approve) retirement, incentive and savings plans for its senior
executives which are recommended by Crawford and reasonably
acceptable to the Board of Directors, and Crawford will be entitled
to participate fully in such plans on the same basis as other senior
executives.
(f) Crawford will be entitled to four weeks of paid vacation
each year, with the unlimited right to carry over unused vacation
days, and sick days and similar benefits consistent with policy
applicable to other senior executives of the Company.
(g) The Company will pay or reimburse Crawford's reasonable
expenses incurred in promoting the business of the Company and in
attending professional and educational events which are reasonably
related to the business of the Company. Such expenses may include, at
Crawford's election, initiation payments and dues at such clubs as
Crawford shall reasonably request.
(h) The Company will create such qualified and non-qualified
stock option plans for its senior executives and others as are
recommended by Crawford and reasonably acceptable to the Board of
Directors, and Crawford shall be entitled to participate fully in
the award of options under such plans on the same basis as other
senior executives of the Company.
4.7 TERMINATION.
The employment agreement described in this Section 4 will be subject
to termination prior to the Scheduled Termination Date in the following
circumstances:
(a) For "cause" by the Company (as defined below), in which
case Crawford shall be paid his base salary earned prior to the date of
termination, and all
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<PAGE> 9
stock options which have not become exercisable shall immediately expire
as of the commencement of business on the date of termination. In
addition, all stock options which are exercisable on the date of
termination must be exercised within six months after the date of
termination; otherwise, they shall be void.
(b) Prior to April 1, 1999, without cause by the Company, in
which event the Company shall, as a condition to termination, pay Crawford
an amount equal to $2,400,000 (three times his base salary), plus
$1,800,000 (three times his first year's minimum bonus). In addition, all
stock options held by Crawford which have not become exercisable will
automatically become exercisable in full, and both those stock options and
any other stock options Crawford holds shall remain exercisable until the
later of (A) December 31, 2004 or (B) the earlier of (i) ten years from
the date of grant or (ii) a Public Offering of voting common stock of the
Company after the date of termination.
(c) After April 1, 1999, without cause by the Company, in which
event the Company shall, as a condition to termination, pay Crawford an
amount equal to two times the base salary (but based on a base salary of
no less than $800,000) earned by Crawford during the preceding twelve
months plus two times the last bonus (but based on a bonus of no less than
$600,000) earned by Crawford. In addition, all stock options held by
Crawford which have not become exercisable will automatically become
exercisable in full, and both those stock options and any other stock
options Crawford holds shall remain exercisable until the later of (A)
December 31, 2004 or (B) the earlier of (i) ten years from the date of
grant or (ii) a Public Offering of voting common stock of the Company
after the date of termination.
(d) For "good reason" by Crawford, which means that the Company
has committed a material breach of this agreement and has not cured such
breach within 30 days after notice of such breach from Crawford. In such
event, the Company shall make the same payments to Crawford as are set
forth in paragraph (b) above, and the other provisions of paragraph (b)
shall apply, in the event the termination is effective prior to April 1,
1999; otherwise, the Company shall make the same payments to Crawford as
are set forth in paragraph (c) above, and the other provisions of paragraph
(c) shall apply.
(e) By Crawford for any reason, in which case Crawford shall be
paid his unpaid salary earned prior to the date of termination, and all
stock options which were exercisable immediately prior to such date of
termination shall remain exercisable until 24 months after the date of
termination. All stock options which were not exercisable at the date of
termination shall lapse, and Crawford shall have no right to exercise them
at any time.
(f) On Crawford's death, in which case all base salary earned
to date but unpaid shall be paid, together with a bonus equal to the prior
year's bonus (or, if
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<PAGE> 10
applicable, the 1998 bonus), prorated for the year of death. All stock
options of Crawford which have not become exercisable will be
automatically exercisable in full, and both those options and any other
stock options Crawford holds shall remain exercisable until the later of
the dates set forth in subclauses (A) and (B) of clause (c) above.
(g) On Crawford's permanent disability (i.e., his inability
to perform his material responsibilities to the Company for a period of six
consecutive months), Crawford shall be entitled to the benefits in section
4.6(a) for a period of five years thereafter and shall be further entitled
to the same benefits as in Section 4.7(f).
In addition to the above payments and provisions, and to the extent
not inconsistent therewith, on Crawford ceasing to be an employee of the
Company, Crawford shall be entitled to such payouts and benefits under the then
existing Company retirement and other fringe benefit programs as are normally
provided by the Company to its senior level employees in similar circumstances.
Lastly, the $8 Million Bonus (including accrued interest to the date of
payment) shall, at the option of Crawford, become due and payable in full on
the later of the date of termination or September 1, 1999, in the event of a
termination pursuant to this Section 4.7, provided, that this sentence shall
apply to a termination pursuant to Section 4.7(e) only if, on the later of the
date of termination or September 1, 1999, the Company can pay such amount
without violating the provisions of any lending agreement it then has with an
institutional lender unaffiliated with TPG. If such amount cannot be paid on
such date for that reason, the Company shall pay such amount as soon as
possible, but in no event later than January 2, 2002.
4.8 OTHER ACTIVITIES. Crawford shall be entitled to serve on the
Boards of Directors of other companies and in civic, cultural, philanthropic
and professional organizations, so long as such service does not detract from
Crawford's performance of his obligations to the Company. Without limiting the
generality of the foregoing, Crawford shall be entitled to serve on the Boards
of Directors of the three companies upon whose boards he currently serves;
i.e., Lyondell Petrochemical Company, I-Stat Corporation and ITT Industries,
Inc. Crawford is currently considering whether to resign from one of such
boards and to serve on the Dupont board. Except as described in this Section
4.8, without the consent of the Company's Board of Directors, Crawford shall
not provide any services to any other entity during the terms of the employment
agreement.
4.9 NO OFFSET; EXCISE TAX.
(a) The payments and other consideration to Crawford under this
Agreement shall be made without offset or deduction of any kind by the
Company, except customary deductions for taxes and other deductions
required by law.
(b) The amounts to which Crawford is entitled hereunder shall
be increased to the extent necessary to pay (i) any excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE")
on any portion of the compensation or benefits payable to Crawford in
connection with a change in control of
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<PAGE> 11
the Company (as defined below) and (ii) any such excise tax and any other
taxes imposed by the Code or under state or local law on the payments
provided for in this subsection 4.9(b). Crawford and the Company agree to
reasonably cooperate to mitigate the amount of any such tax that might
become payable. The Company shall pay to Crawford the payments, or portions
thereof, provided for in this subsection 4.9(b) not later than fifteen (15)
days prior to the date on which such taxes, or portions thereof, are due as
determined by the tax counsel referred to below. Tax counsel selected by
the Company and reasonably acceptable to Crawford shall determine whether
the increase provided for by this subsection 4.9(b) shall be required,
based on the actual tax rates to which Crawford is subject at the time.
Crawford shall provide such counsel with such information as such counsel
reasonably requests in connection with such determination. All
determinations of tax counsel shall be binding on Crawford and the Company.
Tax counsel shall determine that payments shall be increased only if, and
to the extent that, it is more likely than not that the payments or
benefits are subject to a tax. In making the determinations required by
this subsection 4.9(b), tax counsel may rely on benefit consultants,
accountants or other experts. The Company agrees to pay all reasonable fees
and expenses of such tax counsel. If, subsequent to the payment to Crawford
of payments pursuant to this subsection 4.9(b), the tax counsel referred to
in this Section 4.9(b) reasonably determines that the amount of the
payments paid pursuant to this subsection 4.9(b) are greater than, or less
than, the amount required to have been paid, Crawford shall reimburse the
Company an amount, or the Company shall pay to Crawford an additional
amount, respectively, based upon such determination. In the event that tax
counsel referred to in this subsection 4.9(b) reasonably determines that
Crawford is required to pay excise tax, interest or penalties to a
governmental taxing authority as a result of his non-payment of taxes where
such tax counsel had determined that such taxes need not be paid, the
Company shall pay to Crawford an additional amount equal to (i) the amount
of such interest and/or penalties, (ii) the excise tax which was not paid
and (iii) any excise tax and any other taxes imposed by the Code or under
state or local law on the payments provided for in this sentence.
4.10 CHANGE IN CONTROL. Should there be a change in control of the
Company (as defined below) during the term of this Agreement (other than on
account of a Public Offering), at Crawford's election within one year after
such event, such event will be deemed to be a termination of Crawford without
cause, in which case the provisions of Section 4.7(c) shall apply.
4.11 RESTRICTIVE COVENANT.
(a) Crawford agrees not to disclose during the period of
employment to any person not employed by the Company or as Crawford's legal
counsel confidential information concerning the Company, including without
limitation any inventions, processes, methods of distribution or customers' or
Company trade secrets. At any time when he is not employed by the Company,
Crawford agrees not to disclose to any person not employed by the Company or as
Crawford's legal counsel trade secrets of the
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<PAGE> 12
Company which he learned while employed by the Company, except as consented
to by the Company in writing. This clause (a) shall not preclude Crawford
from use or disclosure of (i) non-proprietary or non-confidential
information, (ii) confidential information concerning the Company in the
conduct of Crawford's responsibilities hereunder or required by law or
court order or (iii) information which is available to or known by the
public.
(b) The parties hereto hereby declare that it is impossible to
measure in money the damages which will accrue to the Company by reason of
a failure by Crawford to perform any of his obligations under this Section
4.11. Accordingly, if the Company institutes any action or proceeding to
enforce the provisions hereof, to the extent permitted by applicable law,
Crawford hereby waives the claim or defense that the Company has an
adequate remedy at law, and Crawford shall not urge in any such action or
proceeding the claim or defense that any such remedy at law exists.
(c) The restrictions in this Section 4.11 shall be in addition to any
restrictions imposed on Crawford by statute or at common law.
5. ANNOUNCEMENT; CONFIDENTIALITY. TPG and Crawford shall jointly
announce the existence of this Agreement and shall agree on all press releases
and information given to the media regarding this Agreement and Crawford's
leaving the Employer. Otherwise, the provisions of this Agreement shall be kept
strictly confidential by Crawford and TPG and shall not be revealed to any
other person by either of them except (i) as required by law, (ii) to legal and
financial advisors; (iii) to the Company's Board of Directors after the
acquisition is completed, and (iv) as mutually agreed as necessary in
connection with the Company's business.
6. LITIGATION WITH EMPLOYER. In the unlikely event that the Employer (i)
contests Crawford's right to enter into, or carry out his obligations under,
this Agreement (including becoming employed by the Company), or (ii) attempts,
on account of this Agreement or Crawford's employment by the Company, to (A)
recover the value of options covering the stock of the Employer or its parent
which have been exercised by Crawford prior to the date hereof or (B) deny to
Crawford the benefit of any deferred compensation or non-qualified retirement
benefits to which Crawford is entitled pursuant to the terms of such plan or
arrangement, then TPG agrees that it will at its expense provide legal counsel
reasonably acceptable to Crawford to represent Crawford in connection with any
discussions, litigation or other proceeding in connection therewith.
7. PREPARATION FEES. TPG agrees to pay, or reimburse Crawford for, the
reasonable expenses incurred by Crawford in negotiating and documenting this
Agreement and the Shareholders' Agreement described in Section 10 below,
including the reasonable fees and costs of attorneys and consultants.
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<PAGE> 13
8. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and may be amended
solely by a written instrument executed by both parties. The payments and other
consideration to Crawford under this Agreement shall be made without offset or
deduction of any kind. This Agreement is binding upon and shall be enforceable
by the parties hereto and their respective heirs, successors and assigns, and
shall be construed in accordance with and governed by the laws of California,
without regard to conflict of law principles. In the event of litigation or any
other proceeding between the parties, or Crawford and the Company, arising from
or pertaining to this Agreement or the employment agreement, the prevailing
party in such litigation or other proceeding shall be entitled to recover from
the non-prevailing party the prevailing party's reasonable attorneys' fees,
costs and expenses (not limited to taxable costs) including all expenses of
experts, appeal and actions to enforce awards. This Agreement may be executed in
counterparts, including by the exchange of facsimile signature pages containing
the signatures of one or both parties, and each counterpart so executed and
delivered shall constitute the same agreement.
9. DEFINITIONS.
(a) "Cause" shall mean (i) the willful and continued failure of
Crawford substantially to perform his duties and responsibilities under
this Agreement (other than by reason of permanent disability or death),
after the Board of Directors of the Company delivers to Crawford written
demand for substantial performance that identifies the manner in which the
Board of Directors believes that Crawford has not substantially performed
hereunder, and the failure of Crawford to cease such willful and continued
failure within 30 days after having received such demand and (ii)
conviction of a felony involving moral turpitude.
(b) "Change in control" of the Company shall mean the occurrence of
any of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions, directly
or indirectly) of all or substantially all of the assets of the Company to
any Person or group of related persons for purposes of Section 13(d) of the
Securities Exchange Act of 1934 (a "Group"), together with any affiliates
thereof (other than to TPG or any of its affiliates, unless the transfer to
TPG and its affiliates is part of a larger transaction which would
otherwise cause a change in control to occur); (ii) the approval by the
holders of capital stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iii) any Person or Group (other
than TPG or its affiliates) shall become the owner, directly or indirectly,
beneficially or of record of shares representing more of the aggregate
voting power of the issued and outstanding stock entitled to vote in the
elections of directors (the "VOTING STOCK") of the Company than TPG and its
affiliates own, directly or indirectly, beneficially or of record; (iv) the
replacement of a majority of the Board of Directors of the Company over a
two-year period from the directors who constituted the Board of Directors
of the Company at the beginning of such two-year period and such
replacement shall not have been approved by a vote of at least a majority
of the Board of Directors of the Company then still in office who either
were members of such Board of Directors at
-13-
<PAGE> 14
the beginning of such two-year period or whose election as a member of
such Board of Directors was previously so approved or who were nominated
by, or designees of, TPG or its Affiliates; (v) any person or Group other
than TPG or its affiliates shall have acquired the power to elect a
majority of the members of the Board of Directors of the Company; or (vi)
a merger or consolidation of the Company with another entity in which
holders of the common stock of the Company immediately prior to the
consummation of the transaction hold, directly or indirectly, immediately
following the consummation of the transaction less than 50% of the common
equity interest in the surviving corporation in such transaction.
(c) "Person" shall mean any individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint
venture, or a governmental agency or political subdivision thereof.
10. SHAREHOLDERS AGREEMENT. TPG has furnished Crawford with a
proposed shareholders' agreement between TPG and certain other persons who
will be shareholders (other than Crawford) of the Company immediately
following completion of the Acquisition. Crawford agrees to review such
agreement carefully, and TPG and Crawford agree to negotiate in good faith
with a view to making Crawford a party to the shareholders' agreement, on
the same basis as Warburg Pincus, on the date the Acquisition is completed.
If Crawford becomes a party, the parties anticipate that the registration
rights of Crawford contained in Section 4.3(b) above and the antidilution
rights described in Exhibit "B" hereto would be superceded by the
shareholders' agreement.
-14-
<PAGE> 15
11. SEVERABILITY. Following the completion of the Acquisition, each
party agrees to consider in good faith whether to sever this Agreement into
two separate agreements, one containing essential terms of employment and the
other containing the other terms contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TPG PARTNERS II, L.P.
By: TPG GenPar II,L.P.
its general partner
By: TPG Advisors II, Inc.
its general partner
By: /s/ DAVID M. STANTON
------------------------------------
David M. Stanton
Vice President
/s/ CURTIS J. CRAWFORD
----------------------------------------
CURTIS J. CRAWFORD
-15-
<PAGE> 1
EXHIBIT 10.16
* * * * * * * * * * * * * * * * *
LEASE
* * * * * * * * * * * * * * * * *
Between
ZILOG, INC.
(Tenant)
and
CARRAMERICA REALTY CORPORATION
(Landlord)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. LEASE AGREEMENT ............................................... 3
2. RENT .......................................................... 5
A. Types of Rent ........................................... 5
B. Payment of Operating Cost Share Rent and Tax Share Rent.. 5
C. Definitions ............................................. 6
D. Computation of Base Rent and Rent Adjustments ........... 10
3. PREPARATION AND CONDITION OF PREMISES; TENANT'S POSSESSION
AND MAINTENANCE OF PREMISES ................................... 11
A. Condition of Premises ................................... 11
B. Tenant's Possession ..................................... 11
4. PROJECT SERVICES .............................................. 12
A. Heating and Air Conditioning ............................ 12
B. Elevators ............................................... 12
C. Electricity ............................................. 12
D. Water ................................................... 12
E. Janitorial Service ...................................... 12
F. Interruption of Services ................................ 13
5. ALTERATIONS AND REPAIRS ....................................... 13
A. Landlord's Consent and Conditions ....................... 13
B. Repairs ................................................. 14
C. No Liens ................................................ 15
D. Ownership of Improvements ............................... 16
E. Removal at Termination .................................. 16
6. USE OF PREMISES ............................................... 16
A. Limitation on Use ....................................... 16
B. Signs ................................................... 17
C. Parking ................................................. 17
D. Prohibition Against Use of Roof and Structure of Building 18
E. Common Area ............................................. 18
F. Keys and Access Cards ................................... 18
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES .................. 19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE .................. 19
A. Waiver of Claims .......................................... 19
B. Indemnification ........................................... 19
C. Tenant's Insurance ........................................ 19
D. Insurance Certificates .................................... 21
E. Landlord's Insurance ...................................... 21
9. FIRE AND OTHER CASUALTY ....................................... 21
A. Termination ............................................... 21
B. Restoration ............................................... 21
10. EMINENT DOMAIN ............................................... 22
11. RIGHTS RESERVED TO LANDLORD .................................. 22
A. Name ...................................................... 22
B. Signs ..................................................... 22
C. Window Treatments ......................................... 22
D. Keys ...................................................... 23
E. Access .................................................... 23
F. Preparation for Reoccupancy ............................... 23
G. Heavy Articles ............................................ 23
H. Show Premises ............................................. 23
I. Relocation of Tenant ...................................... 23
J. Use of Lockbox ............................................ 23
K. Repairs and Alterations ................................... 23
L. Landlord's Agents ......................................... 24
M. Building Services ......................................... 24
N. Other Actions ............................................. 24
12. TENANT'S DEFAULT ............................................. 24
A. Rent Default .............................................. 24
B. Assignment/Sublease or Hazardous Substances Default ....... 24
C. Other Performance Default ................................. 24
D. Credit Default ............................................ 24
E. Abandonment Default ....................................... 25
13. LANDLORD REMEDIES ............................................ 25
14. SURRENDER .................................................... 27
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
15. HOLDOVER ..................................................... 27
16. SUBORDINATION TO GROUND LEASES AND MORTGAGES ................. 27
A. Subordination ............................................. 27
B. Termination of Ground Lease or Foreclosure of Mortgage .... 28
C. Security Deposit .......................................... 28
D. Notice and Right to Cure .................................. 28
E. Definitions ............................................... 28
17. ASSIGNMENT AND SUBLEASE ...................................... 29
A. In General ................................................ 29
B. Landlord's Consent ........................................ 29
C. Procedure ................................................. 29
D. Permitted Transfers to Affiliates ......................... 30
E. Excess Payments ........................................... 30
F. Recapture ................................................. 30
18. CONVEYANCE BY LANDLORD ....................................... 30
19. ESTOPPEL CERTIFICATE ......................................... 31
20. LEASE DEPOSIT ................................................ 31
A. Prepaid Rent .............................................. 31
B. Security Deposit .......................................... 31
21. FORCE MAJEURE ................................................ 32
22. TENANT'S PERSONAL PROPERTY AND TRADE FIXTURES ................ 32
23. NOTICES ...................................................... 32
A. Landlord .................................................. 32
B. Tenant .................................................... 33
24. QUIET POSSESSION ............................................. 33
25. REAL ESTATE BROKER ........................................... 33
26. MISCELLANEOUS ................................................ 34
A. Successors and Assigns .................................... 34
B. Date Payments Are Due ..................................... 34
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
C. Meaning of "Landlord," "Re-Entry," "including" and
"Affiliate" ............................................... 34
D. Time of the Essence ....................................... 34
E. No Option ................................................. 34
F. Severability .............................................. 34
G. Governing Law ............................................. 34
H. Lease Modification ........................................ 34
I. No Oral Modification ...................................... 34
J. Landlord's Right to Cure .................................. 34
K. Captions .................................................. 35
L. Authority ................................................. 35
M. Landlord's Enforcement of Remedies ........................ 35
N. Entire Agreement .......................................... 35
0. Landlord's Title .......................................... 35
P. Light and Air Rights ...................................... 35
Q. Singular and Plural ....................................... 35
R. No Recording by Tenant .................................... 35
S. Exclusivity ............................................... 35
T. No Construction Against Drafting Party .................... 35
U. Survival .................................................. 35
V. Rent Not Based on Income .................................. 35
W. Building Manager and Service Providers .................... 36
X. Late Charge and Interest on Late Payments ................. 36
Y. Attorneys' Fees ........................................... 36
27. UNRELATED BUSINESS INCOME .................................... 36
28. HAZARDOUS SUBSTANCES ......................................... 36
29. FINANCIAL STATEMENTS ......................................... 37
30. EXCULPATION .................................................. 37
31. RIGHT OF FIRST NEGOTIATION ................................... 37
32. EXTENSION OPTION ............................................. 38
</TABLE>
Exhibit A - PLAN OF PROJECT AND ADDITIONAL PARKING AREA
Exhibit B - RULES AND REGULATIONS
Exhibit C - TENANT IMPROVEMENT AGREEMENT
Exhibit D - MORTGAGES CURRENTLY AFFECTING THE PROJECT
Exhibit E - LANDLORD'S SIGNAGE STANDARDS
Exhibit F - LIST OF HAZARDOUS SUBSTANCES AND QUANTITIES THEREOF TO BE USED BY
TENANT AT SITE
<PAGE> 6
LEASE
THIS LEASE (the "Lease") is made as of February 18, 1998 (dated for reference
purposes only) between CARRAMERICA REALTY CORPORATION, a Maryland corporation
(the "Landlord") and the Tenant as named in the Schedule below. The term
"Project" means the two buildings (the "Buildings") and other improvements
commonly known as 900 and 910 East Hamilton Avenue located in the City of
Campbell ("City"), County of Santa Clara ("County"), California, on that certain
real property consisting of approximately 7.12 acres as more particularly
described in Exhibit A. The "Premises" means that portion of the Buildings
described in the Schedule. The Building(s) in which the Premises are located
shall be collectively referred to herein as the "Building". The following
schedule (the "Schedule") is an integral part of this Lease. Terms defined in
this Schedule shall have the same meaning throughout the Lease.
SCHEDULE
1. TENANT: Zilog, Inc., a Delaware corporation
2. PREMISES: Suites 110, 120, 400, 500 and 600 in 910 East Hamilton
Avenue Building
3. PROJECT: 900 and 910 East Hamilton Avenue, Campbell, California
4. RENTABLE SQUARE FEET OF THE PREMISES: Suite 110 15,113rsf
Suite 120 2,858rsf
Suite 400 31,379rsf
Suite 500 29,767rsf
Suite 600 29,767rsf
Total 108,884rsf
5. TENANT'S PROPORTIONATE SHARE: 62.47% of Building and 31.16% of
Project
6. LEASE DEPOSIT: Prepaid Rent = $255,877.40
Security Deposit = $255,877.40 (which, at
Tenant's election, may be in the form of a
Letter of Credit subject to the terms of
Section 20)
7. PERMITTED USE: Office, distribution, marketing, research and
development of products which are consistent with the other uses
allowed in the Project, and other related lawful uses allowed
under applicable laws, ordinances and regulations which are
consistent with the other uses allowed in the Project
8. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: Cornish & Carey
Commercial
9. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: Cornish & Carey
Commercial
<PAGE> 7
10. TENANT IMPROVEMENT ALLOWANCE: $1,439,689
11. COMMENCEMENT DATE: March 1, 1998
12. TERMINATION DATE: February 29, 2004
13. TERM: Six (6) years
14. PARKING SPACES: 364 unreserved parking stalls (182 of which
shall be located in the underground parking garage located
adjacent to the Building) pursuant and subject to the terms and
conditions set forth in Sections IF and 6C
15. BASE RENT:
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT MONTHLY BASE RENT
- ------ ---------------- -----------------
<S> <C> <C>
March 1, 1998 through
February 28, 1999 $3,070,528.80 per year $255,877.40 per month
March 1, 1999 through
February 29, 2000 $3,201,189.60 per year $266,765.80 per month
March 1, 2000 through
February 28, 2001 $3,331,850.40 per year $277,654.20 per month
March 1, 2001 through
February 28, 2002 $3,462,511.20 per year $288,542.60 per month
March 1, 2002 through
February 28, 2003 $3,593,172.00 per year $299,431.00 per month
March 1, 2003 through
February 29, 2004 $3,723,832.80 per year $310,319.40 per month
</TABLE>
2
<PAGE> 8
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.
A. Commencement Date. The commencement date ("Commencement Date")
for this Lease is the date set forth in the Schedule. Notwithstanding the
foregoing, if Landlord is unable to deliver possession of the Premises to Tenant
on or before the Commencement Date for any reason, then (i) this Lease shall not
shall not be void or voidable by either party, (ii) Landlord shall not be liable
to Tenant for any loss or damage resulting therefrom, and (iii) the Commencement
Date shall be revised to mean the date on which Landlord delivers possession of
the Premises to Tenant and the Termination Date shall be revised accordingly so
that the Term (as defined below) is unaffected by such delay. If Landlord cannot
deliver possession of the Premises to Tenant on or before April 30, 1998, Tenant
may terminate this Lease by providing written notice to Landlord to that effect
on May 1, 1998.
B. Termination Date. If the Commencement Date is revised pursuant
to Section IA above, then the termination date ("Termination Date") of this
Lease shall be revised to mean the date which is six (6) years (the "Term")
after the revised Commencement Date, or if the Commencement Date is not the
first day of a month, then after the first day of the following month.
C. Early Occupancy. During the period commencing on February 27,
1998 (provided this Lease has not been previously terminated by Tenant pursuant
to Section D below, or by Landlord pursuant to Section E below), and ending on
the Commencement Date (the "Early Occupancy Period"), Tenant shall be permitted
to enter the Premises for the sole purpose of constructing certain interior
tenant improvements therein, provided that Tenant's occupancy of the Premises
during the Early Occupancy Period shall be subject to all of the terms,
covenants and conditions of this Lease (including, without limitation, Tenant's
obligations under Sections 5 (regarding obtaining Landlord's prior written
consent before commencing any alterations) and 9 (regarding Tenant's indemnity
and insurance obligations), except that Landlord agrees that Tenant's obligation
to pay Base Rent, Operating Cost Share Rent and Tax Share Rent (as such terms
are defined in Sections 2.A(l), (2) and (3) below) during the Early Occupancy
Period shall be waived. Notwithstanding the foregoing, Tenant shall pay for all
utility, janitorial and other costs incurred by Landlord to the extent they
relate to Tenant's work during the Early Occupancy Period.
D. Tenant's Termination Right if Merger Fails. Landlord agrees
that Tenant may elect to terminate this Lease, if, and only if, the successful
acquisition of Tenant by the Texas Pacific Group (the "Merger") pursuant to the
terms and conditions set forth in that certain Agreement and Plan of Merger
dated as of July 20, 1997 by and between TPG Partners 11, L.P. and Tenant, as
amended by Amendments Number One and Number Two, dated as of November 18, 1997
and December 10, 1997, respectively (the "Merger Agreement") has not occurred by
February 27, 1998. In the event the Merger fails to occur by February 27, 1998,
Tenant may elect to terminate this Lease by delivering to Landlord on or before
the close of business on February
3
<PAGE> 9
27, 1998 a written termination notice along with reasonable evidence showing
that the Merger was not consummated (e.g., a signed certificate to that effect
from an officer of Tenant). Upon Landlord's receipt of Tenant's termination
notice and such reasonable evidence, Landlord shall promptly return any Lease
Deposit and Rent received by Landlord to Tenant, and Tenant shall return any
portion of the "First Installment" (as defined in Section 3 of the Tenant
Improvement Agreement attached hereto as Exhibit C) received from Landlord, and
this Lease shall automatically terminate and neither party shall have any
further rights or obligations hereunder.
E. Landlord's Termination Right if Shareholder Lawsuit is Filed
Which Would Delay the Consummation of the Merger. In the event a shareholder (or
similar) lawsuit is filed in connection with the proposed Merger which, in the
reasonable determination of Landlord would have the effect of delaying the
consummation of the Merger beyond February 27, 1998, then Landlord shall have
the right (but not the obligation) to terminate this Lease by delivering to
Tenant a written termination notice to that effect (along with any Lease Deposit
previously received by Landlord hereunder) within ten (10) days of Landlord's
receipt of written notice of such lawsuit. Upon Tenant's receipt of such
termination notice and the Lease Deposit and Rent received by Landlord to
Tenant, and Tenant shall return any portion of the First Installment received
from Landlord, and this Lease shall automatically terminate and neither party
shall have any further rights or obligations hereunder.
F. Use of Four Parking Spaces in Underground Garage. Landlord
hereby grants to Tenant the right to use two of Tenant's parking spaces in the
underground parking garage for the sole purpose of installing and maintaining an
emergency generator, air compressor and/or air handling equipment necessary for
the operation of Tenant's business. The two parking spaces to be so used by
Tenant shall be the two parking spaces immediately on the right when entering
the underground parking garage from the entrance located under the Building
(i.e., the 910 East Hamilton Building). In addition, Landlord hereby grants to
Tenant the right to use two of Tenant's parking spaces in the underground
parking garage for the sole purpose of locating its UPS for its data center
necessary for the operation of Tenant's business. The two UPS parking spaces
shall be located in a mutually agreeable area adjacent to the existing power
supply room for the Building. The four parking spaces to be so used by Tenant
shall be referred to as the "Enclosure Areas". Except as specifically provided
above, Tenant shall not use the Enclosure Areas for any other purpose (e.g., a
storage area). Tenant's use of the Enclosure Areas shall be subject to all of
the terms and conditions of this Lease. In particular, Tenant's indemnity and
insurance obligations shall apply to the Enclosure Areas as if they were part of
the Premises, and upon the expiration or termination of this Lease Tenant shall
remove all of its equipment from the Enclosure Areas and restore such areas to
the condition which existed prior to Tenant's installation of such equipment.
Tenant's installation of such equipment (and any other work necessary in the
Enclosure Areas) shall be subject to Section 5 (i.e., the "Alterations"
provisions), including the obligation to install a redwood fence around the
perimeter of the Enclosure Areas in a manner and height reasonably acceptable to
Landlord. Tenant shall be solely responsible for the installation, repair,
maintenance and removal of any equipment in the Enclosure Areas and Landlord
shall have no responsibility or liability whatsoever for the same. Tenant agrees
and acknowledges that the four parking spaces comprising the Enclosure Areas
shall come out the 182 parking spaces which were otherwise available to Tenant
in the underground parking garage pursuant to the Schedule.
4
<PAGE> 10
2. RENT.
A. Types of Rent. Tenant shall pay the following Rent to Landlord
pursuant to the payment instructions to be given to Tenant prior to the
Commencement Date:
(1) Base Rent in monthly installments in advance, the
first monthly installment payable concurrently with the execution of this Lease
and thereafter on or before the first day of each month of the Term in the
amount set forth on the Schedule.
(2) Operating Cost Share Rent in an amount equal to the
Tenant's Proportionate Share of the Operating Costs for the applicable fiscal
year of the Lease, paid monthly in advance in an estimated amount. Definitions
of Operating Costs and Tenant's Proportionate Share, and the method for billing
and payment of Operating Cost Share Rent are set forth in Sections 2B, 2C and
2D.
(3) Tax Share Rent in an amount equal to the Tenant's
Proportionate Share of the Taxes for the applicable fiscal year of this Lease,
paid monthly in advance in an estimated amount. A definition of Taxes and the
method for billing and payment of Tax Share Rent are set forth in Sections 2B,
2C and 2D.
(4) Additional Rent in the amount of all costs, expenses,
liabilities, and amounts which Tenant is required to pay under this Lease,
excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but
including any interest for late payment of any item of Rent.
(5) Rent as used in this Lease means Base Rent, Operating
Cost Share Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay
Rent is an independent covenant, with no right of setoff, deduction or
counterclaim of any kind.
B. Payment of Operating Cost Share Rent and Tax Share Rent.
(1) Payment of Estimated Operating Cost Share Rent and Tax
Share Rent. Landlord shall estimate the Operating Costs and Taxes of the Project
by April 1 of each fiscal year, or as soon as reasonably possible thereafter.
Landlord may revise these estimates whenever it obtains more accurate
information which would indicate that the actual Operating Costs and/or Taxes
will be materially higher in Landlord's reasonable determination than the
estimates previously made by Landlord, such as would be the case if there were a
supplemental real estate tax assessment or a change in the tax rate for (or the
assessed value of) the Project. Within ten (10) days after receiving the
original or revised estimate from Landlord, Tenant shall pay Landlord
one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate,
multiplied by the number of months that have elapsed in the applicable fiscal
year to the date of such payment including the current month, minus payments
previously made by Tenant for the months elapsed. On the first day of each month
thereafter, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
Proportionate Share of this estimate, until a new estimate becomes applicable.
5
<PAGE> 11
(2) Correction of Operating Cost Share Rent. Landlord
shall deliver to Tenant a report for the previous fiscal year (the "Operating
Cost Report") by April 1 of each year, or as soon as reasonably possible
thereafter, setting forth (a) the actual Operating Costs incurred, (b) the
amount of Operating Cost Share Rent due from Tenant, and (c) the amount of
Operating Cost Share Rent paid by Tenant. Within twenty (20) days after such
delivery, Tenant shall pay to Landlord the amount due minus the amount paid. If
the amount paid exceeds the amount due, Landlord shall apply the excess to
Tenant's payments of Operating Cost Share Rent next coming due.
(3) Correction of Tax Share Rent. Landlord shall deliver
to Tenant a report for the previous fiscal year (the "Tax Report") by April 1 of
each year, or as soon as reasonably possible thereafter, setting forth (a) the
actual Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the
amount of Tax Share Rent paid by Tenant. Within twenty (20) days after such
delivery, Tenant shall pay to Landlord the amount due from Tenant minus the
amount paid by Tenant. If the amount paid exceeds the amount due, Landlord shall
apply any excess as a credit against Tenant's payments of Tax Share Rent next
coming due.
C. Definitions.
(1) Included Operating Costs. "Operating Costs" means any
expenses, costs and disbursements of any kind other than Taxes, paid or incurred
by Landlord in connection with the management, maintenance, operation, insurance
(including the related deductibles), repair and other related activities in
connection with any part of the Project and of the personal property, fixtures,
machinery, equipment, systems and apparatus used in connection therewith,
including the cost of providing those services required to be furnished by
Landlord under this Lease (e.g., heating, air conditioning, electricity, water
and janitorial services) and a reasonable management fee not to exceed three
percent (3%) of the total Rent payable hereunder. Operating Costs shall also
include the costs of any capital improvements which are intended to reduce
Operating Costs or improve safety, and those made to keep the Project in
compliance with governmental requirements applicable from time to time or to
replace existing capital improvements, facilities and equipment within the
Building or the common areas of the Project, such as the roof membrane and
resurfacing of the parking areas (collectively, "Included Capital Items");
provided, that the costs of any Included Capital Item shall be amortized by
Landlord, together with an amount equal to interest at ten percent (10%) per
annum, over the estimated useful life of such item and such amortized costs are
only included in Operating Costs for that portion of the useful life of the
Included Capital Item which falls within the Term, unless the cost of the
Included Capital Item is less than Ten Thousand Dollars ($10,000) in which case
it shall be expensed in the year in which it was incurred.
If the Project contains more than one building, then Operating
Costs shall include (i) all Operating Costs fairly allocable to the Building,
and (ii) a proportionate share (based on the gross rentable area of the Building
as a percentage of the gross rentable area of all of the Buildings in the
Project) of all Operating Costs which relate to the Project in general and are
not fairly allocable to any one building in the Project (e.g., the underground
parking facility).
6
<PAGE> 12
If the Project is not fully occupied during any portion of any
Fiscal Year, Landlord may adjust (an "Equitable Adjustment") Operating Costs to
equal what would have been incurred by Landlord had the Project been fully
occupied. This Equitable Adjustment shall apply only to Operating Costs which
are variable and therefore increase as occupancy of the Project increases.
Landlord may incorporate the Equitable Adjustment in its estimates of Operating
Costs.
If Landlord does not furnish any particular service whose cost
would have constituted an Operating Cost to a tenant other than Tenant who has
undertaken to perform such service itself, Operating Costs shall be increased by
the amount which Landlord would have incurred if it had furnished the service to
such tenant.
(2) Excluded Operating Costs. Operating Costs shall not
include:
(a) costs of alterations of tenant premises;
(b) costs of capital improvements other than
Included Capital Items;
(c) interest and principal payments on mortgages
or any other debt costs, or rental payments
on any ground lease of the Project;
(d) real estate brokers' leasing commissions;
(e) legal fees, space planner fees and
advertising expenses incurred with regard to
leasing the Building or portions thereof;
(f) any cost or expenditure for which Landlord
is reimbursed, by insurance proceeds or
otherwise, except by Operating Cost Share
Rent;
(g) the cost of any service furnished to any
office tenant of the Project which Landlord
does not make available to Tenant;
(h) depreciation or amortization (except for the
amortization allowed for any Included
Capital Items pursuant to the first
paragraph of Section 2C(l) above);
(i) any Taxes included in Tax Share Rent and any
franchise or income taxes imposed upon
Landlord or any other taxes imposed on the
income earned by Landlord from all sources;
(j) costs of correcting defects in construction
of the Building (as opposed to the cost of
normal repair, maintenance and
7
<PAGE> 13
replacement expected with the construction
materials and equipment installed in the
Building in light of their specifications);
(k) legal and auditing fees which are for the
benefit of Landlord such as collecting
delinquent rents, preparing tax returns and
other financial statements, and audits other
than those incurred in connection with the
preparation of reports required pursuant to
Section 2B above;
(l) the wages of any employee for services not
related directly to the management,
maintenance, operation and repair of the
Building;
(m) fines, penalties and interest;
(n) leasing commissions, attorneys' fees, costs,
disbursements, and other expenses incurred
in connection with negotiations or disputes
with other tenants in the Project, or in
connection with leasing, renovating, or
improving space for tenants or other
occupants or prospective tenants or other
occupants of the Building or Project;
(o) the cost of any material service sold to or
furnished to any tenant (including Tenant)
or other occupant for which Landlord is
entitled to be reimbursed as an additional
charge or rental over and above the basic
rent and escalations payable under the lease
with such tenant;
(p) expenses in connection with services or
other benefits of a type that are not
available to Tenant but which are furnished
to another tenant or occupant in the
Building or Project;
(q) costs incurred due to Landlord's violation
of any terms or conditions of this Lease or
any other lease relating to the Building or
Project;
(r) overhead profit increments paid to
Landlord's subsidiaries or affiliates for
management or other services on or to the
Building or for supplies or other materials
to the extent that the cost of the services,
supplies or materials unreasonably exceeds
the cost that would have been paid had the
services, supplies, or materials been
provided by unaffiliated parties on
reasonably a competitive basis;
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(s) costs of repairs and other work occassioned
by fire, windstorm, or other casualty
covered by insurance required to be
maintained by Landlord hereunder (to the
extent of the insurance proceeds available);
and
(t) the cost of testing, containing, removing or
otherwise remediating any contamination of
the Project (including the underlying land
and ground water) by any toxic or "Hazardous
Materials" (as defined in Section 28),
including PCB's, where such contamination
was not caused or contributed to by Tenant;
unless such costs are incurred to comply
with a governmental order, law, regulation
or mandate and such contamination was not
caused by Landlord or any of the other
tenants or occupants in the Project.
(3) Taxes. "Taxes" means any and all taxes, assessments
and charges of any kind, general or special, ordinary or extraordinary, levied
against the Project, which Landlord shall pay or become obligated to pay in
connection with the ownership, leasing, renting, management, use, occupancy,
control or operation of the Project or of the personal property, fixtures,
machinery, equipment, systems and apparatus used in connection therewith. Taxes
shall include real estate taxes, personal property taxes, sewer rents, water
rents, special or general assessments, transit taxes, ad valorem taxes, and any
tax levied on the rents hereunder or the interest of Landlord under this Lease
(the "Rent Tax"). Taxes shall also include all fees and other costs and expenses
paid by Landlord in reviewing any tax and in seeking a refund or reduction of
any Taxes, whether or not the Landlord is ultimately successful. Taxes shall
also include any assessments or fees paid to any business park owners
association, or similar entity, which are imposed against the Project pursuant
to any Covenants, Conditions and Restrictions ("CC&R's") recorded against the
Land and any installments of principal and interest required to pay any existing
or future general or special assessments for public improvements, services or
benefits, and any increases resulting from reassessments imposed in connection
with any change in ownership or new construction.
If the Project contains more than one building, then Taxes shall
include (i) all Taxes fairly allocable to the Building, and (ii) a proportionate
share (based on the gross rentable area of the Building as a percentage of the
gross rentable area of all of the Buildings in the Project) of all Taxes which
relate to the Project in general and are not fairly allocable to any one
building in the Project.
For any year, the amount to be included in Taxes (a) from taxes
or assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year. Any
refund or other adjustment to any Taxes by the taxing authority, shall apply
during the year in which the adjustment is made. Taxes shall not include any net
income (except Rent Tax), capital, stock, succession, transfer, franchise, gift,
estate or inheritance tax, or other tax payable on
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Landlord's income from all other sources, except to the extent that such tax
shall be imposed in lieu of any portion of Taxes.
(4) Lease Year. "Lease Year" means each consecutive
twelve-month period beginning with the Commencement Date, except that if the
Commencement Date is not the first day of a calendar month, then the first Lease
Year shall be the period from the Commencement Date through the final day of the
twelve months after the first day of the following month, and each subsequent
Lease Year shall be the twelve months following the prior Lease Year.
(5) Fiscal Year. "Fiscal Year" means the calendar year,
except that the first Fiscal Year and the last Fiscal Year of the Term may be a
partial calendar year.
D. Computation of Base Rent and Rent Adjustments.
(1) Prorations. If this Lease begins on a day other than
the first day of a month, the Base Rent, Operating Cost Share Rent and Tax Share
Rent shall be prorated for such partial month based on the actual number of days
in such month. If this Lease begins on a day other than the first day, or ends
on a day other than the last day, of the Fiscal Year, Operating Cost Share Rent
and Tax Share Rent shall be prorated for the applicable Fiscal Year.
(2) Default Interest. Any sum due from Tenant to Landlord
not paid when due shall bear interest from the date due until paid at the lesser
of eighteen percent (18%) per annum or the maximum rate permitted by law.
(3) Rent Adjustments. The square footage of the Premises
and the Building set forth in the Schedule are conclusively deemed to be the
actual square footage thereof, without regard to any subsequent remeasurement of
the Premises or the Building. If any Operating Cost paid in one Fiscal Year
relates to more than one Fiscal Year, Landlord may proportionately allocate such
Operating Cost among the related Fiscal Years.
(4) Books and Records. Landlord shall maintain books and
records reflecting the Operating Costs and Taxes in accordance with generally
accepted accounting and management practices. Tenant and its certified public
accountant shall have the right to inspect Landlord's records at Landlord's
applicable local office or other location designated by Landlord upon at least
seventy-two (72) hours' prior notice during normal business hours during the
ninety (90) days following the respective delivery of the Operating Cost Report
or the Tax Report. The results of any such inspection shall be kept strictly
confidential by Tenant and its agents, and Tenant and its certified public
accountant must agree, in their contract for such services, to such
confidentiality restrictions and shall specifically agree that the results shall
not be made available to any other tenant of the Project. Unless Tenant sends to
Landlord any written exception to either such report within said ninety (90) day
period, such report shall be deemed final and accepted by Tenant. Tenant shall
pay the amount shown on both reports in the manner prescribed in this Lease,
whether or not Tenant takes any such written exception, without any prejudice to
such exception. If Tenant makes a timely exception, Landlord shall cause its
independent certified
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public accountant to make an independent determination of the matter and to
issue a final and conclusive resolution of Tenant's exception. Tenant shall pay
the cost of such certification unless Landlord's original determination of
annual Operating Costs and Taxes in the aggregate overstated the amounts thereof
by more than five percent (5%).
(5) Miscellaneous, Landlord shall be entitled to deduct
from any refund due Tenant hereunder, the amount of any obligation then payable
to Landlord by Tenant as a result of Tenant's failure to timely pay such amounts
to Landlord as required hereunder. So long as Tenant is in default of any
obligation under this Lease, Tenant shall not be entitled to any refund of any
amount from Landlord. If this Lease is terminated for any reason prior to the
annual determination of Operating Cost Share Rent or Tax Share Rent, either
party shall pay the full amount due to the other within fifteen (15) days after
Landlord's notice to Tenant of the amount when it is determined. Landlord may
commingle any payments made with respect to Operating Cost Share Rent or Tax
Share Rent, without payment of interest.
3. PREPARATION AND CONDITION OF PREMISES; TENANT'S POSSESSION OF
PREMISES.
A. Condition of Premises. Landlord is leasing the Premises and
the Enclosure Areas to Tenant "as is", without any obligation to alter, remodel,
improve, repair or decorate any part of the Premises or the Enclosure Areas,
except that Landlord shall deliver the Premises in good working condition, and
all building systems (including the HVAC, plumbing, electrical and elevators)
and all landscaping, parking areas and parking structures, shall be in good
working condition as of the Commencement Date. Landlord shall provide Tenant
with the Tenant Improvement Allowance in the amount set forth in the Schedule in
accordance with the terms and conditions set forth in the Tenant Improvement
Agreement attached hereto as Exhibit C. Landlord shall be responsible for all
costs associated with code compliance and upgrade costs (including the Americans
With Disabilities Act ("ADA")) required to be incurred in the common areas of
the Project or to the exterior of the Building, except Tenant shall be solely
responsible for all costs associated with code (including ADA) compliance and
upgrade costs to the extent they either (i) are required within the Premises or
the Enclosure Areas, or (ii) are required in the common areas of the Project or
to the exterior of the Building as a result of Tenant's particular use or
activities within the Premises or the Enclosure Areas. For purposes of this
Lease, the Project common areas shall specifically exclude any floors of the
Building where Tenant leases the entire floor. Landlord makes no representations
or warranties regarding the Project's or the Premises' compliance with the ADA.
B. Tenant's Possession, Tenant's taking possession of any portion
of the Premises (including during any Early Occupancy Period) shall be
conclusive evidence that the Premises and all building systems (including the
HVAC, plumbing, electrical and elevators) and all landscaping, parking areas and
parking structures, were in good order, repair and working condition as of the
Commencement Date, subject only to those items noted in a written "punch list"
delivered to Landlord on or prior to May 15, 1998.
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4. PROJECT SERVICES. Landlord shall furnish services as follows:
A. Heating and Air Conditioning. During the normal business hours
of 7:00 a.m. to 6:00 p.m., Monday through Friday, Landlord shall furnish heating
and air conditioning to provide a comfortable temperature, in Landlord's
judgment, for normal business operations, except to the extent Tenant installs
equipment which adversely affects the temperature maintained by the air
conditioning system. If Tenant installs such equipment, Landlord may install
supplementary air conditioning units in the Premises, and Tenant shall pay to
Landlord upon demand as Additional Rent the cost of installation, operation and
maintenance thereof.
Landlord shall furnish heating and air conditioning after
business hours if Tenant provides Landlord reasonable prior notice, and pays
Landlord all the then current charges for such additional heating or air
conditioning.
B. Elevators. If the Building is equipped with one or more
elevators, Landlord shall provide passenger elevator service during normal
business hours to Tenant in common with Landlord and all other tenants. Landlord
shall provide limited passenger service at other times, except in case of an
emergency. For example, if there are more than one elevators which service the
Building, Landlord may provide only one elevator during non-business hours.
C. Electricity. Landlord shall provide sufficient electricity to
operate normal office lighting and office equipment. Tenant shall not install or
operate in the Premises any electrically operated equipment or other machinery,
other than business machines and equipment normally employed for general office
use which do not require high electricity consumption for operation, without
obtaining the prior written consent of Landlord. If any or all of Tenant's
equipment requires electricity consumption in excess of that which is necessary
to operate normal office equipment, such consumption (including consumption for
computer or telephone rooms and special HVAC equipment) shall be submetered by
Landlord at Tenant's expense, and Tenant shall reimburse Landlord as Additional
Rent for the cost of its submetered consumption based upon Landlord's average
cost of electricity. Such Additional Rent shall be in addition to Tenant's
obligations pursuant to Section 2A(2) to pay its Proportionate Share of
Operating Costs.
D. Water. Landlord shall furnish hot and cold tap water for
drinking and toilet purposes. Tenant shall pay Landlord for water furnished for
any other purpose as Additional Rent at rates fixed by Landlord. Such Additional
Rent shall be in addition to Tenant's obligations pursuant to Section 2A(2) to
pay its Proportionate Share of Operating Costs. Tenant shall not permit water to
be wasted.
E. Janitorial Service. Landlord shall furnish janitorial service
Monday through Friday as generally provided to other tenants in the Project.
With reasonable prior notice from Tenant, Landlord shall also provide additional
janitorial service on weekends or holidays at Tenant's expense, and Tenant shall
reimburse Landlord as Additional Rent for the cost of such additional janitorial
services. Such Additional Rent shall be in addition to Tenant's obligations
pursuant to Section 2A(2) to pay its Proportionate Share of Operating Costs.
Landlord agrees that Notwithstanding the foregoing, Landlord agrees that Tenant
may perform its own janitorial service
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within its Premises so long as such work is provided by employees of Tenant (as
opposed to an outside janitorial service provider). Unless Tenant notifies
Landlord to the contrary in writing prior to the commencement of the Early
Occupancy Period, it shall be assumed that Tenant shall be providing its own
janitorial services within the Premises. If Tenant performs its own janitorial
service within the Premises, Tenant agrees that (i) it would still be obligated
to pay Tenant's Proportionate Share of the janitorial expenses incurred by
Landlord for the common areas of the Building and Project, and (ii) its janitors
shall be obligated to cooperate and coordinate their activities with Landlord's
janitorial and maintenance staff.
F. Interruption of Services, If any of the Building equipment or
machinery ceases to function properly for any cause Landlord shall use
reasonable diligence to repair the same promptly. Landlord's inability to
furnish, to any extent, the Project services set forth in this Section 4, or any
cessation thereof resulting from any causes, including any entry for repairs
pursuant to this Lease, and any renovation, redecoration or rehabilitation of
any area of the Building shall not render Landlord liable for damages to either
person or property or for interruption or loss to Tenant's business, nor be
construed as an eviction of Tenant, nor work an abatement of any portion of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Notwithstanding the foregoing, Landlord agrees to use commercially reasonable
efforts to minimize any disruption to Tenant during any such entry.
5. ALTERATIONS AND REPAIRS.
A. Landlord's Consent and Conditions. Tenant shall not make any
improvements or alterations to the Premises or the Enclosure Area (the "Work")
without in each instance submitting plans and specifications for the Work to
Landlord and obtaining Landlord's prior written consent, which shall not be
unreasonably withheld or delayed. Tenant shall pay Landlord's standard charge
(or, if Landlord does not have a standard charge, then Landlord's actual costs
incurred) for review of all of the plans and all other items submitted by
Tenant, provided that the charge for such services during the original Term
shall not exceed $500 per occurrence so long as there are no material objections
to Tenant's plans (i.e., if Landlord in good faith objects to Tenant's plans and
Tenant has to redo its plans and resubmit, or if a dispute arises between
Landlord and Tenant, then Landlord may collect the actual review costs incurred
even if they exceed $500). Landlord will be deemed to be acting reasonably in
withholding its consent for any Work which (a) impacts the base structural
components or systems of the Building, (b) unreasonably or materially impacts
any other tenant's premises, or (c) is visible from outside the Premises.
Notwithstanding the foregoing, Tenant shall be entitled to make improvements or
alterations to the Premises without Landlord's consent to the extent that such
improvements or alterations do not exceed $10,000 per occurrence.
Tenant shall pay for the cost of all Work, including the cost of any and
all approvals, permits, fees and other charges which may be required as a
condition of performing such Work. Upon termination of this Lease, all Work
shall become the property of Landlord, except for Tenant's trade fixtures and
equipment and for items which Landlord requires Tenant to remove at Tenant's
cost at the termination of the Lease pursuant to Section 5E.
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The following requirements shall apply to all Work (including any Work
for which Landlord's consent is not required):
(1) Prior to commencement, Tenant shall furnish to
Landlord building permits, certificates of insurance satisfactory to Landlord.
(2) Tenant shall perform all Work so as to maintain peace
and harmony among other contractors serving the Project and shall avoid
interference with other work to be performed or services to be rendered in the
Project.
(3) The Work shall be performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials in the
Building, and shall comply with all insurance requirements and all applicable
governmental laws, ordinances and regulations ("Governmental Requirements").
(4) Tenant shall perform all Work so as to minimize or
prevent disruption to other tenants, and Tenant shall comply with all reasonable
requests of Landlord in response to complaints from other tenants.
(5) Tenant shall perform all Work in compliance with any
"Policies, Rules and Procedures for Construction Projects" which may be in
effect at the time the Work is performed.
(6) Upon completion, Tenant shall furnish Landlord with
contractor's affidavits and full and final statutory waivers of liens, as-built
plans and specifications for any Work requiring Landlord's consent (and, to the
extent available, for any Work not requiring Landlord's consent), and all other
close-out documentation relating to the Work, including any other information
required under any "Policies, Rules and Procedures for Construction Projects"
which may be in effect at such time.
B. Repairs.
(1) Landlord's Maintenance Obligations. If any part of the
mechanical, electrical or other systems in the Premises (e.g., HVAC, elevators,
life safety or automatic fire extinguisher/sprinkler system) shall be damaged,
Tenant shall promptly notify Landlord, and Landlord shall repair such damage.
Landlord may also at any reasonable time make any repairs or alterations which
Landlord deems necessary for the safety or protection of the Project, or which
Landlord is required to make by any court or pursuant to any Governmental
Requirement. Landlord also shall be responsible for maintenance, repair and
replacement (as reasonably determined to be necessary by Landlord) of all (i)
structural elements of the Building, which structural parts shall only include
the foundation and subflooring of the Building and the structural condition of
the roof (including the roof membrane) and the exterior and load-bearing walls
of the Building, and (ii) the common areas of the Project, including the parking
lots and structures, driveways, walkways and landscaping. Notwithstanding the
foregoing, Tenant agrees that (a) the costs incurred by Landlord to perform the
all of the obligations described herein to the extent they
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are deemed "Operating Costs" (as defined in Section 2.C) shall be passed through
to Tenant and any other tenants in the Project, and (b) any damage caused by
Tenant or by any of Tenant's agents, employees or invitees, shall be repaired by
Landlord solely at Tenant's expense (to the extent such damage is not covered by
any insurance proceeds received by Landlord), or at Landlord's election, such
repairs shall be made by Tenant at Tenant's sole expense, with contractors
approved by Landlord (to the extent such damage is not covered by any insurance
proceeds received by Landlord). Landlord shall have no obligation to challenge
the denial of any claims filed by Landlord with its insurer in connection with
damage caused by Tenant or by any of Tenant's agents, employees or invitees,
unless Tenant pays all of reasonable costs incurred by Landlord to challenge
such denial (including, without limitation, all litigation and/or arbitration
costs, attorneys' fees, consultants' fees, expert witness fees and other costs
reasonably related to the challenging of such denial). It is a condition
precedent to all Landlord's obligations to repair and maintain that Tenant shall
have notified Landlord of the need of such repairs or maintenance or that
Landlord shall have actual knowledge of the need of such repairs, provided that
the foregoing shall not eliminate Landlord's obligation to perform routine
maintenance in connection with those areas which are required hereunder to be
maintained by Landlord. Tenant hereby agrees to provide Landlord with reasonably
prompt notice of the need for any repairs which are the responsibility of
Landlord hereunder. Tenant waives the provisions of Sections 1941 and 1942 of
the California Civil Code and any similar or successor law regarding Tenant's
right to make repairs and deduct the cost of such repairs from the Rent due
under this Lease.
(2) Tenant's Maintenance Obligations. Subject to
Landlord's repair and maintenance obligations as set forth in Section 5B (1)
above, throughout the Term, Tenant shall at its expense make all other repairs
necessary to keep the Premises and the Enclosure Area, and Tenant's equipment,
trade fixtures and personal property, in good order, condition and repair in
compliance with all applicable Governmental Requirements, in their condition as
of the commencement of the Early Occupancy Period, loss or damage caused by the
elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises and the Enclosure Area to Landlord in the condition required under
Section 14 below. To the extent Tenant fails to perform its repair and
maintenance obligations, Landlord may make such repairs itself. The cost of any
repairs made by Landlord on account of Tenant's default, or on account of the
misuse or neglect by Tenant or its invitees, contractors or agents anywhere in
the Project, shall become Additional Rent payable by Tenant on demand.
C. No Liens. Tenant has no authority to cause or permit any lien
or encumbrance of any kind to affect Landlord's interest in the Project; any
such lien or encumbrance shall attach to Tenant's interest only. If any
mechanic's lien shall be filed or claim of lien made for work or materials
furnished to Tenant, then Tenant shall at its expense within ten (10) days after
notice thereof either discharge or contest the lien or claim. If Tenant contests
the lien or claim, then Tenant shall (i) within such ten (10) day period,
provide Landlord adequate security for the lien or claim, (ii) contest the lien
or claim in good faith by appropriate proceedings that operate to stay its
enforcement, and (iii) pay promptly any final adverse judgment entered in any
such proceeding. If Tenant does not comply with these requirements, Landlord may
discharge the
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lien or claim, and the amount paid, as well as attorney's fees and other
expenses incurred by Landlord, shall become Additional Rent payable by Tenant on
demand.
D. Ownership of Improvements. All Work as defined in this Section
5, modular office partitions, hardware, equipment (including the emergency
generator to be installed by Tenant), machinery and all other improvements and
all fixtures and trade fixtures, installed or constructed in the Premises by
Tenant, shall (i) remain Tenant's property during the Term of this Lease and
shall be insured solely by Tenant pursuant to Section 8C(2), and become
Landlord's property upon the termination of this Lease without compensation to
Tenant, unless Landlord consents otherwise in writing, and (ii) at Landlord's
option either (a) be surrendered to Landlord with the Premises at the
termination of the Lease or of Tenant's right to possession, or (b) be removed
in accordance with Subsection 5E below (unless Landlord at the time it gives its
consent to the performance of such construction expressly waives in writing the
right to require such removal). Notwithstanding the foregoing, Landlord agrees
that any modular office partitions, trade fixtures and the emergency generator
(so long as it is not required to operate any of the Building systems which will
remain, such as any supplemental HVAC unit) shall remain Tenant's property
following the termination of this Lease and Tenant shall remove such items in
accordance with Section 5E below.
E. Removal Upon Termination. Upon the termination of this Lease
or Tenant's right of possession Tenant shall remove from the Premises and
Project its trade fixtures, furniture, moveable equipment and other personal
property, any improvements which Landlord elects pursuant to Section 5D shall be
removed by Tenant, and any improvements to any portion of the Project other than
the Premises. If Tenant does not timely remove such property, then Tenant shall
be conclusively presumed to have, at Landlord's election (i) conveyed such
property to Landlord without compensation or (ii) abandoned such property, and
Landlord may dispose of or store any part thereof in any manner at Tenant's sole
cost, without waiving Landlord's right to claim from Tenant all expenses arising
out of Tenant's failure to remove the property, and without liability to Tenant
or any other person. Landlord shall have no duty to be a bailee of any such
personal property. If Landlord elects abandonment, Tenant shall pay to
Landlord, upon demand, any expenses incurred for disposition.
6. USE OF PREMISES.
A. Limitation on Use. Tenant shall use the Premises only for the
Permitted Use stated in the Schedule. Tenant shall not allow any use of the
Premises which will negatively affect the cost of coverage of Landlord's
insurance on the Project. Tenant shall not allow any inflammable or explosive
liquids or materials to be kept on the Premises. Tenant shall not allow any use
of the Premises which would cause the value or utility of any part of the
Premises to diminish or would interfere with any other tenant or with the
operation of the Project by Landlord. Tenant shall not permit any nuisance or
waste upon the Project, or allow any offensive noise or odor in or around the
Project. At the end of each business day, or more frequently if necessary,
Tenant shall deposit all garbage and other trash (excluding any inflammable,
explosive and/or hazardous materials) in trash bins or containers approved by
Landlord in locations designated by Landlord from time to time. If any
governmental authority shall deem the Premises to be a "place
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of public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Building or the
Premises under such laws.
B. Signs. Tenant shall not place on any portion of the Premises
any sign, placard, lettering, banner, displays or other advertising or
communicative material which is visible from the exterior of the Building
without the prior written approval of Landlord. Landlord agrees that Tenant
shall have the right to install, at its sole cost and expense, Tenant's name on
the crown of the Building and any existing monument sign for the Building,
provided that the content and design of such signs are approved in writing by
Landlord. Any approved signs shall strictly conform to all Governmental
Restrictions, any CC&R's recorded against the Project, and any sign criteria
which may be established by Landlord and in effect at the time, and shall be
installed (and removed upon the Termination Date) at Tenant's expense. Tenant,
at its sole cost and expense, shall maintain such signs in good condition and
repair, including the repair of any damage caused to the Building, monument sign
and/or Project upon the removal of such signs). Any signage shall comply with
Landlord's Signage Standards attached hereto as Exhibit E. With respect to
Tenant's signs, Landlord's only obligation shall be to add Tenant's name to the
tenant directory sign located in the lobby of the Building.
C. Parking. Tenant shall have the right to park in the parking
facilities located on the Project (including the underground parking garage) and
in the "Additional Parking Area" described in Exhibit A-1 (collectively, the
"Parking Facilities") in common with other tenants of the Project upon
reasonable, nondiscriminatory terms and conditions, as may from time to time be
established by Landlord, which terms and conditions shall not include the
payment of additional Rent or charges, unless such charges are governmentally
mandated. Tenant agrees not to overburden the Parking Facilities (i.e., use more
than the number of parking stalls indicated on the Schedule) and agrees to
cooperate with Landlord and other tenants in the Project in the use of the
Parking Facilities. Access to the underground parking garage shall be subject to
control by Landlord. Landlord reserves the right in its discretion to determine
whether the Parking Facilities are becoming crowded and to allocate and assign
parking spaces among Tenant and the other tenants in the Project, so long as
such allocation is made in a nondiscriminatory manner and allocates to Tenant
its prorata share of the total parking spaces which are then available for the
Project. Landlord shall not be liable to Tenant, nor shall this Lease be
affected, if any parking is impaired by moratorium, initiative, referendum, law,
ordinance, regulation or order passed, issued or made by any governmental or
quasi-governmental body. Tenant's right to use the parking spaces located on the
Additional Parking Area are set forth in the Declaration and Grant of Reciprocal
Rights dated and recorded July 27, 1988 in Book K618, page 301, the First
Amendment to Declaration of and Grant of Reciprocal Rights dated December 28,
1988 and recorded January 11, 1989 in Book L054, page 936, and the Memorandum of
Parking Use Agreement recorded in Book M217, page 239 in Santa Clara County
(collectively, the "CC&R's"), as may be amended from time to time. Tenant has
received and reviewed a copy of the CC&R's and understands that the owner of the
Additional Parking Area has the right to develop such land, and if it chooses to
do so, such owner may relocate the parking spaces located thereon to another
location while such owner constructs a parking facility on the Additional
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Parking Area, provided that the parking alternative is acceptable to Landlord.
Upon completion of the new parking facility, Tenant shall have the right to use
such number of spaces located thereon as Landlord may determine, in Landlord's
sole business judgment. Notwithstanding the foregoing, Landlord shall not reduce
the number of parking spaces permitted to be used by Tenant unless required to
do so by any governmental or quasi-governmental agency or body.
D. Prohibition Against Use of Roof and Structure of Building.
Tenant shall be prohibited from using any all or any portion of the roof of the
Building or any portion of the structure of the Building during the Term of this
Lease (or any extensions thereof) for any purposes (including without limitation
for the installation, maintenance and repair of a satellite dish and/or other
telecommunications equipment), without the prior written consent of Landlord,
which consent Landlord may withhold in its sole and absolute discretion. Any use
of the roof or the structure of the Building for satellite dish or antennae
purposes shall be pursuant to the terms of a separate license agreement and not
this Lease.
E. Common Area. All areas and facilities within the Project
provided and designated by Landlord for the general use and convenience of
Tenant and other tenants and occupants of any part of the Project, including,
without limitation, those portions of the Building for the general use and
convenience of all tenants of the Building, if any, such as hallways, the roof,
stairs, elevators, entrances and exits, central alarm systems, restrooms,
appurtenant equipment serving the Building, parking areas, sidewalks, landscaped
areas, the fitness center, service areas, trash disposal facilities, and similar
areas and facilities, subject to the reasonable rules and regulations and
changes therein from time to time promulgated by Landlord governing the use of
the Common Area. Landlord reserves the right to change the configuration
(including driveways, landscaped areas and parking spaces) of the Common Area,
eliminate the fitness center and alter, remove or add improvements thereto as
Landlord deems appropriate. Landlord agrees that neither Tenant nor its
employees shall be charged for the use of the fitness center, except that (i)
the costs incurred by Landlord for the operation and maintenance of the fitness
center shall be deemed Operating Costs for purposes of this Lease which shall be
passed through to Tenant and the other tenants in the Project, and (ii) Landlord
reserves the right to charge users of the fitness center for specific services
or supplies provided (e.g., massages, grooming products, food, etc.).
F. Keys and Access Cards. On or before the Commencement Date,
Landlord shall at its cost provide Tenant with (i) one key to each lockable door
which Landlord installs within the Premises (including the front door), and (ii)
one access card to the Building and underground parking garage for each parking
space set forth in the Schedule. Any additional keys or access cards (including
replacement of lost keys and/or access cards) shall be at Tenant's expense.
Notwithstanding the foregoing, Landlord agrees that Tenant may rekey the locks
to the Premises provided that Tenant shall do so at its own expense and upon
completion shall provide Landlord with copies of any keys (including access
cards) necessary to access the Premises in the event of an emergency or as
necessary to perform Landlord's obligations hereunder. Upon surrender of the
Premises, all Tenant's keys and access cards (whether provided by Landlord or
Tenant) shall be returned to Landlord.
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7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply
with all Governmental Requirements applying to its use, repair and maintenance
of the Premises. Tenant shall also comply with all reasonable nondiscriminatory
rules for the Project which may be established and amended from time to time by
Landlord. The present rules and regulations are contained in Exhibit B. Failure
by another tenant to comply with the rules or failure by Landlord to enforce
them shall not relieve Tenant of its obligation to comply with the rules or make
Landlord responsible to Tenant in any way. Landlord shall use reasonable efforts
to apply the rules and regulations uniformly with respect to Tenant and any
other tenants in the Project under leases containing rules and regulations
similar to this Lease. Tenant shall also comply with the CC&R's, as amended from
time to time.
8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
A. Waiver of Claims, To the extent permitted by law, Tenant
waives any claims it may have against Landlord or its officers, directors,
employees or agents for business interruption or damage to property sustained by
Tenant as the result of any act or omission of Landlord, its agents or
employees. To the extent permitted by law, Landlord waives any claims it may
have against Tenant or its officers, directors, employees or agents for loss of
rents or damage to property sustained by Landlord as the result of any act or
omission of Tenant, its agents or employees.
B. Indemnification. Tenant shall indemnify, defend and hold
harmless Landlord and its officers, directors, employees and agents against any
claim by any third party for injury to any person or damage to or loss of any
property occurring in the Project and arising from the use of the Premises and
the Enclosure Area or from any other act or omission or negligence of Tenant,
its employees, agents or invitees, or Tenant's breach of its obligations under
this Lease. Tenant's obligations under this Section shall survive the
termination of this Lease.
Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees and agents against any claim by any third party
for injury or damage to person or the Premises or Enclosure Area to the extent
caused by the negligence or intentional misconduct of Landlord or any of
Landlord's employees or agents, or Landlord's breach of its obligations under
this Lease. Landlord's obligations under this section shall survive the
termination of this Lease.
C. Tenant's Insurance, Tenant shall maintain insurance as
follows, with such other terms, coverages and insurers, as Landlord shall
reasonably require from time to time:
(1) Commercial General Liability Insurance, with (a)
contractual liability including the indemnification provisions contained in this
Lease, (B) a severability of interest endorsement, (c) limits of not less than
Two Million Dollars ($2,000,000) combined single limit per occurrence and not
less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury,
sickness or death, and property damage, and umbrella coverage of not less than
Five Million Dollars ($5,000,000).
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(2) Property Insurance against "All Risks" of physical
loss covering the replacement cost of all improvements, equipment, fixtures,
trade fixtures and personal property at the Premises or the Enclosure Area.
Tenant waives all rights of subrogation, and Tenant's property insurance shall
include a waiver of subrogation in favor of Landlord.
(3) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease--Policy Limit $500,000
Disease--Each Employee $500,000
Such insurance shall contain a waiver of subrogation provision in favor
of Landlord and its agents.
Tenant's insurance shall be primary and not contributory to that carried
by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's building
manager or agent, mortgagee and ground lessor shall be named as additional
insureds as respects to insurance required of the Tenant in Section 8C(l). The
company or companies writing any insurance which Tenant is required to maintain
under this Lease, as well as the form of such insurance, shall at all times be
subject to Landlord's reasonable approval, and any such company shall be
licensed to do business in the state in which the Building is located. Such
insurance companies shall have a A.M. Best rating of A VI or better.
(4) Tenant shall cause any contractor of Tenant performing work
on the Premises to maintain insurance as follows, with such other terms,
coverages and insurers, as Landlord shall reasonably require from time to time:
(a) Commercial General Liability Insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, broad form property damage endorsement, and contractor's
protective liability coverage, to afford protection with limits, for each
occurrence, of not less than One Million Dollars ($1,000,000) with respect to
personal injury, death or property damage.
(b) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease--Policy Limit $500,000
Disease--Each Employee $500,000
Such insurance shall contain a waiver of subrogation provision in
favor of Landlord and its agents.
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Tenant's contractor's insurance shall be primary and not
contributory to that carried by Tenant, Landlord, their agents or mortgagees.
Tenant and Landlord, and if any, Landlord's building manager or agent, mortgagee
or ground lessor shall be named as additional insured on Tenant's contractor's
insurance policies.
D. Insurance Certificates. Tenant shall deliver to Landlord
certificates evidencing all required insurance no later than five (5) days prior
to the Commencement Date and each renewal date. Each certificate will provide
for thirty (30) days prior written notice of cancellation to Landlord and
Tenant.
E. Landlord's Insurance. Landlord shall maintain "All-Risk"
property insurance at replacement cost, including loss of rents, on the
Building, and Commercial General Liability insurance policies covering the
common areas of the Project, each with such terms, coverages and conditions as
are normally carried by reasonably prudent owners of properties similar to the
Project. With respect to property insurance, Landlord and Tenant mutually waive
all rights of subrogation, and the respective "All-Risk" coverage property
insurance policies carried by Landlord and Tenant shall contain enforceable
waiver of subrogation endorsements.
9. FIRE AND OTHER CASUALTY.
A. Termination. If a fire or other casualty causes substantial
damage to the Building or the Premises, and sufficient insurance proceeds will
be available to Landlord to cover the cost of any restoration to the Building
and Premises, Landlord shall engage a registered architect to certify within one
(1) month of the casualty to both Landlord and Tenant the amount of time needed
to restore the Building and the Premises to tenantability, using standard
working methods without the payment of overtime and other premiums. If the time
needed exceeds twelve (12) months from the beginning of the restoration, or two
(2) months therefrom if the restoration would begin during the last twelve (12)
months of the Lease, then in the case of the Premises, either Landlord or Tenant
may terminate this Lease, and in the case of the Building, Landlord may
terminate this Lease, by notice to the other party within ten (10) days after
the notifying party's receipt of the architect's certificate. If sufficient
insurance proceeds will not be available to Landlord to cover the cost of any
restoration to the Building or the Premises, Landlord may terminate this Lease
by written notice to Tenant. Any termination pursuant to this Section 10A shall
be effective thirty (30) days from the date of such termination notice and Rent
shall be paid by Tenant to that date, with an abatement for any portion of the
space which has been untenantable after the casualty.
B. Restoration. If a casualty causes damage to the Building or
the Premises but this Lease is not terminated for any reason, then subject to
the rights of any mortgagees or ground lessors, Landlord shall obtain the
applicable insurance proceeds and diligently restore the Building and the
Premises subject to current Governmental Requirements. Landlord's obligation,
should it elect or be obligated to repair or rebuild, shall be limited to the
basic Premises, the building-standard Tenant Improvements, or the basic
Building, as the case may be, and Tenant shall, at Tenant's expense, replace or
fully repair its damaged improvements (including any Tenant Improvements in
excess of the building standard), personal property and fixtures, and any
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equipment in the Enclosure Area. Rent shall be abated on a per diem basis during
the restoration for any portion of the Premises which is untenantable, except to
the extent that the casualty was caused by the negligence or intentional
misconduct of Tenant, its agents or employees and Landlord receives insurance
proceeds to cover such Rent loss. Landlord shall have no obligation to challenge
the denial of any claims filed by Landlord with its insurer in connection with
damage caused by Tenant or by any of Tenant's agents, employees or invitees,
unless Tenant pays all of reasonable costs incurred by Landlord to challenge
such denial (including, without limitation, all litigation and/or arbitration
costs, attorneys' fees, consultants' fees, expert witness fees and other costs
reasonably related to the challenging of such denial). Tenant shall not be
entitled to any compensation or damages from Landlord for loss of the use of the
Premises, damage to Tenant's personal property and trade fixtures or any
inconvenience occasioned by such damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereinafter enacted.
10. EMINENT DOMAIN. If a part of the Project is taken by eminent domain
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. If any
substantial portion of the Project is taken without affecting the Premises, then
Landlord may terminate this Lease as of the date of such taking. Rent shall
abate from the date of the taking in proportion to any part of the Premises
taken. The entire award for a taking of any kind shall be paid to Landlord, and
Tenant shall have no right to share in the award; provided, however, that
nothing contained herein shall be deemed to give Landlord any interest in or
require Tenant to assign to Landlord any separate award made to Tenant for the
taking of Tenant's personal property and trade fixtures, or its relocation
costs. All obligations accrued to the date of the taking shall be performed by
each party.
11. RIGHTS RESERVED TO LANDLORD.
Landlord may exercise at any time any of the following rights respecting
the operation of the Project without liability to the Tenant of any kind:
A. Name. To change the name of all or any of the Buildings or the
Project, or the street address of the Buildings or the suite number(s) of the
Premises.
B. Signs. To install, modify and/or maintain any signs on the
exterior and in the interior of the Buildings or on the Project, and to approve
at its sole discretion, prior to installation, any of Tenant's signs in the
Premises visible from the common areas or the exterior of the Building.
C. Window Treatments. To approve, at its discretion, prior to
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.
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D. Keys. To retain (or, in the event Tenant rekeys any of the
locks in the Premises, to be provided) and use at any time passkeys to enter the
Premises or any door within the Premises. Upon the termination of this Lease,
Tenant shall surrender all keys to Landlord.
E. Access. Subject to Tenant's reasonable security requirements,
including the requirement that Landlord be accompanied by a representative of
Tenant (except in the case of an emergency), to have access to the Premises with
twenty four hour prior notice (except in the case of an emergency in which case
Landlord shall have the right to immediate access) to inspect the Premises, and
to perform its obligations, or make repairs, alterations, additions or
improvements, as permitted by this Lease.
F. Preparation for Reoccupancy. To decorate, remodel, repair,
alter or otherwise prepare the Premises for reoccupancy at any time after Tenant
abandons the Premises, without relieving Tenant of any obligation to pay Rent.
G. Heavy Articles. To approve the weight, size, placement and
time and manner of movement within the Building of any safe, central filing
system or other heavy article of Tenant's property. Tenant shall move its
property entirely at its own risk.
H. Show Premises. To show the Premises to prospective purchasers,
tenants, brokers, lenders, mortgagees, investors, rating agencies or others at
any reasonable time, provided that Landlord gives prior notice to Tenant and
does not materially interfere with Tenant's use of the Premises.
I. Relocation of Tenant. Intentionally omitted.
J. Use of Lockbox. To designate a lockbox collection agent for
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment. However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant.
K. Repairs and Alterations. To make repairs or alterations to the
Project and in doing so transport any required material through the Premises, to
close entrances, doors, corridors, elevators and other facilities in the
Project, to open any ceiling in the Premises, or to temporarily suspend services
or use of common areas in the Building. Landlord may perform any such repairs or
alterations during ordinary business hours, except that Tenant may require any
work in the Premises to be done after business hours if Tenant pays Landlord for
overtime and any other expenses incurred. Landlord may do or permit any work on
any nearby building, land, street, alley or way. In performing such repairs or
alterations, Landlord shall use commercially reasonable efforts to not disturb
Tenant's use and occupancy of the Premises.
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L. Landlord's Agents. If Tenant is in default under this Lease,
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.
M. Building Services. To install, use and maintain through the
Premises, pipes, conduits, wires and ducts serving the Building, provided that
such installation, use and maintenance does not unreasonably interfere with
Tenant's use of the Premises.
N. Other Actions. To take any other action which Landlord deems
reasonable in connection with the operation, maintenance or preservation of the
Building and the Project.
12. TENANT'S DEFAULT. Any of the following shall constitute a default by
Tenant:
A. Rent Default. Tenant fails to pay any Rent within three (3)
days after notice that such payment was not paid when due, provided that Tenant
acknowledges that such notice shall be in lieu of and not in addition to any
notice required to be given by Landlord to commence an unlawful detainer action
(or similar eviction proceeding) under the then applicable law;
B. Assignment/Sublease or Hazardous Substances Default. Tenant
fails to perform any of its obligations under Section 17 (Assignment and
Sublease) or Section 28 (Hazardous Substances), provided that if the failure is
of the type which can be cured, then Tenant shall not be in default under this
Lease unless this failure continues for thirty (30) days after written notice
from Landlord, except that if the cure cannot be reasonably expected to be
completed within such thirty (30) days and Tenant begins to cure its failure
within the thirty (30) day period, then so long as Tenant continues to
diligently attempt to cure its failure, the thirty (30) day period shall be
extended to sixty (60) days, or such lesser period as is reasonably necessary to
complete the cure;
C. Other Performance Default. Tenant fails to perform any other
obligation to Landlord under this Lease, and this failure continues for thirty
(30) days after written notice from Landlord, except that if the cure cannot be
reasonably expected to be completed within such thirty (30) days and Tenant
begins to cure its failure within the thirty (30) day period, then so long as
Tenant continues to diligently attempt to cure its failure, the thirty (30) day
period shall be extended to sixty (60) days, or such lesser period as is
reasonably necessary to complete the cure;
D. Credit Default. One of the following credit defaults occurs:
(1) Tenant commences any proceeding under any law relating
to bankruptcy, insolvency, reorganization or relief of debts, or seeks
appointment of a receiver, trustee, custodian or other similar official for the
Tenant or for any substantial part of its property, or any such proceeding is
commenced against Tenant and either remains undismissed for a period of thirty
(30) days or results in the entry of an order for relief against Tenant which is
not fully stayed within seven (7) days after entry;
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(2) Tenant becomes insolvent or bankrupt, does not
generally pay its debts as they become due, or admits in writing its inability
to pay its debts, or makes a general assignment for the benefit of creditors;
(3) Any third party obtains a levy or attachment under
process of law against Tenant's leasehold interest.
E. Abandonment Default. Tenant abandons the Premises.
13. LANDLORD REMEDIES. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
A. Landlord may continue this Lease in full force and effect, and
this Lease shall continue in full force and effect as long as Landlord does not
terminate this Lease, and Landlord shall have the right to collect Rent when
due.
B. Landlord may enter the Premises and release them to third
parties for Tenant's account for any period, whether shorter or longer than the
remaining Term. Tenant shall be liable immediately to Landlord for all
reasonable costs Landlord incurs in reletting the Premises or any part thereof,
including, without limitation, broker's commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Tenant shall
pay to Landlord the Rent and other sums due under this Lease on the date the
Rent is due, less the rent and other sums received by Landlord from any
releasing. No act by Landlord other than giving written notice to Tenant shall
terminate this Lease. Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
C. Landlord may terminate this Lease by giving Tenant written
notice of termination, in which event this Lease shall terminate on the date for
termination set forth in such notice. Tenant shall immediately vacate the
Premises and deliver possession to Landlord, and Landlord may repossess the
Premises and may, at Tenant's sole cost, remove any of Tenant's signs and any of
its other property, without relinquishing its right to receive Rent or any other
right against Tenant. On termination, Landlord has the right to recover from
Tenant as damages:
(1) The worth at the time of award of unpaid Rent and
other sums due and payable which had been earned at the time of termination;
plus
(2) The worth at the time of award of the amount by which
the unpaid Rent and other sums due and payable which after termination until the
time of award exceeds the amount of such Rent loss that Tenant proves could have
been reasonably avoided; plus
(3) The worth at the time of award of the amount by which
the unpaid Rent and other sums due and payable for the balance of the Term after
the time of award exceeds the amount of such Rent loss that Tenant proves could
be reasonably avoided; plus
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(4) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus
(5) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
the laws of the State of California.
The "worth at the time of award" of the amounts referred to in Sections
13C(l) and 13C(2) is computed by allowing interest at the maximum rate permitted
by law on the unpaid rent and other sums due and payable from the termination
date through the date of award. The "worth at the time of award" of the amount
referred to in Section 13C(3) is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). Tenant waives redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, or under any other
present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant hereunder.
D. Landlord's Remedies Cumulative. All of Landlord's remedies
under this Lease shall be in addition to all other remedies Landlord may have at
law or in equity. Waiver by Landlord of any breach of any obligation by Tenant
shall be effective only if it is in writing, and shall not be deemed a waiver of
any other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such other
actions for Tenant's account as reasonably may be required to cure or mitigate
any default by Tenant. Tenant shall immediately reimburse Landlord for any such
advance, and such sums shall bear interest at the default interest rate until
paid.
E. WAIVER OF TRIAL BY JURY, EACH PARTY WAIVES TRIAL BY JURY IN
THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS
LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH
THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN CALIFORNIA, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.
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14. SURRENDER. Upon the expiration or earlier termination of this Lease
for any reason, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and damage by fire or
other casualty excepted, with all interior walls repaired and repainted if
marked or damaged, all carpets shampooed and cleaned, all broken, marred or
nonconforming acoustical ceiling tiles replaced, all windows washed, the
plumbing and electrical systems and lighting in good order and repair, including
replacement of any burned out or broken light bulb or ballasts, and all floors
cleaned and waxed, all to the reasonable satisfaction of Landlord; provided in
no event shall Tenant be required to return the Premises in better condition
than received (except for the Tenant Improvements and other improvements and
alterations made to the Premises by Tenant after the delivery of the Premises to
Tenant). Tenant shall remove from the Premises and the Enclosure Area all
Tenant's personal property and all of Tenant's alterations required to be
removed pursuant to Section 5E, and restore the Premises and Enclosure Area to
its condition prior to their installation. If Tenant fails to remove any
alterations and/or Tenant's personal property, and such failure continues after
the termination of this Lease, Landlord may retain or dispose of such property
and all rights of Tenant with respect to it shall cease, or Landlord may place
all or any portion of such property in public storage for Tenant's account.
Tenant shall be liable to Landlord for costs of removal of any such alterations
and Tenant's personal property and storage and transportation costs of same, and
the cost of repairing and restoring the Premises, together with interest at the
Interest Rate from the date of expenditure by Landlord. If the Premises are not
so surrendered at the termination of this Lease, Tenant shall indemnify Landlord
against all loss or liability, including attorneys' fees and costs, resulting
from delay by Tenant in so surrendering the Premises.
15. HOLDOVER. Tenant shall have no right to holdover possession of the
Premises after the expiration or termination of this Lease without Landlord's
prior written consent which Landlord may withhold in its sole and absolute
discretion. If, however, Tenant retains possession of any part of the Premises
after the Term, Tenant shall become a tenant at sufferance only, for the entire
Premises upon all of the terms of this Lease as might be applicable to such
tenancy, except that Tenant shall pay all of the Base Rent, Operating Cost Share
Rent and Tax Share Rent at double the rate in effect immediately prior to such
holdover, computed on a monthly basis for each fall or partial month Tenant
remains in possession. Tenant shall also pay Landlord all of Landlord's direct
and consequential damages resulting from Tenant's holdover. No acceptance of
Rent or other payments by Landlord under these holdover provisions shall operate
as a waiver of Landlord's right to regain possession or any other of Landlord's
remedies.
16. SUBORDINATION TO GROUND LEASES AND MORTGAGES.
A. Subordination. This Lease shall be subordinate to any present
or future ground lease or mortgage respecting the Project, and any amendments to
such ground lease or mortgage, at the election of the ground lessor or mortgagee
as the case may be, effected by notice to Tenant in the manner provided in this
Lease, provided that the mortgagee or ground lessor and Tenant shall enter into
a non-disturbance agreement, whereby such mortgagee or ground lessor agrees that
notwithstanding such subordination, in the event of foreclosure or deed in lieu
thereof, such mortgagee or ground lessor shall recognize Tenant's rights under
this Lease, and so long as Tenant is not in default under this Lease after the
expiration of any applicable notice and cure
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periods, Tenant may remain in possession of the Premises under the terms of this
Lease. In the event that any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord; provided such mortgagee or beneficiary
recognizes this Lease and Tenant's right to possession of the Premises on the
terms contained herein. Tenant shall execute and deliver such a subordination
and non-disturbance agreement, as well as any additional documents evidencing
the priority or subordination of this Lease with respect to any such mortgage or
deed of trust, within thirty (30) days after receipt of written demand by
Landlord and in the form reasonably requested by Landlord. Landlord represents
that as of the Commencement Date, there is no mortgage or deed of trust
affecting the Project except as set forth in Exhibit D, attached hereto.
B. Termination of Ground Lease or Foreclosure of Mortgage. If any
ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure
given and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project. At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any document furnished by the requesting party to evidence
Tenant's agreement to attorn.
C. Security Deposit. Any ground lessor or mortgagee shall be
responsible for the return of any security deposit by Tenant only to the extent
the security deposit, if any, is received by such ground lessor or mortgagee.
D. Notice and Right to Cure. The Project is subject to any ground
lease and mortgage identified with name and address of ground lessor or
mortgagee in Exhibit D to this Lease (as the same may be amended from time to
time by written notice to Tenant). Tenant agrees to send by registered or
certified mail to any ground lessor or mortgagee identified either in such
Exhibit or in any later notice from Landlord to Tenant a copy of any notice of
default sent by Tenant to Landlord. If Landlord fails to cure such default
within the required time period under this Lease, but ground lessor or mortgagee
begins to cure within ten (10) days after such period and proceeds diligently to
complete such cure, then ground lessor or mortgagee shall have such additional
time as is necessary to complete such cure, including any time necessary to
obtain possession if possession is necessary to cure, and Tenant shall not begin
to enforce its remedies so long as the cure is being diligently pursued.
E. Definitions. As used in this Section 16, "mortgage" shall
include "trust deed" and "deed of trust", "mortgagee" shall include "trustee",
"beneficiary" and the mortgagee of any ground lessee, and "ground lessor",
"mortgagee", and "purchaser at a foreclosure sale" shall include, in each case,
all of its successors and assigns, however remote.
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17. ASSIGNMENT AND SUBLEASE.
A. In General. Except for the "Permitted Transfers" (as defined
in Section 18D below), Tenant shall not, without the prior consent of Landlord
in each case, (i) make or allow any assignment or transfer, by operation of law
or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or
allow any lien or encumbrance, by operation of law or otherwise, upon any part
of Tenant's interest in this Lease, (iii) sublet any part of the Premises, or
(iv) permit anyone other than Tenant and its employees (and its strategic
partners) to occupy any part of the Premises. Tenant shall remain primarily
liable for all of its obligations under this Lease, notwithstanding any
assignment or transfer. No consent granted by Landlord shall be deemed to be a
consent to any subsequent assignment or transfer, lien or encumbrance, sublease
or occupancy. Tenant shall pay all of Landlord's attorneys' fees and other
expenses incurred in connection with any consent requested by Tenant or in
reviewing any proposed assignment or subletting; provided that such attorneys'
fees and review costs shall not exceed $1,000 per assignment or sublet during
the original Term, unless Tenant challenges or disputes either Landlord's
conditions to its approval or its disapproval of the proposed transfer. Except
for a Permitted Transfer, any assignment or transfer, grant of lien or
encumbrance, or sublease or occupancy without Landlord's prior written consent
shall be void. If Tenant shall assign this Lease or sublet any portion of the
Premises for the remainder of the Term to an entity other than a Tenant
Affiliate (as defined in Section 17.D below), then any rights of Tenant to renew
this Lease or extend the Term as to the portion of the Premises which was
subleased or assigned shall be extinguished thereby and will not be transferred
to the assignee or subtenant, all such rights being personal to the Tenant named
herein. For example, if Tenant subleases the space in Suite 600 for the
remainder of the Term to a non-Tenant Affiliate, then Tenant's right to extend
the Term pursuant to Section 32 shall no longer apply to the Suite 600 portion
of the Premises.
B. Landlord's Consent. Landlord will not unreasonably withhold or
delay or condition its consent to any proposed assignment or subletting. It
shall be reasonable for Landlord to withhold its consent to any assignment or
sublease if (i) Tenant is in default under this Lease, (ii) the proposed
assignee or sublessee is a tenant in the Project, (iii) the financial
responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iv) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord's standards for the Building or are in violation of the terms of this
Lease or any other leases in the Project, or (v) the proposed assignee or
subtenant is a government entity. The foregoing shall not exclude any other
reasonable basis for Landlord to withhold its consent.
C. Procedure. Tenant shall notify Landlord of any proposed
assignment or sublease at least thirty (30) days prior to its proposed effective
date. The notice shall include the name and address of the proposed assignee or
subtenant, its corporate affiliates in the case of a corporation and its
partners in a case of a partnership, an execution copy of the proposed
assignment or sublease, and sufficient information to permit Landlord to
determine the financial responsibility and character of the proposed assignee or
subtenant. As a condition to any effective assignment of this Lease, the
assignee shall execute and deliver in form satisfactory to Landlord at least
fifteen (15) days prior to the effective date of the assignment, an assumption
of all of the
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obligations of Tenant under this Lease. As a condition to any effective
sublease, subtenant shall execute and deliver in form satisfactory to Landlord
at least fifteen (15) days prior to the effective date of the sublease, an
agreement to comply with all of Tenant's obligations under this Lease, and at
Landlord's option, an agreement (except for the economic obligations which
subtenant will undertake directly to Tenant) to attorn to Landlord under the
terms of the sublease in the event this Lease terminates before the sublease
expires.
D. Permitted Transfers to Affiliates. If no default on the part
of Tenant has occurred and is continuing, Tenant may assign this Lease or sublet
any portion of the Premises (hereinafter collectively referred to as a
"Permitted Transfer") to (i) a parent or subsidiary of Tenant, (ii) an entity
into which Tenant is merged or consolidated, (iii) an entity to which
substantially all of Tenant's assets are transferred, or (iv) an association or
joint venture in which Tenant has a material interest as evidenced in a written
partnership or joint venture agreement (collectively, "Tenant Affiliate"),
without first obtaining Landlord's written consent, if Tenant notifies Landlord
at least ten (10) business days prior to the Permitted Transfer and provides
Landlord with (a) in the case of a Permitted Transfer described in subsections
(i), (ii) or (iii), information satisfactory to Landlord in order to determine
the net worth both of the successor entity and of Tenant immediately prior to
such assignment, and showing the net worth of the successor to be at least equal
to the net worth of Tenant, or (b) in the case of a Permitted Transfer to an
association or joint venture in which Tenant has a material interest, a copy of
the executed partnership or joint venture agreement which documents that Tenant
has a material interest in such association or joint venture, In the event of a
Permitted Transfer, the provisions of Sections 17.C, 17.E, 17.F and 32.D shall
not apply, provided that Tenant shall still be obligated to provide prior
written notice of such Permitted Transfer to Landlord.
E. Excess Payments. If Tenant shall assign this Lease or sublet
any part of the Premises for consideration in excess of the pro-rata portion of
Rent applicable to the space subject to the assignment or sublet, then Tenant
shall pay to Landlord as Additional Rent fifty percent (50%) of any such excess
immediately upon receipt; provided that Tenant shall be entitled to first
recover the reasonable marketing expenses, leasing commission, attorneys' fees
and tenant improvement costs incurred in connection with such assignment or
sublet before making such Additional Rent payments to Landlord).
F. Recapture. Landlord may, by giving written notice to Tenant
within thirty (30) days after receipt of Tenant's notice of a proposed
assignment or sublet of some or all of the Premises for the remainder of the
Term, terminate this Lease with respect to the space described in Tenant's
notice, as of the effective date of the proposed assignment or sublease and all
obligations under this Lease as to such space shall expire except as to any
obligations that expressly survive any termination of this Lease.
18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
interest in the Project or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any portion of the Security Deposit (including the Letter of Credit) not
delivered to its transferee, and Tenant shall look solely to
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Landlord's successors for performance of such obligations provided that such
successors assume Landlord's obligations hereunder. This Lease shall not be
affected by any such transfer.
19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested. Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit, and that the non-certifying party has no claims or
offsets against the requesting party.
20. LEASE DEPOSIT. Tenant shall deposit with Landlord on the date Tenant
executes and delivers this Lease to Landlord the cash sums set forth in the
Schedule for both the "Prepaid Rent" and the Security Deposit (or, at Tenant's
election, a "Letter of Credit" in the amount of the Security Deposit in the form
described herein) (collectively, the "Lease Deposit").
A. Prepaid Rent. The Prepaid Rent (which shall be paid by Tenant
upon the execution and delivery of this Lease) shall be applied by Landlord
against the first full month's Base Rent payment obligation hereunder.
B. Security Deposit. As of the Commencement Date, the Security
Deposit shall be equal to any cash portion of the Security Deposit as set forth
in the Schedule, and any Letter of Credit; provided that the sum of such cash
Security Deposit and Letter of Credit shall be at all times during the Term be
equal or greater than the sum set forth in the Schedule (i.e., $255,877.40). The
"Letter of Credit" shall (i) be in the form of an unconditional and irrevocable
letter of credit which is acceptable to Landlord, (ii) name Landlord as
beneficiary, (iii) expressly allow Landlord to draw upon it at any time from
time to time by delivering to the issuer notice that Landlord is entitled to
draw thereunder, (iv) be drawable on an FDIC-insured financial institution
satisfactory to Landlord, and (v) be redeemable in the state of Landlord's
choice. If Tenant does not provide Landlord with a substitute Letter of Credit
complying with all of the requirements hereof at least thirty (30) days before
the stated expiration date of the current Letter of Credit, then Landlord shall
have the right to draw upon the current Letter of Credit and hold the funds
drawn as part of the Security Deposit.
The Security Deposit shall be held by Landlord during the Term as security for
the performance of all of Tenant's obligations hereunder. If Tenant defaults
under this Lease, Landlord may apply
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all or any part of the Security Deposit for the payment of any Rent or other sum
in default, the repair of any damage to the Premises caused by Tenant or the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default to the full
extent permitted by law. Tenant hereby waives any restriction on the use or
application of the Security Deposit by Landlord as set forth in California Civil
Code Section 1950.7. To the extent any portion of the Security Deposit is used,
Tenant shall within five (5) days after demand from Landlord restore the deposit
to its full amount. Landlord may keep the Security Deposit in its general funds
and shall not be required to pay interest to Tenant on the deposit amount. If
Tenant shall perform all of its obligations under this Lease and return the
Premises to Landlord at the end of the Term, Landlord shall return all of the
remaining Security Deposit to Tenant within thirty (30) days after the end of
the Term. The Security Deposit shall not serve as an advance payment of Rent or
a measure of Landlord's damages for any default under this Lease. If Landlord
transfers its interest in the Project or this Lease, Landlord may transfer the
Security Deposit to its transferee. Upon such transfer, Landlord shall have no
further obligation to return the Security Deposit to Tenant, and Tenant's right
to the return of the Security Deposit shall apply solely against Landlord's
transferee.
Notwithstanding the foregoing, if on February 28, 2001 Tenant is not in default
beyond any applicable cure period in the performance of any of its obligations
hereunder, Landlord shall return the Security Deposit (including any Letter of
Credit) to Tenant.
21. FORCE MAJEURE. Neither Landlord or Tenant shall be in default under
this Lease to the extent that party is unable to perform any of its obligations
on account of any strike or labor problem, equipment, material, supplies or
energy shortages (i.e., such items cannot be obtained at normal costs within a
reasonable time because of limited availability), governmental pre-emption or
prescription, national emergency, or any other cause of any kind beyond the
reasonable control of the party required to act (provided that the foregoing
shall not apply to any monetary obligation) ("Force Majeure").
22. TENANT'S PERSONAL PROPERTY AND FIXTURES. Intentionally omitted.
23. NOTICES. All notices, consents, approvals and similar communications
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:
A. Landlord. To Landlord as follows:
CarrAmerica Realty Corporation
1810 Gateway Drive, Suite 150
San Mateo, California 94404
Attn: Market Officer
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with a copy to:
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Lease Administration
or to such other person at such other address as Landlord may designate by
notice to Tenant.
B. Tenant. To Tenant as follows:
Zilog, Inc.
910 East Hamilton
Campbell, California 95008
Attn: Robert E. Collins
With a copy of all default notices only to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Attn: Toni Pryor Wise, Esq.
or to such other person at such other address as Tenant may designate by notice
to Landlord.
Mailed notices shall be sent by United States certified or registered
mail, or by a reputable national overnight courier service, postage prepaid.
Mailed notices shall be deemed to have been given on the earlier of actual
delivery or three (3) business days after posting in the United States mail in
the case of registered or certified mail, and one business day in the case of
overnight courier.
24. QUIET POSSESSION. So long as Tenant shall perform all of its
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord, subject to the
terms of this Lease.
25. REAL ESTATE BROKER. Landlord and Tenant each represents and warrants
to the other that it has not dealt with any real estate broker with respect to
this Lease, except for the broker(s) listed in the Schedule, and no other broker
is in any way entitled to any broker's fee or other payment in connection with
this Lease. Landlord and Tenant each agrees to indemnify and hold the other
harmless from any and all claims by any broker, agent or person claiming a
commission or other form of compensation by virtue of this Amendment as a result
of such party's dealings with the party from whom indemnification is sought.
Landlord shall pay the real estate brokerage commission due Cornish & Carey
Commercial ("C&C") pursuant to the terms and conditions set forth in a separate
agreement between Landlord and C&C.
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26. MISCELLANEOUS.
A. Successors and Assigns. Subject to the limits on Tenant's
assignment contained in Section 17, the provisions of this Lease shall be
binding upon and inure to the benefit of all successors and assigns of Landlord
and Tenant.
B. Date Payments Are Due. Except for payments to be made by
Tenant under this Lease which are due upon demand, Tenant shall pay to Landlord
any amount for which Landlord renders a statement of account within thirty (30)
days of Tenant's receipt of Landlord's statement.
C. Meaning of "Landlord". "Re-Entry, "including" and "Affiliate".
The term "Landlord" means only the owner of the Project and the lessor's
interest in this Lease from time to time. The words "re-entry" and "re-enter"
are not restricted to their technical legal meaning. The words "including" and
similar words shall mean "without limitation." The word "affiliate" shall mean a
person or entity controlling, controlled by or under common control with the
applicable entity. "Control" shall mean the power directly or indirectly, by
contract or otherwise, to direct the management and policies of the applicable
entity.
D. Time of the Essence. Time is of the essence of each provision
of this Lease.
E. No Option, This document shall not be effective for any
purpose until it has been executed and delivered by both parties; execution and
delivery by one party shall not create any option or other right in the other
party.
F. Severability. The unenforceability of any provision of this
Lease shall not affect any other provision.
G. Governing Law. This Lease shall be governed in all respects by
the laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.
H. Lease Modification. Tenant agrees to modify this Lease in any
way requested by a mortgagee which does not cause increased expense or
obligation to Tenant or otherwise materially adversely affect Tenant's interests
under this Lease.
I. No Oral Modification. No modification of this Lease shall be
effective unless it is a written modification signed by both parties.
J. Landlord's Right to Cure. If Landlord breaches any of its
obligations under this Lease, Tenant shall notify Landlord in writing and shall
take no action respecting such breach so long as Landlord promptly begins to
cure the breach and diligently pursues such cure to its completion. Landlord may
cure any default by Tenant; any expenses incurred shall become Additional Rent
due from Tenant on demand by Landlord.
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K. Captions. The captions used in this Lease shall have no effect
on the construction of this Lease.
L. Authority. Landlord and Tenant each represents to the other
that it has full power and authority to execute and perform this Lease.
M. Landlord's Enforcement of Remedies. Landlord may enforce any
of its remedies under this Lease either in its own name or through an agent.
N. Entire Agreement. This Lease, together with all Appendices,
constitutes the entire agreement between the parties. No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.
O. Landlord's Title, Landlord's title shall always be paramount
to the interest of the Tenant, and nothing in this Lease shall empower Tenant to
do anything which might in any way impair Landlord's title.
P. Light and Air Rights. Landlord does not grant in this Lease
any rights to light and air in connection with Project. Landlord reserves to
itself, the Land, the Building below the improved floor of each floor of the
Premises, the Building above the ceiling of each floor of the Premises, the
exterior of the Premises and the areas on the same floor outside the Premises,
along with the areas within the Premises required for the installation and
repair of utility lines and other items required to serve other tenants of the
Building.
Q. Singular and Plural. Wherever appropriate in this Lease, a
singular term shall be construed to mean the plural where necessary, and a
plural term the singular. For example, if at any time two parties shall
constitute Landlord or Tenant, then the relevant term shall refer to both
parties together.
R. No Recording by Tenant. Tenant shall not record in any public
records any memorandum or any portion of this Lease.
S. Exclusivity. Landlord does not grant to Tenant in this Lease
any exclusive right except the right to occupy its Premises.
T. No Construction Against Drafting Party. The rule of
construction that ambiguities are resolved against the drafting party shall not
apply to this Lease.
U. Survival. All obligations of Landlord and Tenant under this
Lease shall survive the termination of this Lease.
V. Rent Not Based on Income. No Rent or other payment in respect
of the Premises shall be based in any way upon net income or profits from the
Premises. Tenant may not enter into or permit any sublease or license or other
agreement in connection with the Premises which provides for a rental or other
payment based on net income or profit.
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W. Building Manager and Service Providers. Landlord may perform
any of its obligations under this Lease through its employees or third parties
hired by the Landlord.
X. Late Charge and Interest on Late Payments. Without limiting
the provisions of Section 12A, if Tenant fails to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay upon
demand a late charge equal to the greater of five percent (5%) of the amount of
such payment or $250. In addition, interest shall be paid by Tenant to Landlord
on any late payments of Rent from the date due until paid at the rate provided
in Section 2D(2). Such late charge and interest shall constitute Additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.
Y. Attorneys' Fees. If either party shall bring any action or
legal proceeding for damages for an alleged breach of any provision of this
Lease to recover Rent or other sums due, to terminate the tenancy of the
Premises or to enforce, protect or establish any term, condition or covenant of
this Lease or right of either party, the prevailing party shall be entitled to
recover, as a part of the action or proceedings, or in a separate action brought
for that purpose, reasonable attorneys' fees and related court costs, including
expert witness fees, as may be fixed by the court or jury. The prevailing party
shall be the party that secures a final judgment in its favor.
27. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.
28. HAZARDOUS SUBSTANCES.
A. Tenant shall not cause or permit any Hazardous Substances to
be brought upon, stored, or used in, on or under the Project other than such
quantities of Hazardous Substances as are customary and reasonably necessary for
the conduct of the Permitted Uses listed in the Schedule to this Lease, and
which are listed in the Chemical Inventory attached hereto as Exhibit F, unless
Landlord has consented in writing to the storage or use of larger quantities of
such Hazardous Substances or to the use and storage of additional Hazardous
Substances, in its sole discretion. Any handling, transportation, storage,
treatment, disposal or use of any Hazardous Substances in or about the Project
by Tenant, its agents, employees, contractors or invitees shall strictly comply
with all applicable Governmental Requirements. Tenant shall indemnify, defend
and hold Landlord harmless from and against any liabilities, losses, claims,
damages, penalties, fines, attorneys' fees and court costs, remediation costs,
investigation costs and any other expenses which result from or arise out of the
use, storage, treatment, transportation, release, or disposal of any Hazardous
Substances on or about the Project by Tenant, its agents, employees, contractors
or invitees. If any lender or governmental agency shall require testing for
Hazardous Substances in the Premises or the Enclosure Area, Tenant shall pay
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for such testing. In addition, Tenant may use and store in the Premises certain
Hazardous Substances, such as inks, document duplication fluids and janitorial
cleaning fluids (the "Necessary Hazardous Substances") as are necessary in the
normal operation of Tenant's business in the Premises, if Tenant (i) transports
all such Necessary Hazardous Substances to and from the Premises only via the
loading dock and the freight elevator; (ii) uses and stores all Necessary
Hazardous Substances in accordance with all applicable Governmental
Requirements; (iii) indemnifies and holds Landlord harmless from any claims,
costs or damages arising from the presence of any Necessary Hazardous Substances
in the Building; and (iv) pays any increased insurance premiums arising from the
presence of any Necessary Hazardous Substances in the Building.
B. "Hazardous Substances" means any hazardous or toxic
substances, materials or waste which are or become regulated by any local
government authority, the state in which the Project is located or the United
States government, including those substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or
local law, and the regulations adopted under these laws.
29. FINANCIAL STATEMENTS. Within ten (10) days after Landlord's written
request therefor, Tenant shall deliver to Landlord the current financial
statements of Tenant, and financial statements of the two (2) years prior to the
current financial statements year, with an opinion of a certified public
accountant, including a balance sheet and profit and loss statement for the most
recent prior year, all prepared in accordance with generally accepted accounting
principles consistently applied; provided in no event shall Tenant be required
to disclose any material nonpublic information or to produce any financial
statements other than those already in existence at the time of a request.
30. EXCULPATION. Landlord shall have no personal liability under this
Lease; its liability shall be limited to its interest in the Project, and shall
not extend to any other property or assets of the Landlord. In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.
31. RIGHT OF FIRST NEGOTIATION. Provided that Tenant is not then in
default in the performance of any of its obligations under this Lease (beyond
any applicable cure period) and subject to the terms and conditions set forth
herein, Landlord grants to Tenant the following right of first negotiation
("Right of First Negotiation") with respect to any space contained in the
Building ("Expansion Space") which becomes available during the original Term.
This Right of First Negotiation shall be subject to any extension or renewal
which may occur in connection with the then existing tenant of such Expansion
Space. When Expansion Space becomes available, Tenant shall have fifteen (15)
days following its receipt of Landlord's notice that such space is available to
respond. Tenant's failure to respond during such period shall be deemed to be
Tenant's election to pass on the available Expansion Space. In the event
Landlord receives written notice from Tenant during such period of Tenant's
interest in the available space, then Landlord
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and Tenant shall meet and confer within the fifteen (15) day period following
Landlord's receipt of Tenant's notice to agree on the terms and conditions upon
which Tenant would lease the Expansion Space from Landlord. If Landlord and
Tenant are able to agree on the terms on which Landlord would lease the
Expansion Space to Tenant, Landlord and Tenant agree to execute an amendment to
this Lease to incorporate those terms agreed to by Landlord and Tenant. In the
event Landlord and Tenant are unable to agree on the terms for the Expansion
Space within the fifteen (15) day period following Landlord's receipt of
Tenant's notice regarding Tenant's interest in the available Expansion Space (or
in the event Tenant passes on such space, or is deemed to have passed on such
space), Landlord shall be free to market such space to any third parties without
any liability to Tenant. Landlord and Tenant agree to negotiate in good faith
taking into consideration the following factors: (i) the rental rates of similar
projects in the geographic area of the Project (including the rent, operating
costs, and all other monetary payments that Landlord could obtain for the
Expansion Space from a third party desiring to lease such space, the services
provided under the terms of the Lease, the obligation, or lack thereof, to pay
tenant improvement costs and leasing commissions in connection with such renewal
and all other monetary payments then being obtained for new leases of space
comparable to such space), and (ii) it should be assumed that the Expansion
Space will be used for the highest and best use allowed under the Lease. The
Right of First Negotiation described herein is personal to Tenant and may not be
exercised or assigned, voluntarily or involuntarily, by or to any person or
entity other than Tenant, without Landlord's prior written consent, which
Landlord may withhold in its sole and absolute discretion.
32. EXTENSION OPTION. Subject to Subsection B below, Tenant may at its
option extend the Term of this Lease for one (1) period of three (3) years (the
"Renewal Term"). The Renewal Term shall be upon the same terms contained in this
Lease, except that (i) Landlord shall have no obligation to provide Tenant with
any Tenant Improvement Allowances in connection with the Renewal Term, (ii) the
Base Rent during the Renewal Term shall be calculated as set forth below, and
(iii) any reference in the Lease to the "Term" of the Lease shall be deemed to
include the Renewal Term and apply thereto, unless it is expressly provided
otherwise. Tenant shall have no additional extension options.
A. The Base Rent during the Renewal Term shall be the greater of
(i) the Base Rent applicable to the last month prior to the Renewal Term, or
(ii) one hundred percent (100%) of the Market Rate (defined hereinafter) for
such space for a term commencing on the first day of the Renewal Term. "Market
Rate" shall mean the then prevailing market rate for a comparable term
commencing on the first day of the Renewal Term for tenants of comparable size
and creditworthiness for comparable space in the Building and other first class
buildings of comparable age with similar facilities in the vicinity of the
Building.
B. To exercise any option, Tenant must deliver a binding notice
to Landlord not sooner than twelve (12) months nor later than six (6) months
prior to the expiration of the initial Term of this Lease. Thereafter, the
Market Rate for the Renewal Term shall be calculated pursuant to Subsection C
below and Landlord shall inform Tenant of the Market Rate. Such calculations
shall be final and shall not be recalculated at the actual commencement of the
Renewal
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Term. If Tenant fails to timely give its notice of exercise, Tenant will be
deemed to have waived its option to extend.
C. Market Rate shall be determined as follows:
(i) If Tenant provides Landlord with its binding notice of
exercise pursuant to Subsection B above, then prior to the commencement date of
the Renewal Term Landlord shall calculate and inform Tenant of the Market Rate.
If Tenant rejects the Market Rate as calculated by Landlord, Tenant shall inform
Landlord of its rejection within ten (10) days after Tenant's receipt of
Landlord's calculation, and Landlord and Tenant shall commence negotiations to
agree upon the Market Rate. If Tenant fails to timely reject Landlord's
calculation of the Market Rate it will be deemed to have accepted such
calculation. If Landlord and Tenant are unable to reach agreement within
twenty-one (21) days after Landlord's receipt of Tenant's notice of rejection,
then the Market Rate shall be determined in accordance with (ii) below.
(ii) If Landlord and Tenant are unable to reach agreement
on the Market Rate within said twenty-one (21) day period, then within seven (7)
days, Landlord and Tenant shall each simultaneously submit to the other in a
sealed envelope its good faith estimate of the Market Rate. If the higher of
such estimates is not more than one hundred five percent (105%) of the lower,
then the Market Rate shall be the average of the two. Otherwise, the dispute
shall be resolved by arbitration in accordance with (iii) below.
(iii) Within seven (7) days after the exchange of
estimates, the parties shall select as an arbitrator an independent MAI
appraiser with at least five (5) years of experience in appraising office space
in the metropolitan area in which the Project is located (a "Qualified"
Appraiser"). If the parties cannot agree on a Qualified Appraiser, then within a
second period of seven (7) days, each shall select a Qualified Appraiser and
within ten (10) days thereafter the two appointed Qualified Appraisers shall
select a third Qualified Appraiser and the third Qualified Appraiser shall be
the sole arbitrator. If one party shall fail to select a Qualified Appraiser
within the second seven (7) day period, then the Qualified Appraiser chosen by
the other party shall be the sole arbitrator.
(iv) Within twenty-one (21) days after submission of the
matter to the arbitrator, the arbitrator shall determine the Market Rate by
choosing whichever of the estimates submitted by Landlord and Tenant the
arbitrator judges to be more accurate. The arbitrator shall notify Landlord and
Tenant of its decision, which shall be final and binding. If the arbitrator
believes that expert advice would materially assist him, the arbitrator may
retain one or more qualified persons to provide expert advice. The fees of the
arbitrator and the expenses of the arbitration proceeding, including the fees of
any expert witnesses retained by the arbitrator, shall be paid by the party
whose estimate is not selected. Each party shall pay the fees of its respective
counsel and the fees of any witness called by that party.
D. Tenant's option to extend is personal to Tenant and may not be
exercised or assigned, voluntarily or involuntarily, by or to any person or
entity other than Tenant, without Landlord's prior written consent, which
Landlord may withhold in its sole and absolute discretion.
39
<PAGE> 45
Tenant's option to extend this Lease is subject to the conditions that: (i) on
the date that Tenant delivers its binding notice exercising an option to extend,
Tenant is not in default under this Lease after the expiration of any applicable
notice and cure periods, and (ii) Tenant shall not have assigned the Lease as
to, or entered into a sublet for, that portion of the Premises which Tenant
intends to extend the Term (except pursuant to a Permitted Transfer).
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
LANDLORD:
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ PHILLIP HAWKINS
-------------------------------
Print Name: Phillip Hawkins
-----------------------
Print Title: Managing Director
----------------------
Date: 2/24/98
-----------------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - TENANT'S SIGNATURES ON FOLLOWING
PAGE.]
40
<PAGE> 46
TENANT:
ZILOG, INC.,
a Delaware corporation
By: /s/ ROBERT E. COLLINS
-------------------------------
Print Name: Robert E. Collins
-----------------------
Print Title: Vice President CFO
----------------------
Date: 2/20/98
-----------------------------
By: /s/ CURTIS J. CRAWFORD
-------------------------------
Print Name: Curtis J. Crawford
-----------------------
Print Title: President
----------------------
Date: 2/20/98
-----------------------------
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF ZILOG, INC.
1. Zilog Europe, a California corporation.
2. Zilog Asia Ltd., a Hong Kong company.
3. Zilog Philippines, Inc., a Philippines corporation.
4. Zilog Electronics Philippines, Inc. a Philippines corporation
and wholly owned subsidiary of Zilog Philippines, Inc.
5. Zilog Japan KK, a Japanese company.
6. Zilog TOA Company, a California corporation.
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of our firm under the captions "Summary Historical
and Pro Forma Consolidated Financial Data," "Selected Consolidated Financial
Data" and "Experts," and to the use of our report dated February 6, 1998,
except for Note 2, as to which the date is February 27, 1998, in the
Registration Statement (Form S-4) and related Prospectus of Zilog, Inc. for the
registration of $280,000,000 of 9 1/2% Senior Secured Notes due 2005.
/s/ Ernst & Young LLP
San Jose, California Ernst & Young LLP
April 27, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
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) [ ]
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1867445
(Jurisdiction of Incorporation or organization (I.R.S. Employer Identification No.)
if not a U.S. national bank)
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
</TABLE>
JOHN R. TOWERS, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
-------------------
ZILOG, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 133092996
(State or other jurisdiction of (I.R. S. Employer Identification No.)
incorporation or organization)
</TABLE>
210 EAST HACIENDA AVENUE
CAMPBELL, CALIFORNIA 95008
9-1/2% SENIOR SECURED NOTES DUE 2005
(Title of indenture securities)
================================================================================
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The
Commonwealth of Massachusetts, 100 Cambridge Street,
Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. Not applicable.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as
now in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
-2-
<PAGE> 3
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as
Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference
thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the
documents specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
4. A copy of the existing bylaws of the trustee, or instruments
corresponding thereto.
A copy of the bylaws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
5. A copy of each indenture referred to in item 4, if the obligor is
in default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of
the Act is annexed hereto as Exhibit 6 and made a part
hereof.
-3-
<PAGE> 4
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2 of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, "hereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 28th day of April, 1998.
STATE STREET BANK AND TRUST COMPANY
By /s/ STEVEN CIMALORE
-----------------------------
Name Steven Cimalore
--------------------------
Title Vice President
--------------------------
-5-
<PAGE> 6
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Zilog, Inc.
of its 9-1/2% Senior Secured Notes due 2005 we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By /s/ STEVEN CIMALORE
-------------------------------
Name Steven Cimalore
------------------------------
Title Vice President
-----------------------------
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-05-1998
<CASH> 66,890
<SECURITIES> 0
<RECEIVABLES> 28,357
<ALLOWANCES> 250
<INVENTORY> 32,511
<CURRENT-ASSETS> 147,622
<PP&E> 422,718
<DEPRECIATION> 207,756
<TOTAL-ASSETS> 373,105
<CURRENT-LIABILITIES> 53,831
<BONDS> 280,000
0
25,000
<COMMON> 200
<OTHER-SE> (1,996)
<TOTAL-LIABILITY-AND-EQUITY> 373,105
<SALES> 49,539
<TOTAL-REVENUES> 49,539
<CGS> 40,767
<TOTAL-COSTS> 40,767
<OTHER-EXPENSES> 8,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,978
<INCOME-PRETAX> (28,484)
<INCOME-TAX> (8,545)
<INCOME-CONTINUING> (19,939)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,939)
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>EARNINGS PER SHARE IS NOT APPLICABLE.
</FN>
</TABLE>
<PAGE> 1
Exhibit 99.1
FORM OF LETTER OF TRANSMITTAL
ZILOG, INC.
Offer to Exchange
9-1/2% Senior Secured Notes due 2005,
which have been registered under the Securities Act of 1933, as amended,
for any and all Outstanding
9-1/2% Senior Secured Notes due 2005
Pursuant to the Prospectus, dated _, 1998.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
______________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON ___________________, 1998.
Delivery to: State Street Bank and Trust Company, Exchange Agent
<TABLE>
<S> <C>
By Mail: By Overnight Mail or Courier:
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand in New York to 5:00 p.m. By Hand in Boston to 5:00 p.m.
(as drop agent): Two International Place
61 Broadway Fourth Floor
15th Floor Corporate Trust
Corporate Trust Window Boston, Massachusetts 02110
New York, NY 10006
</TABLE>
For information call:
(617) 664-5587
Delivery of this instrument to an address other than as set forth above
will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus, dated
__________, 1998 (the "Prospectus"), of Zilog, Inc., a Delaware corporation,
(the "Issuer" or "Zilog"), and this Letter of Transmittal (this "Letter"), which
together constitute the offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $280,000,000 of 9-1/2% Senior Secured Notes due 2005
(the "New Notes") for an equal principal amount at maturity of the outstanding
9-1/2% Senior Secured Notes due 2005 (the "Old Notes"). State Street Bank and
Trust Company is the exchange agent for the Exchange Offer (the "Exchange
Agent").
For each Old Note accepted for exchange, the holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. The New Notes will accrue interest at
<PAGE> 2
9-1/2% per annum. Interest on the New Notes is payable semi-annually in arrears
on March 1 and September 1 of each year commencing September 1, 1998.
Notwithstanding the foregoing, liquidated damages ("Liquidated Damages")
shall become payable in respect of the Old Notes as follows:
If (a) the Issuer fails to file a registration statement with respect to
the New Notes (the "Exchange Offer Registration Statement") or a shelf
registration statement covering resales of the Old Notes (the "Shelf
Registration Statement", and, collectively, the "Registration Statements") as
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Issuer fails to
consummate the Exchange Offer within 180 days after the date at which the Old
Notes were issued (the "Issue Date") as required by the Regulation Rights
Agreement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
(as defined in "The Exchange Offer -- Terms of the Exchange Offer" section of
the Prospectus) during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Issuer will pay Liquidated Damages as follows:
to each holder of Transfer Restricted Securities, with respect to such 90-day
period immediately following the occurrence of the first Registration Default in
an amount equal to $0.05 per week per $1,000 principal amount of Transfer
Restricted Securities held by such holder. The amount of the Liquidated Damages
will increase by an additional $0.05 per week per $1,000 principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.25 per week per $1,000 principal amount of Transfer
Restricted Securities. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
The Issuer reserves the right (i) to delay acceptance of any Old Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Old Notes not previously accepted if any of the conditions set
forth in "The Exchange Offer-- Conditions" section of the Prospectus shall have
occurred and shall not have been waived by the Issuer, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (ii) to
amend the terms of the Exchange Offer in any manner deemed by it to be
advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the Exchange Agent. If the Exchange Offer
is amended in a manner determined by the Issuer to constitute a material change,
the Issuer will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Old Notes of such amendment.
This Letter is to be completed by a holder of Old Notes either if Old
Notes are to be forwarded herewith or if a tender of Old Notes, if available, is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in "The Exchange Offer" section of the
Prospectus. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
<PAGE> 3
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES 1 2 3
- ------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Certificate Aggregate Principal Amount
Holder(s) (Please fill in, if blank) Number(s)* Principal Amount at Maturity
at Maturity of Old Tendered**
Note(s)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2. Old Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________
Account Number Transaction Code Number__________________________________
[ ] CHECK HERE IF TENDERED OLD 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______________________
Name of Institution which guaranteed delivery___________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number __________ Transaction Code Number __________
[ ] 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:________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Issuer all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Issuer 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 accepted by the Issuer. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaged in, or intends to engage in a distribution of such New Notes,
or has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and that neither the holder of such Old Notes
nor any such other person is an "affiliate as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Issuer.
The undersigned also acknowledges that this Exchange Offer is being made
based upon the Issuer's understanding of an interpretation by the staff of the
Securities and Exchange Commission (the "Commission") as set forth in no-action
letters issued to third parties, including Exxon Capital Holdings Corporation,
SEC No-Action Letter (available April 13, 1988), Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June 5, 1991) and Shearman &
Sterling, SEC No-Action Letter (available July 2, 1993), that the New Notes
issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by each holder thereof
(other than a broker-dealer who acquires such New Notes directly from the Issuer
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or any such holder that is an "affiliate" of
the Issuer 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 New Notes are acquired in the ordinary course
of such holder's business and such holder is not engaged in, and does not intend
to engage in, a distribution of such New Notes and has no arrangement with any
person to participate in the distribution of such New Notes. If a holder of Old
Notes is engaged in or intends to engage in a distribution of the New Notes or
has any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder may not rely on
the applicable interpretations of the staff of the Commission and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such New 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 Issuer to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal of Tenders"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not
<PAGE> 5
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Notes, please credit the account indicated above maintained at
the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the New
Notes (and, if applicable, substitute certificates representing Old Notes for
any Old Notes not exchanged) to the undersigned at the address shown above in
the box entitled "Description of Old Notes".
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 6
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of and sent to someone other than the
person(s) whose signature(s) appear(s) on this Letter above, or if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue New Notes and/or Notes to:
Name(s):
------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------------
(Including Zip Code)
(Complete accompanying Substitute Form W-9)
Credit unexchanged Old Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility
account set forth below.
- --------------------------------------------------------------------------------
(Book-Entry Transfer Facility Account Number, if applicable)
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be sent to someone other than the person(s) whose signature(s)
appear(s) on this Letter above or to such person(s) at an address other than
shown in the box entitled "Description of Old Notes" on this Letter above.
Mail New Notes and/or Old Notes to:
Name(s):
------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
IMPORTANT: THIS LETTER (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A
BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
<PAGE> 7
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute Form W-9)
Dated: ..................................................................., 1998
...............................................................................x
...................... ........................................................x
(Signature(s) of Owner) (Date)
Area Code and Telephone Number: ........................................
If a holder is tendering any Old Notes, this Letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s): ...............................................................
........................................................................
(Please Type or Print)
Capacity: ..............................................................
Address: ...............................................................
........................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:................................................
(Authorized Signature)
........................................................................
(Title)
........................................................................
(Name and Firm)
Dated: ..........................................................., 1998
<PAGE> 8
INSTRUCTIONS
Zilog, Inc.
Forming Part of the Terms and Conditions of the Offer to Exchange
9-1/2% Senior Secured Notes due 2005,
which have been registered under the Securities Act of
1933, as amended, for any and all Outstanding 9-1/2%
Senior Secured Notes due 2005.
1. Delivery of this Letter and Old Notes; Guaranteed Delivery Procedures.
This Letter is to be completed by holders of Old Notes 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 Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter of Transmittal and any
other documents required by this Letter, 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. Old Notes tendered hereby must be in denominations of $1,000 and any
integral multiple thereof.
Holders of Old Notes whose certificates for Old 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 Old 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 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 and Notice of Guaranteed Delivery,
substantially in the form provided by the Issuer (by mail or hand delivery),
setting forth the name and address of the holder of Old Notes and the amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Old Notes, in proper form
for transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
The method of delivery of this Letter, the Old 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 Old Notes are sent by mail, it is suggested that the mailing
be made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to holders of Old Notes who tender by
book-entry transfer).
If less than all of the Old Notes evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount at maturity of Old Notes to be tendered in the box above
entitled "Description of Old Notes--Principal Amount at Maturity Tendered." A
reissued certificate representing the balance of nontendered Old Notes will be
sent to such tendering holder, unless otherwise provided in the appropriate box
on this Letter, promptly after the Expiration Date. All of the Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
<PAGE> 9
3. Signatures of this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old 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 Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Old 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 as there are different registrations of certificates.
When this Letter is signed by the registered holder of the Old Notes
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificates must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder of
any certificates specified herein, such certificates must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name of the registered holder appears on the certificates and the signatures on
such certificates must be guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers 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 Issuer,
proper evidence satisfactory to the Issuer of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., by a commercial bank or trust company
having an office or correspondent in the United States or by an "eligible
guarantor" institution within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934 (an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old 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 Old Notes) tendered who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. A holder of
Old Notes tendering Old Notes by book-entry transfer may request that Old Notes
not exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder of Old Notes may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name or address of the person signing this Letter.
<PAGE> 10
5. Tax Identification Number.
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Issuer (as payor) with such
Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering holder who is an individual, is his or
her social security number. If the Issuer is not provided with the current TIN
or an adequate basis for an exemption, such tendering holder may be subject to a
550 penalty imposed by the Internal Revenue Service. In addition, delivery of
New Notes to such tendering holder may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
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 not been notified by the Internal Revenue Service that such holder is
subject to a backup withholding as a result of a failure to report all interest
or dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Issuer a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Issuer within 60
days, backup withholding will begin and continue until such holder furnishes its
TIN to the Issuer.
6. Transfer Taxes.
The Issuer will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged 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 Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of Old
Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or 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 6, it is not necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Issuer reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
<PAGE> 11
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Issuer, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
<PAGE> 12
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: ZILOG, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN TIN:_____________________________________
Form W-9 IN THE BOX AT RIGHT AND CERTIFY (Social Security Number or
BY SIGNING AND DATING BELOW. Employer Identification Number)
-------------------------------------------------------------------------------
Department of Part 2 -- TIN Applied For
the Treasury
-------------------------------------------------------------------------------
Internal CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Revenue
Service
Payor's Request (1) the number shown on this form is my correct Taxpayer Payor's Identification
For Taxpayer Number (or I am waiting for a number to be issued to me).
Identification
Number
("TIN") and
Certification
(2) I am not subject to backup withholding either because:
(a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup withholding, and
(3) any other information provided on this form is true and correct.
--------------------------------------------------------------------------------
Signature Date
- -----------------------------------------------------------------------------------------------
</TABLE>
You must cross out item (2) of the above certification if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- ---------------------------------------- ------------------------------------
Signature Date
<PAGE> 1
EXHIBIT 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY FOR
ZILOG, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Zilog, Inc. (the "Issuer") made pursuant to the
Prospectus, dated _, 1998 (the "Prospectus"), and the enclosed Letter of
Transmittal (the "Letter of Transmittal") if certificates for Old Notes are not
immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Issuer prior to 5:00 P.M., New York City time, on the Expiration Date
of the Exchange Offer. Such form may be delivered by mail or hand delivery to
State Street Bank and Trust Company (the "Exchange Agent") as set forth below.
In addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal must also be received by the Exchange Agent prior to 5:00 P.M., New
York City time, on the Expiration Date. Capitalized terms not defined herein are
defined in the Prospectus.
<TABLE>
<S> <C>
By Mail: By Overnight Mail or Courier:
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand in New York to 5:00 p.m. By Hand in Boston to 5:00 p.m.
(as drop agent): Two International Place
61 Broadway Fourth Floor
15th Floor Corporate Trust
Corporate Trust Window Boston, Massachusetts 02110
New York, NY 10006
</TABLE>
For information call:
(617) 664-5587
Delivery of this instrument to an address other than as set forth above
will not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer
the principal amount of Old Notes set forth below, pursuant to the guaranteed
delivery procedure described in "The Exchange Offer -Guaranteed Delivery
Procedures" section of the Prospectus.
<PAGE> 2
Principal Amount of Old Notes Tendered: Name(s) of Record Holders(s):
$________________________________________ __________________________________
__________________________________
Address(es):
Certificate Nos. (if available):
__________________________________
_________________________________________ __________________________________
_________________________________________ Area Code and Telephone Number(s):
If Old Notes will be delivered by
book-entry transfer to The Depositary Trust
Company, provide Depositary account number.
Account Number __________________________ Signature(s):
__________________________________
__________________________________
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.
<PAGE> 1
EXHIBIT 99.3
FORM OF LETTER
ZILOG, INC.
Offer to Exchange
9-1/2% Senior Secured Notes due 2005,
which have been registered under the Securities Act of 1933, as amended,
for any and all Outstanding
Senior Secured Notes due 2005
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Upon and subject to the terms and conditions set forth in the
Prospectus, dated __________, 1998 (the "Prospectus"), and the enclosed Letter
of Transmittal (the "Letter of Transmittal"), an offer to exchange (the
"Exchange Offer") the registered Series B 9-1/2% Senior Secured Notes due 2005
(the "New Notes") for any and all outstanding Series A 9-1/2% Senior Secured
Notes due 2005 (the "Old Notes") (CUSIP No. __________) is being made pursuant
to such Prospectus. The Exchange Offer is being made in order to satisfy certain
obligations of Zilog, Inc. (the "Issuer") contained in the Registration Rights
Agreement, dated as of February 27, 1998, between the Issuer and Goldman Sachs &
Co., BancBoston Securities Inc. and Citicorp Securities, Inc. (the "Initial
Purchasers").
We are requesting that you contact your clients for whom you
hold Old Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Old Notes registered in your name
or in the name of your nominee, or who hold Old Notes registered in their own
names, we are enclosing the following documents:
1. Prospectus dated __________, 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis; and
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on __________, 1998 (the "Expiration Date") (30
calendar days following the commencement of the Exchange Offer), unless extended
by the Issuer. Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal, with any required signature guarantees and any
other required documents, should be sent to the Exchange Agent and certificates
representing the Old Notes should be delivered to the Exchange Agent, all in
accordance with the instructions set forth in the Letter of Transmittal and the
Prospectus.
<PAGE> 2
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer - Guaranteed Delivery
Procedures."
Additional copies of the enclosed material may be obtained from the
Exchange Agent, State Street Bank and Trust Company, 61 Broadway, 15th Floor,
Corporate Trust Window, New York, NY 10006, telephone: (617) 664-5587.
ZILOG, INC.
-----------------------------------------
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm that is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office correspondent in the United
States or any "eligible guarantor" institution within the meaning of Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, hereby (a)
guarantees to deliver to the Exchange Agent, at one its address set forth above,
the certificates representing all tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, together with a properly completed and
duly executed Letter of Transmittal, with any required signature guarantees, and
any other documents required by the Letter of Transmittal within three New York
Stock Exchange trading days after the date of execution of this Notice of
Guaranteed Delivery.
Name of Firm: ___________________________ __________________________________
(Authorized Signature)
Address:__________________________
__________________________________
Title:____________________________
Area Code and
Telephone Number:________________________ Name:_____________________________
Date:_____________________________
<PAGE> 1
EXHIBIT 99.4
FORM OF LETTER
ZILOG, INC.
Offer to Exchange
9-1/2% Senior Secured Notes due 2005,
which have been registered under the Securities Act of 1933, as amended,
for any and all Outstanding
9-1/2% Senior Secured Notes due 2005
To Our Clients:
Enclosed for your consideration is a Prospectus of Zilog, Inc., a Delaware
corporation (the "Issuer"), dated __________, 1998 (the "Prospectus"), and the
enclosed Letter of Transmittal (the "Letter of Transmittal") relating to the
offer to exchange (the "Exchange Offer") registered Series B 9-1/2% Senior
Secured Notes due 2005 (the "New Notes") for any and all outstanding Series A
9-1/2% Senior Secured Notes due 2005 (the "Old Notes") (CUSIP No. __________),
upon the terms and subject to the conditions described in the Prospectus. The
Exchange Offer is being made in order to satisfy certain obligations of the
Issuer contained in the Registration Rights Agreement, dated as of February 27,
1998, between the Issuer and Goldman Sachs & Co., BancBoston Securities Inc. and
Citicorp Securities, Inc. (the "Initial Purchasers").
This material is being forwarded to you as the beneficial owner of the
Old Notes carried by us in your account but not registered in your name. A
tender of such Old Notes may only be made by us as the holder of record and
pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to tender
on your behalf the Old Notes held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
We also request that you confirm that we may, on your behalf, make the
representations and warranties contained in the Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on __________, 1998 (the "Expiration Date") (30 calendar
days following the commencement of the Exchange Offer), unless extended by the
Issuer. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before 5:00 p.m., New York City time on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer -- Conditions."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Issuer will be paid by the Issuer, except as otherwise provided in
the Instructions in the Letter of Transmittal.
<PAGE> 2
4. The Exchange Offer expires at 5:00 p.m., New York City time, on the
Expiration Date unless extended by the Issuer.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form set forth below.
The Letter of Transmittal is furnished to you for information only and may not
be used directly by you to tender Old Notes.
Instructions with Respect to the Exchange Offer
The undersigned acknowledge(s) receipt of your letter enclosing the
Prospectus, dated __________, 1998, of Zilog, Inc., a Delaware corporation, and
the related specimen Letter of Transmittal.
This will instruct you to tender the number of Old Notes indicated below
held by you for the account of the undersigned, pursuant to the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal.
(Check one).
Box 1 [ ] Please tender my Old Notes held by you for my account. If I do
not wish to tender all of the Old Notes held by you for my
account, I have identified on a signed schedule attached hereto
the number of Old Notes that I do not wish tendered.
Box 2 [ ] Please do not tender any Old Notes held by you for my account.
- --------------------------------------------------------------------------------
Date __________,1998
-----------------------------------------
Signature(s)
-----------------------------------------
Please print name(s) here
-----------------------------------------
Area Code and Telephone No.
Unless a specific contrary instruction is given in the space provided,
your signature(s) hereon shall constitute an instruction to us to tender all Old
Notes.
